(The Center Square) – Virginia leaders are ready to add another tax, announcing agreement Tuesday to create a legal retail cannabis market with sales set to begin July 1, 2027.

The agreement is expected to be included in the state’s still-unfinished two-year budget, which lawmakers must approve before the June 30 deadline.

Virginia legalized adult possession of up to 1 ounce of marijuana and home cultivation of up to four plants in 2021 but never established a retail market.

Earlier this year, the General Assembly passed legislation that would have launched regulated adult-use sales on Jan. 1. Gov. Abigail Spanberger sought changes including a six-month delay, additional enforcement provisions and other revisions to the legislation. After lawmakers declined to adopt those amendments during the reconvened session, the governor vetoed the bills in May.

The compromise follows weeks of negotiations between Spanberger and the legislation’s chief patrons, Sen. Lashrecse Aird, D-Henrico, and Del. Paul Krizek, D-Fairfax.

Under the proposal, the Cannabis Control Authority would begin accepting license applications Feb. 1, with retail sales beginning July 1, 2027.

The framework would cap the number of retail licenses at 350 statewide and increase the legal possession limit from one ounce to two ounces.

It would establish a 6% state tax on cannabis sales, rising to 8% on July 1, 2029. Localities could impose an additional tax ranging from 1% to 3.5%.

The proposal also includes restrictions on advertising aimed at children, requirements for child-resistant packaging and a ban on cannabis products shaped like animals, fruits, vehicles or people. Retail stores would be required to remain at least 1,000 feet from schools, hospitals, playgrounds and drug treatment facilities.

Oversight of intoxicating hemp products would be transferred from the Virginia Department of Agriculture and Consumer Services to the Cannabis Control Authority.

“We will do it in a way that protects consumers, targets the illicit market with clear enforcement and regulatory authority, and creates a more competitive market for small businesses and farmers,” Spanberger said in a statement.

Aird said Virginia’s current system has allowed illegal sales to continue despite legalization of possession.

“Virginia legalized adult possession years ago, but without a regulated retail market, we left the illicit market to fill the gap,” Aird said.

Krizek said the agreement reflects collaboration between lawmakers and would create a legal retail market with protections for consumers and small businesses.

According to the proposal, cannabis tax revenue would support early childhood education, K-12 education, behavioral health and substance use disorder programs, public health initiatives and the Cannabis Equity Reinvestment Fund.

The cannabis proposal is expected to move as part of the state’s broader budget package. The House is scheduled to reconvene Thursday and the Senate on Monday as negotiations continue ahead of the June 30 budget deadline.