A hitch in Nevada’s legal pot law may prevent licensing distributors
February 27, 2017
CARSON CITY — Nevada Department of Taxation officials are working on regulations to license distributors who can provide recreational marijuana to dispensaries in Nevada.
But those regulations will soon run into a problem authors of the ballot question that legalized pot in Nevada probably didn't think of.
Specifically, the law to "tax and regulate marijuana like alcohol" requires dispensaries to buy from licensed alcohol distributors and wholesalers. The problem: Any federally licensed booze distributor would risk that license by selling marijuana.
Those distributors are licensed under the Federal Alcohol Administration Act of 1935. To get and keep that license, wholesalers and distributors have to "operate in conformity with federal law." According to Sections 203 and 204 of that law, failure to do so is grounds to revoke that license.
“Before we issue a distributor-wholesaler license to some one we do ask for proof they’ve been permitted through the federal government. They are still to some extent being regulated federally even if they are only going to be moving goods in the state of Nevada.”Stephanie KlapsteinTaxation spokesman
That federal license will be revoked, "if the secretary of the Treasury finds that the permittee has willfully violated any of the conditions thereof," according to the 1935 law.
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Selling marijuana is a federal felony — obviously grounds to revoke that license.
At the state level, taxation spokesman Stephanie Klapstein said applicants for a state license to wholesale and distribute alcohol have to provide taxation with a copy of their federal license.
"Before we issue a distributor-wholesaler license to someone we do ask for proof they've been permitted through the federal government," she said. "They are still to some extent being regulated federally even if they are only going to be moving goods in the state of Nevada."
However, she said, suspension or revocation of the federal permit "is not statutorily identified as grounds for us to revoke their Nevada wholesaler license."
In any event, it's extremely unlikely a major liquor distributor would risk that federal license to sell a few lids of pot so no one expects any of the major distributors to get into the marijuana business. Southern Wine and Spirits, one of the nation's largest alcohol distributors, has a substantial share of the booze business in Nevada, including on the Las Vegas Strip. Several attempts to get a comment from that business were unsuccessful with a spokesman at their Florida headquarters saying only that their legal team was looking at the issue.
Taxation Director Deonne Contine said there is an out in the law allowing the state to permit marijuana distributors who don't have a federal license if they can show there aren't enough of those entities willing to do so.
There are currently 67 licensed distributor-wholesalers in Nevada but passage of the recreational marijuana law didn't suddenly draw a bunch of new applications. Just six new permits have been issued in the state since the November election.
Attempts to get a comment from Tom Hogue, spokesman for the Tax and Trade Board — the federal entity that licenses alcohol businesses — were also unsuccessful.
Contine said that whole issue isn't their focus at this point, that taxation is moving forward to produce first temporary and then final regulations for the licensure and regulation of recreational marijuana businesses. Klapstein said this week that they will continue to do so despite statements that the Trump Administration may move against states that have legalized recreational marijuana.
There have thus far been no indications what form a Trump administration crackdown would take and whether it would target individual users, suppliers and dispensaries or the state itself.