The Nevada Department of Taxation (NDOT) recently released sales and tax data from the state’s legal cannabis market for February 2020. Total retail sales experienced their largest month-over-month decline since the opening of the state’s adult-use market in July 2017. Tax data indicates that wholesale trading and transfer volume also contracted significantly.
February tourism figures show that the number of visitors to Las Vegas was unaffected by the COVID-19 pandemic that month, though anecdotal reports suggest there may have been a drop off in visitors from certain parts of the world. With the Las Vegas metro area – which accounts for around 80% of Nevada’s cannabis commerce – essentially shut down beginning in late March, and cannabis retailers limited to only delivery sales, February’s low revenue numbers mean that some businesses may not have any cushion to absorb the suppressed sales they have experienced for in excess of the past month.
According to NDOT data, Nevada cannabis retailers generated almost $51.7 million in revenue in February, down from over $64.1 million in sales in January. Those figures include both retail sales of adult-use and medical cannabis, with February’s off by 19.4% compared to January’s cumulative revenues. February 2020’s sales are up by 3.2% year-over-year, compared to over $50.1 million in cumulative revenue recorded in the same month in 2019. Recent months have generally seen year-over-year sales increases of around 20%.
February 2020’s total retail revenues are the lowest monthly sales figure recorded for Nevada’s market since February 2019. While sales did decline from January to February 2019 they did so by a much smaller magnitude, of 5%. Interestingly, overall tourism figures for the month appear as if they were unaffected by the COVID-19 pandemic, which in February was mostly impacting countries outside the U.S. According to the Las Vegas Convention and Visitors Authority (LVCVA), February 2020 saw over 3.3 million tourists visit Sin City, up 4.5% year-over-year.
Some reports – such as this one from local outlet KLAS – indicate that the number of tourists traveling from China and other Asian countries, which were struggling to deal with the coronavirus outbreak in February, was reduced, but again the overall numbers from the LVCVA do not point to a significant contraction in tourists to what is by far Nevada’s largest local cannabis market. The LVCVA data does not track daily information on tourist visits, so it is possible that tourism declined later in the month, which could go some way to explain the dramatic drop-off in monthly sales.
Of February’s sales total, over $46.4 million was constituted by adult-use cannabis sales, or 89.8% of overall monthly revenues. In January, $54.5 million in adult-use sales made up 85.1% of total revenue. February 2020’s retail revenues from the adult-use market are down by 14.9% month-over-month, and are up by 9.1% year-over-year.
Sales of cannabis to medical patients, as well as any revenues from other goods, decreased by about 45% from January to February, from over $9.5 million to over $5.2 million, respectively. In January, sales to registered patients jumped by about 45%, indicating that those with medical cannabis recommendations stocked up in January and did not need to make additional purchases in February.
On the production side, Nevada’s 15% wholesale excise tax applies to transfers of product in both the adult-use and medical sectors of the state’s legal cannabis industry. Receipts from the state’s supply-side excise tax in February dropped by almost 35% from the prior month, to almost $2.95 million, from almost $4.52 million collected in January. In January, collections from the wholesale excise tax spiked by about 55% month-over-month, indicating that transfers and wholesale trades from cultivators to processors and retailers have been occurring unevenly in recent months, after holding steady in Q3 2019, then rising to record levels in October and November 2019.
The decrease in collections from the state’s wholesale excise levy indicates that the overall volume of product traded and transferred by cultivators to retailers and processors contracted significantly in February. Fair Market Values (FMVs) – which are set by the state and upon which cultivators’ tax burdens are based – were stable from January to February. FMVs are adjusted biannually by Nevada regulators, on January 1 and July 1.