Carson City — While Nevadans have been able to legally smoke marijuana since January, starting in July they will be able to legally buy it. 

On Monday, the Nevada Tax Commission approved temporary regulations for the Nevada Department of Taxation’s “early start” recreational marijuana program.

The program allows licensed medical marijuana establishments that are currently in good standing with the state to apply by May 31 for temporary licenses to cultivate, produce, distribute or sell recreational marijuana. 

“These regulations need to be adopted today. If we don’t have a temporary program, we will not have dollars in the governor’s budget,” said Deonne Contine, executive director of the Department of Taxation. 

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“Good standing” means that the establishments have established a clean compliance history for the past six months, meaning businesses that opened this year are currently ineligible.

Businesses will have additional opportunities to apply for the temporary licenses past May, although all licenses will expire at the end of March 2018. 

A hefty chunk of program revenue will come from the annual fees collected from the industry. Outside of the uniform $5,000 application fee for all program licenses, the licenses once acquired will cost: 

  • $20,000 for a retail establishment
  • $30,000 for a cultivation facility (growing)
  • $10,000 for a production/manufacturing facility (packaging)
  • $15,000 for a testing facility
  • $15,000 for a marijuana distributor (transport)

Gov. Brian Sandoval budgeted about $70 million in recreational marijuana revenue in his two-year budget, an incentive for the state to kickstart the program sooner rather than later. 

Several legislative bills could change that tax structure, but, for the time being, recreational marijuana, which will be separated from medical marijuana during the grow period, will be sold with a 15 percent wholesale tax.

Medical marijuana will be sold with a 2 percent wholesale tax. Medical marijuana also carries a 2 percent tax applied at production and another 2 percent tax applied at sale. 

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While the regulations passed with only one “nay” vote, the bulk of pushback came from bitter wholesale liquor distributors who felt betrayed by both industry advocates and the Department of Taxation. 

“My clients have been pushed aside,” said attorney Samuel McMullen, who represents a group of wholesale liquor distributors. 

Wholesale liquor distributors were guaranteed as the sole distributors of recreational marijuana for the first 18 months of the new industry under legislation passed by voters in November. 

Now, regulations allow existing medical marijuana establishments and medical marijuana distributors to apply for licenses to distribute, or transport, recreational marijuana.

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The Department of Taxation maintained that it reached out in November to all of the distributors — about 60 in the state — and only about a dozen responded, which is insufficient for the expected demand of recreational product.

All businesses that receive licenses will be under strict oversight. Code violations can result in a 10-day correction period, license revocation or thousands of dollars in fines. 

Any business that operates without a license can be fined up to $35,000, while those who fail to comply with certain standards can be fined up to $10,000. 

The temporary regulations will be replaced by those currently being drafted by Gov. Brian Sandoval’s Marijuana Task Force, made up of industry leaders, private citizens and representatives of both local and state law enforcement, health and finance agencies. Those regulations will be in place no later than Jan. 1, 2018. 

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