The Nevada Department of Taxation (NDOT) recently released sales and tax data from the state’s legal cannabis market for July 2018. Just as in June, combined tax collections from retail sales and wholesale transfers in Nevada established a new record high, with receipts from the state’s levy on wholesale transfers also reaching a new all-time high on its own.
However, due to the manner in which Nevada taxes wholesale trading – explained below – it appears that the volume of product moved in the supply side of the state’s market actually subsided compared to June.
According to NDOT data, Nevada cannabis retailers generated just over $48.4 million in revenue in July. That figure includes both retail sales of adult-use and medical cannabis, as well as other merchandise sold by dispensaries that is subject to sales tax, and is up very slightly – by 0.05% compared to June’s cumulative revenues. July 2018’s total taxable sales in Nevada are up by 21.5% year-over-year, compared to over $39.8 million in cumulative revenue recorded in July 2017, the first month of adult-use sales in the state.
Of July’s sales total, just under $41 million was generated by adult-use cannabis sales, or almost 85% of overall monthly revenue. Those figures are up from almost $40.6 million in sales, which made up about 84% of total revenue in June. For the recently-concluded fiscal year, cannabis sales to general adult consumers accounted for just over 80% of all revenue generated by the state’s industry, or almost $425 million of about $530 million in total sales.
Sales of cannabis to medical patients, as well as any revenues from other goods, decreased by about 5% from June to July, from $7.8 million to $7.4 million, respectively.
As of July, monthly retail revenues in the adult-use sector exceeded $40 million for three consecutive months, the first time such a phenomenon has been observed since the start of sales to the general adult public in July 2017. May’s sales of $43.7 million remain the record for Nevada’s young adult-use market.
Wholesale tax collections for Nevada’s cannabis market in July increased for the second consecutive month, while also reaching a record high for the second month in a row. 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 July amounted to over $3.8 million, up by about 24% from June’s collections of over $3.06 million, which itself followed a 12% month-over-month increase from May to June.
Much of the increase in wholesale tax revenue that was reported for July is likely due largely to rising Fair Market Values (FMVs). Nevada’s wholesale excise tax on cultivators is calculated by taking 15% of standard Fair Market Values (FMVs) set by the state Department of Taxation (NDOT), rather than actual contract prices. FMVs for various product types are established biannually and new ones went into effect in July.
For example, the FMVs in effect for the second half of this year for flower, trim, and small buds are all up compared to those in effect for the first half, by 23.4%, 32.8%, and 48.5%, respectively. Given the fact that FMVs generally increased by greater proportions than wholesale tax collections in July, the data indicates that total volume of wholesale transfers may have decreased in that month relative to June.