Lower cannabis retail prices are leading to diminishing cannabis tax revenue in Nevada, where state lawmakers are considering adjusting tax rates in response.
Nevada cannabis retailers are still busy ringing up purchases in the $758 million annual market, but price compression is seeing tax revenue decline by 40% from a 2021 peak, according to the Nevada Current.
That’s because the prices of most items have diminished in Nevada’s mature market.
The price of flower has dropped 50% since 2019, while edibles have declined in price by 40% since then, the Current reported.
Are Nevada cannabis taxes high compared to other states?
Nevada cannabis is subject to both wholesale and retail cannabis taxes plus state and local sales taxes.
- A 15% wholesale tax applies to the “fair market value” as the state determines on a quarterly basis
- A 10% excise tax at the point of sale for adult-use consumers
That still leaves Nevada cannabis taxes “average or below average” compared to the rest of the country, said state Cannabis Compliance Board Executive Director Michael Miles, according to the Current.
In response, Las Vegas -area state Assemblymember Danielle Gallant has proposed cutting the wholesale tax entirely and raising the excise tax to create more revenue.
However, that would require increase the excise tax to as much as 15%, according to a report submitted to state lawmakers, potentially raising the tax burden paid by consumers by 50%.
Is Nevada raising cannabis taxes?
As the Current reported, Gallant’s proposal has never advanced out of committee, and there is currently no tax increase proposal before Nevada lawmakers.
Current fair market value at wholesale for cannabis products in Nevada are
- $1,037 for a pound of flower
- $150 for flower approved for extraction
- $1,134 per pound of flower meant for pre-rolls
According to the Tax Foundation, Washington is still home to possibly the heaviest taxes in the country at 37%.
What happens when a state raises cannabis taxes?
Other western states have reassessed cannabis taxes over the past few years as annual sales revenue steadily declines from a Covid-19 pandemic-era peak.
Last year, California Gov. Gavin Newsom signed a bill that eliminated a short-lived increase in state excise taxes from 15% to 18%, but sales have continued to flatten absent what many operators say is a badly needed tax cut.
However, a recent increase in the Michigan wholesale tax to 21% – on top of a 10% excise tax and state and local sales taxes – is hampering the industry there, operators have said.
Cannabis operators say that tax increases don’t lead to an increase in state revenue, as sticker shock compels consumers to find cheaper alternatives on the illicit market.
