Nevada took a gamble on recreational marijuana, and it’s paying off.
Dispensaries sold $27.1 million of pot in Nevada, in July alone. That's almost double what both Colorado and Oregon sold in their first months. It's almost seven times what Washington sold.
Banking on weed, Nevada made $10.2 million off the fledgling industry during the first month of sales in July, according to the Nevada Department of Taxation. Of that, $6.5 million came from industry fees and $3.68 million came from tax revenue.
Gov. Brian Sandoval projected that, between its two-year old medical marijuana industry and the now upright recreational marijuana industry, the state could pull in approximately $100 million over the next two fiscal years from both taxes and fees.
The latest projection, however, is that the state will generate nearly $120 million from taxes over the next two years, according to Stephanie Klapstein, spokeswoman for the Department of Taxation.
Where does the money go?
The state reeled in $2.71 million from the 10-percent tax tacked on to the sale of all recreational marijuana sales at the register. There is no tax upon sale for medical marijuana.
Another $974,060 rolled in from the 15-percent wholesale tax, which cultivators pay before both medical and recreational marijuana are delivered to dispensaries.
"That money was otherwise going to go to the black market. It’s not that everyone decided to start consuming marijuana because it’s legal, it’s just now that we can realize the tax revenue," said Riana Durett, executive director of the Nevada Dispensary Association.
Although Nevadans hoped much of the industry's revenue would go to the schools, only a portion will.
Initially, Sandoval proposed that the revenue from the sales tax would go to the schools, but he decided later to shift the money to the state's rainy day fund so that the education department’s budget was not leaning on a mercurial market. The rainy day fund can be spent on anything but is usually spared for emergencies.
Revenue from the 15-percent wholesale tax, which is tacked on at the cultivation level for both recreational and medical marijuana, goes towards paying for the cost incurred by the state, a figure which has not yet been released, and costs incurred by local governments. No money has yet been pushed to local governments, Klapstein said.
Any remainder from the wholesale tax thereafter goes to the state's School Distributive Account, which gives money to schools per pupil. Income from the industry fees will be treated the same way as revenue from the wholesale tax.
Where does the money come from?
The state Department of Taxation, which runs both the medical and recreational marijuana program, has received 333 applications for recreational marijuana establishment licenses and has issued 250 licenses, including 53 retail stores, 92 cultivation facilities, 65 product manufacturing facilities, 9 testing labs, and 31 distributors.
Of those 250 licenses issued, 203 are located in Clark County with the remaining distributed in Carson City and Nye and Washoe Counties. About a dozen dispensaries currently operate in the Northern Nevada. The application fee for all recreational marijuana licenses is $5,000 and actual license fees range from $10,000 to $30,000.
"Everyone needs to keep in mind that there are high regulatory costs. One company told me that their energy bill is $15,000. What you don’t see is all the investment going into the operations and regulatory compliance. This isn’t just pure profit," said Durett.
Although the big bucks are good news for the industry, the numbers for August and September could be affected by the embarrassing hiccup of the distribution issues the state has had. The state still is in an embroiled court battle with alcohol distributors, who have thwarted many of the state's efforts to license additional recreational marijuana distributors.
Many dispensaries had been struggling to stay stocked with supply until recent weeks when the Department of Taxation was able to issue two dozen licenses to additional distributors.
Dispensaries also are expecting that once California's recreational market goes online in January 2018, there may be a dip due to neighborly competition.
Nevada voters passed a ballot measure in November last year legalizing recreational marijuana. Adults age 21 and over are allowed to possess up to one ounce of marijuana and an eight-ounce of concentrate.