Nevada dispensaries licensed to sell recreational marijuana are running out of pot less than a week after the legal market came to life, according to the state Department of Taxation.
On Friday, taxation officials announced that Gov. Brian Sandoval had endorsed the department’s “statement of emergency,” allowing state officials to consider adopting an emergency regulation that could alleviate the shortage.
The regulation would allow the department to consider a larger pool of applicants for distribution licenses, licenses that permit the transport of recreational marijuana from the cultivation and packaging facilities to the dispensaries.The Nevada Tax Commission will vote on the regulation on Thursday.
As of Friday, the taxation department has issued not one distribution license because of a last-minute court battle, incomplete applications and zoning issues, meaning dispensaries will not be getting a delivery for a while.
“Based on reports of adult-use marijuana sales already far exceeding the industry’s expectations at the state’s 47 licensed retail marijuana stores, and the reality that many stores are running out of inventory, the Department must address the lack of distributors immediately. Some establishments report the need for delivery within the next several days,” said department spokeswoman Stephanie Klapstein in an email Friday.
As the state law legalizing recreational marijuana was passed in November, wholesale alcohol distributors were promised exclusive rights to transport wholesale marijuana for the first 18 months of legal sales. Since November, the state has received seven applications from liquor wholesalers.
“We continue to work with the liquor wholesalers who have applied for distribution licenses, but most don’t yet meet the requirements that would allow us to license them. Even as we attempted to schedule the final facility inspection for one of the applicants this week, they told us their facility was not ready and declined the inspection,” Klapstein said.
The department tried to address the issue earlier this year by opening the application process up to the businesses that have been transporting medical marijuana and other marijuana businesses, but an 11th hour court battle ended in an order only to accept applications from wholesale alcohol distributors. The taxation department since appealed the court’s decision.
Now that any marijuana dispensary licensed to sell recreational marijuana must receive all product — both recreational and medical — from a distributor licensed to transport recreational marijuana, many of them are stuck with dwindling supplies of flower and edibles both.
“The business owners in this industry have invested hundreds of millions of dollars to build facilities across the state. They have hired and trained thousands of additional employees to meet the demands of the market. Unless the issue with distributor licensing is resolved quickly, the inability to deliver product to retail stores will result in many of these people losing their jobs and will bring this nascent market to a grinding halt. A halt in this market will lead to a hole in the state’s school budget,” Klapstein said.
If the regulation passes and the taxation department issues distribution licenses, not all of the industry’s hardships will be solved. Many cultivation centers are in the midst of the grow cycle of some strains of marijuana, meaning there will be a lag between dispensaries selling out and the next harvest. Additionally, some cultivation centers already have sold futures of their next crop.
While the department does not plan to release any numbers on state tax revenue from the industry until late September, the Nevada Dispensary Association earlier this week estimated that dispensaries made about $3 million in sales and the state made about $1 million in tax revenue between July 1 and July 4.
Revenue collected from the 15 percent cultivation tax goes toward schools, while the 10 percent sales tax revenue goes toward the state’s rainy day fund, which can be used for any number of expenditures.
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