By Brian Bahouth
Reno – If you are 21 years of age or older and visit Nevada this summer, you will likely be able to legally purchase cannabis in some of the state’s roughly 50 medical marijuana dispensaries. Yesterday the Nevada Tax Commission approved a set of temporary regulations that would allow select medical marijuana dispensaries to open to the general adult public as soon as July 1 of this year.
The reasons are many.
Last November Nevada voters passed Ballot Question 2, which legalizes the limited adult possession and use of cannabis and also directs the Nevada Department of Taxation to develop and implement a system of rules to license, tax and regulate the gamut of possible marijuana businesses to broadly include cultivators, processors and retail outlets; but the state has until January 1, 2018 to develop and adopt final regulations, so in the meantime it is legal in Nevada for adults to possess and use limited amounts of cannabis, yet there is no place for them to legally buy the product, unless they’re a patient in the state’s medical marijuana program, so the temporary regulations are in part an effort to head off the formation of illegal markets, among a host of reasons.
The language of Ballot Question 2 mandates that for the first 18 months of 2018, only medical marijuana businesses already licensed in Nevada can apply for an adult use license, and so it is with the temporary regulations. Between now and May 31, a “medical marijuana establishment that has received a medical marijuana establishment registration certificate (in Nevada) and is operating and in good standing,” may apply to operate under the temporary regulations. Department of Taxation spokesperson Stephanie Klapstein said the Department will be ready to issue licenses beginning July 1.
State regulators in Oregon 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. How much cannabis tax will be collected in Nevada under the temporary regulations is a matter of speculation.
In Nevada under the temporary regulations, cultivators of cannabis must pay a 15 percent excise tax when they transfer cannabis to a production facility or retail establishment. The tax is to be based on a “Fair Market Value” of cannabis, which the Department of Taxation will calculate based on “reported sales or transfer of each category.”
Calculation of the “Fair Market” value will be different for 6 categories of cannabis, similar to the system in Colorado: Bud, Small/Popcorn Bud, Trim, Immature Plant, Wet Whole Plant, or Seeds.
Current marijuana tax provisions for medical cannabis will apply to adult use marijuana under the temporary regulations, so marijuana sold by medical marijuana establishments is subject to a 2 percent tax at cultivation, a 2 percent tax at production and 2 percent tax at the dispensary.
Local and state sales taxes will also apply. The state of Nevada has a base sales tax rate of 4.9 percent, and local governments are authorized to add up to 3.25 percent, and the total tax rate at point of sale can be as high as 8.15 percent.
Local government approval.
A key part of the temporary regulations mandates that the state receive notification from local governments that the dispensaries applying for a temporary “recreational” license are in compliance with all local regulations to include zoning and other considerations. Henderson and Carson City have imposed temporary moratoriums on the issuance of recreational licenses, and neither Las Vegas nor Reno have adopted regulations for the licensing of adult use cannabis businesses, so how quickly local governments in Nevada will be prepared to issue adult use permits is yet to be determined and may present an obstacle to the early opening of marijuana dispensaries to the general adult public. Discussion of recreational marijuana licenses is on the Reno City Council May 10 agenda.
How much cannabis a recreational customer will be able to buy at one time is not delineated in the temporary regulations, but purchase amounts are spelled out in the initiative itself, and according to Ballot Question 2, an individual can buy or possess up to an ounce of cannabis or one-eighth ounce of cannabis concentrate, but for current medical marijuana patients, the affect recreational sales will have on the availability and cost of medicine is of concern and yet to be determined.
Also worthy of note, the temporary regulations protect the identities of individuals who apply for marijuana business licenses, which attracted the formal objection of the Nevada Press Association.
Senate Bill 302 is still active in the state Legislature and would also enact an early start program, but according to a Department of Taxation spokesperson, the bill was a backup plan for an early start if the Tax Commission failed to adopt the temporary rules, and now the early start bill is moot.