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Advanced Tax Planning

100+ Years of Combined Tax Resolution Experience.

Where Does the Tax Money Go for Nevada Recreational Marijuana?

On June 30th of 2017, people began lining up outside of Nevada’s newest dispensaries after the legalization of recreational marijuana in the state. The marijuana industry in Nevada is booming.

What people don’t always know is the amount of tax on Nevada recreational marijuana- it is the most taxed item in the United States.

One popular idea that supports the legalization of marijuana is the ability to tax it. In the United States, there never seems to be enough tax money to help with infrastructure, education, research, and more. Many people agree that taxing marijuana is a good idea.

As states legalize recreational marijuana, they add their own tax to it. The state will determine how they will use the tax money they collect. 

Let’s find out where the Nevada recreational marijuana taxes go.

Nevada Recreational Marijuana Taxes

Most of everything you buy has a tax on it. Depending on the state, this includes prepared food, clothing, and the latest tech gadgets. Well, the same is true for marijuana, too.

One tax you’ll hear a lot about is an excise tax which is a legislated tax you already find on alcohol, gasoline, and tobacco products. It’s a tax imposed by a government infrastructure within a country.

While you do see the sales tax on an item when you buy it, you rarely see the entire excise tax. This is because marijuana businesses pay the excise tax directly. These businesses will increase the cost of their products to help cover the costs of the excise tax.

Since legalization, an excise tax exists on marijuana. Nevada recreational marijuana has 2 different excise taxes based on the type of marijuana sold.

Wholesale marijuana, which is bought in large quantities, has a 15% excise tax. Dispensaries are the main groups that pay this tax. 

Retail marijuana, AKA marijuana sold to individuals at a dispensary, has a 10% excise tax. This tax is what most consumers will pay when they buy marijuana in Nevada.

In 2019, tax collected from Nevada recreational marijuana sales neared $100 million. That includes both the 15% wholesale and 10% sales excise taxes.

People with a medical marijuana card do not have to pay the retail excise tax or pay a much lower percentage.

But where does this tax money go?

Taxes for Education

Education is a struggling industry across the United States. Even the wealthiest school districts don’t have enough money to meet the needs of students and teachers.

One place that the taxes on Nevada recreational marijuana go is education. A percentage of the tax collected from marijuana always went to schools.

But it wasn’t until May of 2019 that Senate Bill 545 proposed that all money collected from the 10% excise tax on marijuana go to schools. Originally, a small amount of tax money collected from the 15% excise tax went to education. In 2018, that total came to around $27 million for Nevada’s Distributive School Account.

Senate Bill 545 helps get more money into Nevada’s education system. Today, around $60 million goes to schools. This includes the Clark County School District which is one of Nevada’s most underfunded districts in the state.

The Nevada Distributive School Account then divides the money based on districts’ needs and the number of students. Depending on the school year, about 80% of the funding goes to employee salaries and benefits. The other 20% helps cover the costs of transportation, utilities, and school materials.

Taxes for the Homeless

At the county level, Clark County in Nevada is using tax money collected from marijuana business license fees to combat homelessness. The amount isn’t as large as the tax used for education, but it’s a start.

The county shares the money with organizations that help the homeless. This includes warming houses, shelters, and food pantries. Many of these organizations help people who are homeless by offering them a place to stay, finding them a job, and then helping them find a place to live.

When marijuana first became legal in Nevada, business license fees and taxes went straight to Nevada’s emergency fund. In 2019, the county decided to allocate more money to homeless organizations. These include HELP of Southern Nevada and the Shannon West Homeless Youth Center.

Taxes for Nevada’s Emergency Fund

In 2017, Nevada’s emergency fund was at an all-time low. Before the education bill, Senate Bill 487 passed to allocate much of the tax collected from Nevada’s marijuana to the emergency fund.

Nevada’s emergency fund helps during times of economic downfall. The purpose of the fund is for the state to save money during good economic times. If or when the economy falls, the state can use the money in the fund to continue funding state programs and more.

Every state has some form of an emergency fund.

To improve Nevada’s low emergency fund, the 10% excise tax on marijuana sales went to the fund rather than education. The first year of legal marijuana sales led to a total of $70 million in both 10% and 15% taxes. About $43 million came from the tax on sales and used only for the emergency fund.

In 2019, this changed with the education bill. Now, all the money collected from the 10% excise tax goes to education. A fraction of the money from the wholesale excise tax goes to the emergency fund.

While the idea of the emergency fund sounds good, many people question whether or not this taxation is sustainable.

Is Marijuana Taxing Stable?

People like to buy and use legal recreational marijuana. The same is true in Nevada.

Most people believe the popularity of marijuana makes it a stable item to tax. Across the country, states who legalized Marijuana continue to have demand. Many supporters believe the demand might slow over a few years, but not end.

However, some people aren’t so sure.

Due to the heavy taxes and state fees dispensaries face, many believe some dispensaries will close. Others believe the demand for marijuana will slow after the novelty has worn off.

The question of whether the taxes collected from Nevada recreational marijuana will continue is uncertain.

Do you own a marijuana dispensary or are thinking about joining the business? Let us know. We’re happy to provide you with any tax help. 

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