By Brian Bahouth

Reno – On May 8 the Nevada Tax Commission adopted temporary regulations that would enable the state to license some of Nevada’s medical marijuana dispensaries to open to the general adult public on July 1 of this year, but a provision in the temporary rules stipulates that the issuance of a state license to sell adult use or “recreational” marijuana is contingent on written notification from municipalities that the dispensaries meet local licensing guidelines, and yesterday during their regular Wednesday meeting the Reno City Council voted unanimously to adopt regulations that would allow the city’s four medical marijuana dispensaries to participate in the Early Start Program, should they apply and meet all state and local requirements.

The changes to Reno Municipal Code will allow the City to issue temporary retail marijuana dispensary establishment business licenses to sell retail marijuana to citizen 21 years of age or older.  The licenses would expire April 1, 2018.

Nevada voters approved Ballot Question 2 last November by a 54 to 46 percent margin, and in accordance with the initiative, the Nevada Department of Taxation must develop and adopt a set of rules to regulate the cultivation, various production, distribution and retail sale of marijuana and marijuana products to people 21 year of age and older by January 1, 2018.  But as of now, adults in Nevada can legally possess cannabis but have no place to legally purchase it, except as a member of the state’s  medical marijuana program, so the Nevada Tax Commission adopted the early start temporary regulations in part to help prevent the formation of illegal cannabis markets and glean tax revenue.

There are more than 50 medical marijuana dispensaries operating in Nevada, and the Department of Taxation is currently taking applications for the Early Start Program until May 31 and plans to issue licenses before July 1.

Under the Early Start Program, a marijuana cultivator must pay a 15 percent excise tax when they transfer marijuana to a processor or retailer.  The Nevada Department of Taxation will determine a “fair market value,” of cannabis, and the excise tax will be based on that price.

Nevada’s medical marijuana program is a template, and the Early Start Program will also carry forward a 2 percent tax at cultivation, 2 percent tax at production and a 2 percent tax at the dispensary.  State and local sales taxes will also apply.  There are pieces of legislation active in the state Legislature that would impose additional taxes on the retail sale of cannabis, and this legislative session is set to end on June 5, but whether those taxes will apply during the Early Start Program is yet to be determined.

State regulators in Oregon radically underestimated the amount of marijuana tax revenue the state would glean in 2016 after lawmakers enacted a similar early start program.  In October 2015, a year after Oregon legalized adult use of cannabis, the state opened roughly 350 medical marijuana dispensaries to the general adult public with a 25 percent tax on recreational marijuana.  Officials initially estimated marijuana tax revenue to be between $2 and $10 million, but after final accounting, nearly $60.2 million had been collected in 2016.

In Oregon they opened six times as many dispensaries as are in Nevada, but roughly 40 million people visit Las Vegas a year, and by contrast, some 9 million people visit Portland, Oregon’s largest single tourist destination; so marijuana tax revenue in Nevada is something of a wait and see that could have an effect on funding for the state’s schools and other programs.  Almost all marijuana tax in Nevada is earmarked for education, and the state spends roughly a billion dollars a year on K-12 funding.  Nevada Governor Brian Sandoval has budgeted for roughly $144 million in marijuana tax revenue over the 2017-2019 biennium, so marijuana taxes need to make up 5 to 7 percent of the state’s education funding.