Nevada Voters Approve Recreational Marijuana Initiative

November 9, 2016 Cannabis Law Alert

The Nevada Marijuana Legalization Initiative, also known as Question 2 on the November 8, 2016, ballot passed with a vote of 54 percent. Question 2 amends existing Nevada law to enact the Regulation and Taxation of Marijuana Act (the Act), which, among other things, permits a person 21 years of age or older to possess, use, consume, purchase or process one ounce or less of marijuana, excluding concentrated marijuana, and one-eighth of an ounce of concentrated marijuana. The Act also permits a person 21 years of age or older to cultivate no more than six marijuana plants for personal use, provided that: (1) the cultivation takes place in a closet or other enclosed area that can be locked; (2) no more than 12 plants are possessed or cultivated at a single residence; and (3) the cultivation is not within 25 miles of a licensed retail marijuana store. Last, the Act allows a person 21 years of age or older to obtain and use marijuana paraphernalia.

Much like regulations pertaining to alcohol, civil and criminal penalties can be imposed under the Act for driving under the influence of marijuana or knowingly selling or giving marijuana to a person under 21 years of age, unless the recipient is permitted to possess marijuana under Nevada’s existing medical marijuana laws. In addition, penalties can be imposed for possessing or using marijuana or marijuana paraphernalia in state correctional facilities, possessing or using marijuana on school grounds or undertaking any task under the influence of marijuana that constitutes negligence or professional malpractice. Furthermore, the Act does not prevent employers from enforcing marijuana bans for their workers or marijuana bans in public buildings or on private property.

The Act also permits the operation of marijuana establishments, which will be regulated by the Nevada Department of Taxation (the Department). While the effective date of the Act is January 1, 2017, the state will not begin accepting applications or issuing licenses until several months after that date. Under the Act, the Department is required to begin accepting applications for marijuana establishments no later than 12 months after the effective date of the Act. For a period of 18 months after the Department begins accepting applications, applications for retail stores, product manufacturing facilities and cultivation facilities will only be accepted from currently registered (licensed) medical marijuana establishments. Moreover, during the 18-month time frame, the Department will only issue marijuana distributors licenses to persons holding a Nevada wholesale liquor license, unless the Department determines that doing so would result in an insufficient number of marijuana distributors.

Once the Department receives a complete marijuana establishment license application, it will have 90 days to either issue the appropriate license or send a notice of rejection that sets forth the reasons why the application was not approved. An application will be approved if the prospective marijuana establishment complies with the Act and any other regulations adopted by the Department. In addition, in order to be approved, a proposed marijuana establishment must not be located within 1,000 feet of a public or private K-12 school or 300 feet of a community facility. All licenses would expire within one year of the date of issuance and would be renewed by the Department within 10 days of receipt of a complete renewal application.

All applicants for a marijuana establishment license will be required to pay a one-time application fee of $5,000, which is assessed per license. Thus, if an applicant wishes to open both a retail establishment and a cultivation facility, the applicant must pay the $5,000 fee for each license application. In addition, the Department will impose an annual fee ranging from $3,300 to $30,000, depending upon the type of license issued. The Act also imposes a 15 percent excise tax on wholesale sales of marijuana in Nevada by a marijuana cultivation facility, while retail establishments will continue to pay the two percent excise tax that is currently in place. The revenue from the marijuana excise tax, as well as revenue from licensing fees and penalties collected by the Department, would first go to the Department and local governments to cover the costs of enforcing the provisions of the Act and any regulations promulgated thereunder. Any remaining revenue would be deposited in the State Distributive School Account, which provides funding for public K-12 education. 

For questions or more information about this alert, please contact Mark J. Connot at 702.699.5924 or [email protected], Tracy A. Gallegos at 702.699.5908 or [email protected] or any member of the firm’s Cannabis Law Practice.

*Please be mindful that possessing, using, distributing and/or selling marijuana is a federal crime, and no legal advice we give is intended to provide any guidance or assistance in violating federal law nor will it provide any guidance or assistance in complying with federal law. Please also note that we are not advising you regarding the federal, state or local tax consequences of engaging in any business in this industry.