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A legal showdown is brewing in Newton, Massachusetts, where three cannabis retailers are demanding a refund of nearly $2 million in what they call "clearly and unequivocally unlawful" fees. The lawsuit, filed Friday in Middlesex County Superior Court, accuses the city of wrongfully extracting revenue under the guise of "community impact fees"—a battle that could redefine how municipalities tax the burgeoning cannabis industry.

The plaintiffs, Ascend, Redi, and Garden Remedies, claim Newton continued to charge these fees even after state lawmakers clarified in 2022 that cities must provide evidence of actual costs incurred due to cannabis operations. The retailers allege the city not only failed to do so but engaged in retaliatory tactics when they challenged the payments.

The Fee Fight: How It All Began

Community impact fees were originally created to offset potential costs associated with legalized recreational marijuana, such as increased policing or public health initiatives. However, critics argue that many municipalities, including Newton, have used the fees as a hidden tax on cannabis businesses.

The retailers say their agreements with Newton, first signed in 2018 and 2019, included the disputed fees—until the 2022 amendment forced cities to justify them. A public records request last month, they claim, confirmed what they had suspected all along: Newton had incurred no additional costs from their businesses.

"The city never even undertook any assessment or analysis of costs incurred … as required by law," the complaint states.

Retaliation Claims Add Fuel to the Fire

In a stunning turn, the lawsuit alleges Newton retaliated against Ascend and Redi for challenging the fees. The city demanded payment under the original agreements—despite their renegotiation—and Mayor Ruthanne Fuller publicly accused them of shortchanging taxpayers.

"The mayor knows full well these fees are illegal," the complaint asserts, calling the city's actions "bad faith."

What’s at Stake?

The dispensaries are not just seeking refunds—they want the court to declare that Newton cannot collect fees without proving they are tied to real costs. The lawsuit also demands damages for breach of contract, unfair dealing, and unjust enrichment.

Garden Remedies, the first to sign a host community agreement in 2018, paid nearly $1.7 million in fees before renegotiating last year. Ascend and Redi, who had similar percentage-based agreements, paid roughly $493,000 and $200,000, respectively.