(The Center Square) — Maine Democratic Governor Janet Mills has signed a bill to divert tax revenue from cannabis sales to cities and towns to help cover the impact on municipal services.

The measure, which was recently approved by the state legislature, will allow local governments that house cannabis grow facilities and retail stores to seek reimbursement for municipal expenses up to $20,000 per year.

Under the new law, local governments must document “eligible expenses” for hosting cannabis operations, such as legal fees and costs associated with reviewing an application to open a cannabis operation. retail operation and the holding of a municipal meeting or election.

The new law is a scaled-down version of the original bill, which would have required that 5% of the state’s combined 15.5% recreational cannabis taxes be paid to local governments.

The measure’s lead sponsor, Rep. Tiffany Roberts, D-South Berwick, said it would help alleviate “budget uncertainty” for local governments that house cannabis retail operations.

“This bill will allow municipal governments to recoup the expense of regulating the adult use industry and encourage partnerships with local businesses,” she said during a recent testimony.

Maine approved recreational cannabis in 2016, allowing adults 21 and older to own up to 2.5 ounces of pot and it allows regulated cultivation and sale.

Products are subject to 10% excise tax and 5.5% state sales tax. In 2021, profits from recreational pot sales in Maine topped more than $81 million, according to state data.

But local governments don’t see any of that money – even if they’re hosting a cannabis business – and are barred from charging businesses local pot excise duties.

Admittedly, local taxes and so-called “hospitality fees” for cannabis businesses have proven controversial in other states that have legalized medical and recreational use.

Cannabis industry experts say excessive entry fees are stunting market growth by crowding out smaller companies that cannot afford high start-up costs.

John Burke, a lawyer who represents cannabis companies, said that in the absence of revenue-sharing agreements with local governments, cities and towns were charging “excessive” license fees to allow the opening of cannabis stores in their communities. He said this is holding back the growth of the retail marijuana industry by creating financial barriers to market entry.

“Not having revenue sharing prevents the state from receiving the kind of revenue it intended from the adult use program, which hurts businesses operating legally in the adult use program. and frustrates municipalities that were meant to be partners with the state in administering the program,” Burke said during a hearing on the bill.

According to the National Conference of State Legislatures, at least 18 states, the District of Columbia and the US territory of Guam have legalized cannabis for recreational use.

Maine is also one of 37 states that have allowed the sale of medical marijuana, but the state does not tax these products.