Local Governments In Delaware Seek To Impose Additional Sales Tax On Legal Marijuana Purchases

“This is a billion-dollar industry, and Wilmington, we should be getting our share.”

By Brianna Hill, Spotlight Delaware

Wilmington and New Castle County want to tax marijuana sales as part of Delaware’s incoming recreational cannabis industry.

The jurisdictions are each considering resolutions to ask state legislators to allow them to collect an additional local sales tax on marijuana products.

Those taxes, if approved, could make marijuana sales in Wilmington among the most expensive in the region.

Currently, Wilmington is proposing a tax of up to 3 percent on marijuana sales, while New Castle County is considering a proposal to tax the sales at up to 5 percent. Those would add to a 15 percent state sales tax on marijuana.

In addition, Wilmington City Council will take a final vote next week on a proposal to allow some recreational marijuana businesses to operate largely in the city’s industrial zones and Riverfront area.

Local cannabis tax proposals

According to state regulators, recreational marijuana establishments were originally set to open this April. However, due to regulatory delays, the market’s launch date has been paused until further notice.

Sticking to the original timeline, local governments have already begun setting restrictions on where marijuana shops can operate, since the state’s marijuana laws allow counties and municipalities to limit where cannabis businesses are allowed, while municipalities also have the authority to ban the industry outright from their town limits.

About a third of the state’s municipalities have already banned marijuana shops outright, but other areas like Wilmington struggled to come to a compromise on how to regulate the local industry.

Last year, city residents and elected officials debated the issue, with one common complaint being that the local government would not receive any direct revenue from the industry.

When Delaware legalized recreational marijuana in 2023, the state established a 15 percent sales tax on marijuana products. And of that, 7 percent will go toward a Justice Reinvestment Fund, which will support grants, contracts, and services aimed at addressing the lasting impacts of marijuana prohibition.

Although those funds would trickle down to municipalities that would also benefit from the creation of new businesses, more local leaders throughout the state have argued that local governments should receive direct funds from the industry.

This month, City Councilman Chris Johnson (D) proposed a resolution asking the General Assembly to let Wilmington collect up to a 3 percent sales tax on marijuana products sold in city retail stores, which he says would boost local revenue.

“This is a billion-dollar industry, and Wilmington, we should be getting our share,” he said.

Johnson proposed a similar resolution last year, but said the proposal was never picked up by any lawmaker down in Dover.

The new resolution will go to the full council on May 1 for a final vote to be adopted, and Johnson said he would like to see it be approved by state lawmakers by the end of the current legislative session.

New Castle County followed suit this week with its own resolution, asking the state to allow the county to tax up to 5 percent on the retail sale of marijuana products.

County Councilwoman Janet Kilpatrick (R), who is sponsoring the proposal with Councilman Kevin Caneco (D), said the tax will help to offset the “burden” that some offices in the county will have to bear as a result of the incoming industry.

“From the very beginning, the Land Use Department, along with Council, had to prepare the criteria for a logical zoning category as well as criteria that are presumed to help the public.  Beyond that, we anticipate that there will be public safety interaction (police, mental health assistance and ambulance, to name a few),” Kilpatrick wrote in a statement to Spotlight Delaware.

The resolution will be introduced and discussed during Tuesday’s Finance Committee meeting.

If lawmakers in Dover approve Wilmington and New Castle County’s requests to impose the local tax, retail marijuana stores operating in the most populated areas of Delaware can expect to be taxed between 18 percent and 23 percent.

Out of the 59 marijuana business operators who selected to operate in New Castle, the tax would only affect the 14 operators who were awarded retail licenses to open in the county.

Some advocates say that the hefty tax would push customers to surrounding states and would only further the illicit market of unregulated cannabis products being sold, which they claim the state has not done anything about.

“It’s gonna destroy the dispensaries in the north,” said Emily Wilkins, vice president of First State Compassion, which currently operates a medical marijuana retail store in New Castle County.

Wilkins and James Brobyn, president of the Delaware Cannabis Industry Association, believe that the tax is penalizing marijuana operators who still have yet to open their stores, while existing liquor stores, smoke shops and unregulated cannabis products are not being taxed at all.

“These politicians just come after us because we’re the easiest targets,” Brobyn said.

Wilmington’s zoning ordinance

In addition to the upcoming sales tax proposals, Wilmington’s recent zoning ordinance on marijuana establishments will soon come to a final vote.

The legislation, developed in collaboration with Mayor John Carney’s (D) office and introduced earlier this month, would require marijuana shops to stay at least 300 feet away from residential areas and schools. Shops would also be limited to specific commercial, manufacturing, and waterfront zones.

Without setting zoning restrictions on the shops, city officials say marijuana businesses would be able to set up throughout the city, including some residential areas, without buffers to sensitive areas.

Under the current proposal, no cannabis businesses would be allowed in any residential districts or commercial districts except for C-5. Testing, retail, manufacturing and cultivation shops would also be allowed in the M-1, M-2, W-1, W-2 and W-3 districts. Retail and testing establishments would also be allowed in W-4 with special permission from the zoning board.

These restrictions would push businesses to the east side of downtown Wilmington—to areas like Riverside, Riverfront East and largely industrial areas near Interstate 495—to develop businesses with the fewest procedural headaches. The Riverfront will likely be a prime location for a retail shop, but would require approval from city council.

All marijuana business operators would also have to obtain a business license from the city in order to operate.

During the April 16 Community Development & Urban Planning Committee meeting, Johnson, who sponsored the bill, emphasized that the current proposal is a happy medium between stakeholders.

“This is through negotiations and, frankly, listening to the public—both me and my colleagues going to civic association meetings, pitching the ideas, and taking feedback, and really working to find a map that works,” he said.

Other city council members agreed, including the city’s lone Republican council member, James Spadola, who was opposed to last year’s proposal that included a 100-foot buffer between stores and sensitive areas.

Johnson said he’d prefer more “expansive” zoning for marijuana operators, but hopes that once shops open and establish themselves in the city, some of the myths around cannabis will fade, eventually allowing for restrictions to be loosened.

Both the ordinance setting zoning restrictions for marijuana shops and the city’s sales tax resolution are scheduled for a final vote at the full council meeting on May 1.

This story was first published by Spotlight Delaware.

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