An Uxbridge cannabis business is set to receive a refund of nearly $1.2 million, following the settlement of a lawsuit over the Town of Uxbridge’s decision to charge the business a community impact fee.

Caroline’s Cannabis, a dispensary with a location at 640 Douglas St. in Uxbridge, has reached an agreement with the Town of Uxbridge to see $1,171,633 worth of community impact payments returned to the business, according to a press release issued Thursday by Macmillan Law Offices, a Haverhill-based firm representing Caroline’s.

The agreement comes following an April lawsuit that Caroline’s filed in Worcester County Superior Court seeking to force the town to provide documentation showing the impact fees were related to costs imposed by the dispensary’s operations.

“Hopefully this is a cautionary tale for those municipalities that are still resistant to refunding unsubstantiated community impact fees,” Thomas MacMillian, the legal representative for Caroline’s, told WBJ in an email.

Massachusetts law allows municipalities to charge cannabis businesses a community impact fee of up to 3% of the company’s gross sales to cover costs imposed on the municipality that are reasonably related to the operation of the business. Cannabis operators have long argued that these fees are unjust and that cannabis establishments do not cause any additional costs to municipalities when compared to more traditional businesses.

“For years, communities have been treating cannabis community impact fees as piggy banks with zero accountability and little transparency,” David O’Brien, president and CEO of the Massachusetts Cannabis Business Association, said in a release issued Friday. “The legislature has repeatedly made it clear that municipalities cannot legally collect fees that are not spent on reasonably-related municipal costs, but cities and towns are holding on to millions of dollars that were unjustly collected over the past few years. Communities need to immediately return all money that wasn’t spent on reasonably-related costs.”

In the early years of the legal cannabis rollout, the way local governments were asking for large fees in exchange for approval of host community agreements served as an impediment to the growth of the industry and was one of the reasons why smaller businesses and those run by people of color had a hard time breaking into the sector.

An analysis released by MassCBA in 2022 of 54 municipalities found they had collected over $50 million in impact fees. Based on the size of the state’s cannabis economy, the organization says the total amount of collected impact fees in Massachusetts could be as high as $165 million.

The refund issued by Uxbridge represents 80% of the payments Caroline’s has made to the Town, according to Macmillan Law.

“I’m happy that we were able to come to a mutual agreement,” Caroline Frankel, owner of Caroline’s Cannabis, said in the release issued by MassCBA. “Unfortunately, it took litigation for the Town to recognize there are no negative impacts, and to resolve the case. This case should help other operators and municipalities to work out an agreement.”

Others in the Massachusetts cannabis space agree it’s time for municipalities to reconsider their impact fees, which are established in the host community agreements businesses are required to sign with the municipalities that host them.

“After so many municipalities abused the Host Community Agreement process for years, it’s gratifying to see a fresh start initiated by new guidance from the CCC and some cities and towns even reversing course and returning some of the excessive fees,” Shaleen Title, who served as a CCC commissioner from 2017 until 2020, said in the MassCBA release. “The small businesses who stood up for themselves and led this change should be commended.”

A bill signed into law by former Gov. Charlie Baker in August 2022 clarified municipalities are required to document any financial impact caused by the existence of a cannabis business within its borders, and fees should be directly tied to those established impacts.

In November 2022, the City of Boston decided to return $3 million in impact fees to nine cannabis businesses, becoming the first local government in the state to do so, according to reporting from the Boston Globe.