Legal pot in Nevada, one year later: Silver State’s cannabis ecosystem shows no signs of slowing, experts say | NevadaAppeal.com

Legal pot in Nevada, one year later: Silver State’s cannabis ecosystem shows no signs of slowing, experts say

Kaleb M. Roedel
kroedel@nnbw.biz

More than 55 million. That's how many dollars the state of Nevada has collected in taxes from legal marijuana sales 10 months into the fiscal year, according to the Nevada Department of Taxation.

The $55.3 million figure puts Nevada, with two months to go, already ahead of the combined marijuana tax revenue that the state projected for the entire year.

Retailers in Nevada have sold $433.51 million in cannabis during the first 10 months of its adult-use market.

In other words, Nevada's cannabis industry, nearly one year after recreational sales fired up in Reno and Las Vegas, is growing strong — and showing no signs of slowing down.

'We need to get bigger'

Just ask Alexis Jensen, dispensary manager at Sierra Well, which has a presence in Reno and Carson City. The company's dispensary in Carson recently expanded by nearly 1,300 square feet and added a pick-up window in an effort to double its inventory capacity and foot traffic, Jensen said.

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"When we didn't have our pick-up window, it could be up to a 45-50 minute wait," Jensen said. "And they're waiting patiently and that's why we're like … we need to get bigger. Of course, we had to do it the right way and go through the permits and stuff, so it took a little longer than anticipated. But we're slowly getting that train moving, so it's going to be great."

Andrew Koetting, general manager at Sierra Well, said the legalization of recreational sales — which in Carson City initiated Jan. 1, 2018 — changed everything "pretty drastically."

"Our daily numbers probably tripled or quadrupled since then, and it's been steady since," said Koetting, adding they see as many as 700-800 customers on Fridays. "That growth is one of the reasons we're expanding. So we can help service the community."

RISE, a cannabis dispensary with locations in Carson City and Spanish Springs, has also seen its customer base increase significantly.

"Our traffic has probably tripled since we went recreational," said Mallory French, the company's store manager in Spanish Springs. "There's a lot of opportunity for growth here in Northern Nevada. We're looking at putting a cultivation production facility in Carson City."

SPECIAL EVENTS INFLUENCE

While the marijuana tax revenues have generally trended upward throughout the fiscal year, Anderson said the department of taxation is learning the Nevada cannabis market is heavily impacted by special events.

"The Super Bowl was the first one that we kind of noticed this," he said.

Indeed, though February — Super Bowl 52 was held Feb. 4 — is the shortest month of the year, it scored Nevada's second-largest month of cannabis tax revenue at $5.95 million.

"February should pretty much be a down month simply based on numbers," Anderson continued. "But at the time there was relatively high marijuana activity. And in talking to representatives of the industry, it was the Super Bowl."

A month later, in March, the state's cannabis tax revenues jumped to a record-high $7 million, which Anderson said was likely impacted by March Madness.

Expanding workforce

In terms of workforce impacts, Stephanie Klapstein, public information officer of the Nevada Department of Taxation, said the state doesn't have numbers of how many jobs the cannabis industry has created in Nevada, but staff is "working to get them."

The department issues "agent cards" for employees in the industry. However, an employee is required to have a card for each establishment type in which he or she works.

"For example, if Joe works in both a cultivation and production facility, he needs two agent cards," Klapstein explained in an email to the NNBV. "Further, before July 2017, employees needed an agent card for each establishment they worked in — not just each establishment type."

Though the number of employee agent cards issued is higher than actual employees, there are 8,555 active employee agent cards and 688 more conditionally approved agent cards (applications still being processed by the state).

In terms of businesses themselves, since the inception of legalized adult-use marijuana, Nevada has issued 288 cannabis-related licenses, including those for retail stores, cultivation, production, and testing labs, according to the state taxation department.

Of those 288, roughly 20 percent were issued through Washoe County and Carson City. Notably, when Nevada voters legalized recreational marijuana, the ballot initiative only allowed existing medical marijuana establishments to apply for a retail cannabis license.

That changes later this year. Come November, the state will likely open up the application process for a retail marijuana license to anyone.

"When we accept applications (then), they can come from anybody," Anderson said. "Whether it's dispensary, cultivation, production … you can go after any kind of license on the adult-use side. That's where we're thinking the numbers will really start heading upwards."

Managing supply — and demand

That said, Anderson said the department of taxation is tasked with making sure Nevada doesn't get stuck in an "oversupply" situation.

"We are charged with assessing the marketplace, making sure that cultivation is in line with demand at the dispensaries and so on," he said, pointing to Oregon as a cautionary tale.

Due to Oregon lawmakers deciding not to cap licenses and implement relatively inexpensive licensing fees, Nevada's northwest neighbor has nearly 1 million pounds of marijuana flower in its inventory, according to the Associated Press. The state population is roughly 4 million people.

Consequently, Oregon's marijuana prices are in a freefall, dropping more than 50 percent in recent years — from $14 a gram in 2015 to $7 in 2017, according to a study by the state's Office of Economic Analysis.

Such a situation may not only affect a state's wholesale price of marijuana, Anderson warned.

"The potential problem when you have an oversupply," Anderson said, "is you can have leakage into the black market. So we want to make sure that we keep everything balanced and consistent in Nevada."

Koetting, of Sierra Well, agreed the state's strict licensing policies have — and will continue to — benefit the Silver State.

"The regulations have really helped throttle the growth of the industry," he said. "What we don't want to run into is something like Oregon where there's thousands and thousands of licenses being issued. I think it's hard to see where we'll be in 5-10 years, but currently it's growing and growing at a rate that's manageable."

By the numbers – cannabis in Nevada

$49 million: Marijuana tax revenues collected

$305 million: Total taxable sales of adult-use marijuana

$386 million: Total combined taxable sales for medical, adult-use and marijuana-related tangible goods

97: Percentage of projected marijuana tax revenue state has brought in

63: Number of dispensaries in Nevada

14: Number of dispensaries in Northern Nevada

Source: Nevada Department of Taxation. Numbers cover first 9 months of 2017-18 fiscal year — from July 1, 2017, to March 31, 2018.

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The more you know

How is the marijuana tax revenue generated?

Through two different taxes:

• 15 percent wholesale tax paid by cultivators on both medical and recreational cannabis.

• 10 percent tax on retail sales, which is paid by consumers on only adult-use marijuana.

Where does the money go?

• The 10 percent retail tax revenues ($30.47 million, to date) go to Nevada’s rainy day fund. The 15 percent wholesale tax proceeds ($18.5 million, to date) go to three different areas:

• The Nevada Department of Taxation’s marijuana enforcement division costs ($2.8 million, to date).

• Next, $5 million must go to local jurisdictions’ marijuana enforcement activities.

• The remainder of the revenues goes directly to Nevada’s Distributive School Account.

Legislative changes coming? Not in 2019

The language of the Question 2 ballot initiative passed by Nevada voters in the 2016 election, legalizing recreational marijuana, cannot be changed until three years after the law goes into effect (Jan. 1, 2017). Therefore, no changes can be made to the recreational marijuana ballot initiative in 2019 legislature; any legislative changes would have to wait until 2021.