A multi-state cannabis operator has filed a lawsuit against an Ohio township, arguing that local officials illegally demanded nearly 5% of retailers' annual revenue as a condition for allowing dispensaries to operate.
Vext Science claims in the lawsuit that Pierce Township's attempt to collect 4.5% of cannabis retailers' gross annual revenue amounts to "extortion" under Ohio law. The legal challenge highlights growing tensions between cannabis businesses and local governments as municipalities seek to extract maximum value from adult-use legalization.
Ohio voters approved recreational cannabis sales in November 2023, with retail operations beginning in August 2024. But the rollout has been complicated by local jurisdictions imposing their own fees and restrictions on top of state-level requirements.
The Fee Structure
Pierce Township, located in Clermont County east of Cincinnati, reportedly made the 4.5% revenue share a precondition for cannabis retailers seeking to establish operations within township boundaries. Unlike traditional licensing fees or property taxes, the percentage-based levy would grow proportionally with a dispensary's sales.
For a dispensary generating $5 million in annual sales, the township fee would total $225,000 per year. That's on top of Ohio's 10% adult-use excise tax and standard state and local sales taxes.
Vext Science operates cannabis businesses across multiple states and has been expanding into Ohio's newly legal adult-use market. The company argues that the township lacks legal authority to impose such fees and that the demand constitutes an illegal shakedown.
Legal Questions
The lawsuit raises questions about how far local governments can go in extracting payments from cannabis operators. While municipalities typically have broad authority to regulate businesses through zoning and licensing, courts have struck down fees that appear punitive or exceed the actual cost of regulation.
Ohio's cannabis law allows local jurisdictions to impose additional taxes, but legal experts note there are limits. The state's general tax code prohibits municipalities from levying taxes on gross receipts for most businesses.
Several Ohio townships and cities have attempted to impose local cannabis taxes since voters approved adult-use sales. Some communities have opted out of allowing dispensaries entirely, while others have sought revenue-sharing agreements with operators.
What's Next
The case will test whether Ohio courts view percentage-based local fees as legitimate regulation or overreach. A ruling against Pierce Township could limit other municipalities' ability to demand similar payments from cannabis retailers.
Vext Science has not disclosed whether it has already paid any fees to the township or if the lawsuit was filed preemptively. The company's legal team is seeking both declaratory judgment that the fees are unlawful and an injunction preventing their collection.
Pierce Township officials have not yet publicly responded to the lawsuit. The case is pending in Clermont County Common Pleas Court.
The outcome could have implications for cannabis operators statewide as Ohio's adult-use market continues to mature. Industry observers say clear guidance on local fee authority would help operators plan expansion and avoid costly legal disputes.
This article is based on original reporting by mjbizdaily.com.
