Vermont cannabis board urges fee changes, proposes farmers‑market pilot and excise‑tax funding review

James Pepper, chair of the Vermont Cannabis Control Board, told the House Ways and Means Committee on April 24 that the board is recommending changes to the state’s cannabis license fee schedule, a limited pilot to allow cultivators to sell through a retailer‑hosted farmers’ market, and reconsideration of a sunset on using excise tax revenue to help fund the board’s operations.

The proposal follows a statutory check‑in required by Act 164 and three years of operating data. "The first thing that the cannabis board was required to do when we were seated was to report back to this committee, with a fee structure that was … sufficient to fund the duties of the Cannabis Control Board," Pepper said, summarizing the board’s charge under the statute.

Why it matters: The board’s fees and how they are structured affect market entry for small craft cultivators, the revenue available to fund regulation, and the retail price of cannabis — which influences whether consumers shift to the unregulated (illicit) market or to intoxicating hemp products allowed by federal law. Pepper told lawmakers the board balanced a goal of prioritizing small craft operators with the need to generate sufficient regulatory revenue.

Market snapshot and budget numbers provided to the committee show the regulated industry in Vermont includes several hundred licensed businesses and generated taxable sales of about $124.3 million in fiscal 2024, yielding roughly $17.4 million in excise tax and about $7.5 million in sales tax that year. Pepper said fees collected between July 1, 2024, and March 15, 2025, totaled about $2.4 million; the board’s FY 2026 budget request is about $6.5 million, with an expected approximate $4.0 million contribution from excise tax under the current structure.

Fees and proposed adjustments: The board presented two fee philosophies: higher fees that could cover the board’s full budget but could deter new licensees, or lower fees that make market entry easier for small cultivators at the cost of requiring state support. Vermont opted for a hybrid approach when licensing began: lower fees for small, craft (tier 1, 1,000 square feet or less) growers and higher fees for large indoor operations, plus a temporary excise‑tax backstop to cover a projected gap. That excise‑tax allocation carries a legislative sunset meant to force a reassessment three years after initial fee setting.

Pepper summarized a draft fee restructuring his staff modeled: halving outdoor fees across tiers, eliminating the largest unused tier (tier 6), and doubling indoor cultivation fees for larger indoor tiers while holding the smallest indoor tiers harmless. He described the draft as roughly revenue neutral against today’s licensed population and said it would modestly increase projected revenue in the current model. "It actually increases just ever so slightly projected revenues," he said. He cautioned that changes could push some mid‑sized operators to exit the regulated market and that the timing is late in the legislative session for major changes.

Local fees and municipal costs: Municipalities may assess a local option tax of 1% where allowed and can charge a nominal permit fee (a $100 fee was set as a placeholder early in implementation). Pepper said municipalities have not demonstrated large, realized direct costs tied to hosting cannabis businesses (for example, extra traffic, increased police patrols or road repaving) but that towns should have the opportunity to justify higher local fees if they can document true costs. He also noted municipalities can form local cannabis control commissions to review applications, which carries administrative burden.

Farmers’‑market pilot: The board described a conceptual pilot modeled on a New York program that allows a limited, retail‑hosted cannabis growers’ marketplace. Under the concept Pepper outlined, a retail licensee would apply and host a growers’ showcase; participating cultivators would be limited and subject to full inventory‑tracking, age verification, tax collection and the retailer’s onsite controls. The board’s suggested limiting principles include making a pilot temporary or limited in number of events, requiring retailers to hold responsibility for compliance, and sharing fees between host localities and the state. Pepper said early experience in New York did not produce the anticipated surge in thefts or diversion.

Excise tax funding sunset: When the regulated market launched, the legislature allowed a portion of cannabis excise tax to be routed to the Cannabis Regulation Fund to cover regulatory costs; that provision was given a sunset so the legislature would revisit the arrangement after three years. Pepper said if the sunset is allowed to take effect, excise tax receipts would be deposited directly to the general fund and the board would need appropriations from the general fund or a new revenue arrangement. "That’s the kind of choice that was made back in 2022 and we’ll have to make again, whether to push out that sunset or not," he told the committee.

Board capacity and licensing moratorium: Pepper said staffing ratios and regulatory workload are driven by the number of licensees. The board currently operates with a field compliance staff of nine and a licensing staff level that the board described as stretched because Vermont’s market prioritizes many small cultivators (he said roughly 75% of cultivators are tier‑1, 1,000 square feet or less). The board is operating under a moratorium on issuing new licenses while an economist reexamines demand, capacity and market impacts; any reopening of licensing would be informed by that analysis.

Questions from lawmakers focused on growth expectations, municipal fees and how a farmers’‑market pilot would be licensed and enforced. Senator Higgins and Representatives Holcomb and Higley asked whether the $100 municipal fee has been adequate and whether the fee and licensing structure could continue to support small operators while ensuring adequate regulatory oversight.

Next steps: Pepper said the Senate Economic Development Committee and Senate Finance may consider related changes this session, including the farmers’‑market pilot and whether to continue directing excise tax to the Cannabis Regulation Fund. He told lawmakers the board had submitted a December fee report and additional materials they could review, and he offered to provide the detailed fee model to committee staff for follow up.

Ending: The committee took the presentation as informational and directed questions to be followed up in subsequent legislative work on H.321 (the miscellaneous cannabis bill) and related proposals. No formal votes or committee actions on fee changes were recorded during the hearing.