Are Taxes On Nevada Marijuana Too High?

Are Taxes On Nevada Marijuana Too High?

Nevada marijuana advocates have been fighting for legalization in their state for nearly 20 years, and less than eight months after Nevadans voted to legalize the substance, dozens of stores across the state have finally begun selling recreational marijuana legally.

However, while the people lined up outside the state’s dispensaries were dancing in the streets on July 1, the high taxes and overreaching regulations Nevada officials have imposed, alongside the more permissive legislation, will possibly help preserve the same black market for pot they’ve been fighting for decades.

Nevadans first voted to legalize medical marijuana use in 1998, but it wasn’t until 2013 that the Nevada Legislature voted to allow regulated access to medical cannabis. After the state’s first medical dispensaries opened in the summer of 2015, Nevadans then voted to allow recreational marijuana use for anyone over the age of 21 by approving Question 2 on the state’s ballot last November.

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With the vote, the state joined Alaska, Colorado, Oregon, Washington, Massachusetts, and Washington, D.C., in allowing marijuana to be legally purchased for recreational use. Nevadans 21 and older can now possess up to an ounce of marijuana or as much as one-eighth of an ounce of cannabis concentrate. And while state officials waited until eleventh hour to finally comply with the legislation, Nevada State Senator Tick Segerblom, D-Las Vegas, made the first purchase of recreational Nevada marijuana at midnight on July 1.

Segerblom, who pushed for legal medical marijuana dispensaries that would be eventually allowed to sell the drug for recreational use, purchased some Segerblom Haze, a variety pot named after him. A steady stream of ecstatic consumers followed him to the register.

“You don’t have to hide in the corner anymore and feel bad about it,” Pam Mateo told the Las Vegas Review-Journal as she left the dispensary with her purchase at around 1:30 a.m.

Local ordinances required dispensaries to close between 3 a.m. and 6 a.m., but when doors opened again a few hours later, people once again stood in long lines — this time, in triple-digit heat — to make their pot purchases. Greg Fuller, 32, of Charlotte, North Carolina, couldn’t get over the fact that he was really about to legally buy Nevada marijuana.

“It’s just so weird,” Fuller said. “You don’t go to the store and buy weed. This is a hell of an experience.”

A hell of an experience, indeed.

As Reason points out, however, the limited number of allowed retailers and super-high taxes people are paying to get high will possibly push many customers back to the easier and cheaper black market once the initial buzz wears off.

Federal marijuana laws, as well as Nevada’s zoning and state casino regulations, are conservative and strict. Dispensaries can’t open anywhere near a casino, which means the Las Vegas Strip is off-limits. As CNN reports, the 12 or so dispensaries that parallel to the strip are several blocks away and nowhere in sight. So, not only are they sort of a pain to get to, but (at least for now) the lines are really long.

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Even if customers think going through the hassle of lining up at a tucked-away dispensary is worth it — did we mention home delivery is illegal, too? — the taxes they will pay once they get there might change their minds. The high taxes pot buyers face in Colorado and Washington has kept the black markets in thriving in those states, and the same might be expected for Nevada marijuana.

According to the Las Vegas Sun, state retailers generated $3 million in sales during the first four days that Nevadans could legally purchase pot. Per the report, those sales generated $500,000 in taxes for state. As Reason calculates, however, the state actually raked in much more:

“Allowing for rounding, that only accounts for about 15 percent of sales — which is the state excise tax on the first wholesale sale. Nevada also imposes a 10 percent retail excise tax on recreational sales, and then adds in sales tax, which varies from just under 7 percent to over 8 percent according to where you are. Let's call the total tax take about 32 percent of legal recreational marijuana sales. That's a really high tax rate to impose on any industry — especially one that was thriving (albeit illegally) and entirely untaxed less than two weeks ago.”

Will Nevada learn from Colorado and Washington and adjust its regulations, or are the new regulations simply a money grab? Nevada is expected to generate $60 million in tax revenue in the next two years. While lowering the taxes on pot — as well permitting more dispensaries and allowing home delivery — would cut into Nevada’s tax receipts, it would also go a long way toward dismantling the black market for pot in the Silver State.

The next few months (or years?) will determine whether Nevada’s lawmakers are really serious about legal marijuana, or if they’re just blowing smoke.