At 12:01am on Saturday, July 1, many Las Vegas medical marijuana dispensaries will begin selling “legal” pot for the first time. Question 2 passed by a slim majority in November, with only Clark and Washoe counties, home to the cities of Las Vegas and Reno, respectively, showing solid support. Despite the narrow votes, and some last minute changes to regulations, Nevada will become the 5th state to begin selling some form of “recreational” marijuana.

The Las Vegas Review-Journal covered 14 questions about the new regulations. Of particular interest is the tax structure that will drastically increase the price of “legal” weed. A 15% excise tax assessed to growers is then largely passed on to the consumer, and in Clark County, for example, consumers will pay a total of 32% in additional taxes. This has driven prices to about $80 for a 1/8th of an ounce and as much as $400 for an ounce. By comparison, medical marijuana is Nevada runs anywhere from $30 to $60 for an 1/8th ounce, and Colorado and Washington recreational weed tends to be in the $20-60 range.

The second huge issue facing Nevadans and dispensaries is legal supply. While the dispensaries have stocked up for the opening weekend, some saying they have a “month or two” of product on-hand, there are still no agencies licensed to transport weed. A judge declared that the state’s licensed liquor distributors should have exclusive rights to transport marijuana from cultivation facilities to dispensaries, but none of the 5 companies are ready to begin, leaving dispensaries with no supply line. What this means is when supply is gone, it’s gone. Unless the situation is resolved, shortages could start within a week or two.

In a special to the Reno Gazette-Journal, attorney Jim Hartman warned against moving too swiftly in implementing the law.

In the name of “educational funding,” Nevada politicians and the marijuana industry last December entered into an unholy alliance to heedlessly rush the process. An “early start” program was conceived by political insiders to advance the “first sale” date to July 1, 2017. This early start program was never the subject of any public hearings, state legislative approval or Nevada Tax Commission action prior to the announcement.

Gov. Brian Sandoval proposed a 10% retail sales tax on recreational marijuana for education. His rosy two year forecast of $60 million in revenue runs counter to initial experiences in Colorado (revenue 1/3 of forecast) and Alaska (1/5 of forecast). Our new state motto: “Light one up for the kids.”

What Hartman is quite rightly pointing out is that the promised cash cow hasn’t produced as expected. Colorado has been presented as a success story for “funding failing schools,” but the results haven’t been there. In May, Colorado lawmakers voted almost unanimously to increase the sales tax on “recreational” marijuana. The Denver Post reports, “Under the legislative proposal, the increase to the 15 percent special sales tax rate is paired with the elimination of the 2.9 percent regular sales tax. So the move amounts to a 2.1 percentage-point tax hike for consumers.”

Also of note is that recreational marijuana will still be a cash-only business. Credit cards will not be accepted, though it is expected that all dispensaries will have on-site ATMs available.

While Nevada tries to work through its issues, Massachusetts, California, and Maine will hopefully be watching and learning from the mistakes. Maine and California both plan January 1, 2018 starts to sale, while Massachusetts is holding off until mid-2018. Meanwhile, Delaware has put “recreational” marijuana on hold for now as the legislature is struggling with a $350 million budget hole.

 

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