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As legal marijuana sales statewide drop off, Nevada’s marijuana industry leaders are concerned about the industry’s inability to collect federal relief funds should their sales continue to tank.
“It’s safe to say sales are below 50 percent statewide, many stores are below that, and some are (temporarily) closed,” said Riana Durrett, executive director of the Nevada Dispensary Association.
Immediately after Gov. Steve Sisolak restricted cannabis sales to delivery-only purchases, retailers statewide saw a dramatic dive in sales for a number of reasons, Durrett said.
“(It) was a mixture of the lack of capacity to meet the market demand through delivery, a drop in tourism and because people had already stocked up,” said Durrett.
While the new measure is one of many that state officials are taking to contain the spread of the coronavirus in Nevada, the industry’s long-term concern is whether cannabis businesses will be able to take advantage of the stimulus funding that other businesses are entitled to.
“Their expenses are increasing at this time while their sales are decreasing significantly,” she said, noting that the industry is playing catch up with its new delivery model.
Following the switch to a delivery-only business model industry wide, businesses were forced to acquire more vehicles, change sales platforms and hire new drivers, which can take up to two weeks since they require agent cards for transportation of product.
“They are also implementing further precautions to prevent the spread of COVID-19 while conducting deliveries,” Durrett said.
Nevada’s cannabis sales dropped about 20 percent below typical numbers, according to BDS Analytics, which analyzes marijuana sales data.
“Normally, March is a significant pickup month in Nevada. We’d usually see an 18 percent increase year over year, too,” said BDS CEO and founder Roy Bingham.
Nevada did about $60 million in sales in March 2019, and they’ll likely even out to about the same for this year due to the rapid rise and then fall of sales, according to Bingham.
“It will likely be the first month without significant increase year over year since adult use,” Bingham said.
April, however, could potentially fall below past sales, Bingham said, despite the fact it has one of the highest cannabis sales days nationwide, April 20, considered by some consumers to be a holiday to celebrate pot.
“It’s likely sales will continue to be impacted by COVID-19 once stores reopen due to the lack of tourism and unemployment,” said Durrett.
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No reefer relief
A dent in the cannabis industry will further put a damper on the state’s already hurting economy.
The industry directly employs about 8,200 people statewide, according to Durrett, and it pulled in nearly $110 million in taxes and fees from during fiscal year 2019, according to state records.
While cannabis businesses are required to comply with all federal mandates, which means they will have to pay taxes, sick leave and family medical leave mandates under recent disaster relief bills passed by Congress, they won’t be eligible for the subsidies under those bills, according to Durrett.
“(Cannabis businesses) are not eligible for any federal relief, except possibly delaying their payroll tax payment,” Durrett said.
Cannabis businesses are legal and regulated under state law, but federal law still prohibits the use and sale of marijuana. The federal prohibition complicates banking, payroll and record keeping in the industry.
“Other businesses that are able to weather the storm (can do so) with forgivable loans and can afford to keep employees because their payroll is being subsidized, but the cannabis industry will not receive any financial assistance,” Durrett said.
State officials have helped the industry to increase its delivery capacity by expediting the transport vehicle approval process that cannabis dispensaries and delivery businesses have to go through.
About 850 vehicles now are on the roads delivering cannabis to Nevadans, according to Tyler Klimas, executive director of the Cannabis Compliance Board in Nevada.
“I see industry pivoting their business models, but there are a lot of business that are going to have to make tough decisions, and the cannabis industry is not immune,” Klimas said.
The board will have a lot of difficult decisions before it, Klimas said, but it’s hard to tell what those decisions will be until the board is full and the epidemic begins to subside.
The main goal will be to streamline processes and ensure that, for retailers who closed temporarily, getting back online will be a smooth but also well-regulated process, Klimas said.
For now, state officials continue to monitor the retailers, request documentation and pull video surveillance footage at will to ensure that operations are still running up to par with state regulations. The concern that consumers will turn to the black market as the industry is faced with change is as worrisome as it was before the epidemic, Klimas said.
“I can tell you the same concerns that keep me up at night for potential of diversion – the same concerns we had before the pandemic – they are still top of mind and our enforcement measures have not changed,” he said.
Klimas believes the state’s decision to switch to delivery-only was a necessary action as he recalls dispensary lines, not consistent with social distancing guidelines, out the door and around buildings just before the governor’s order came down.
“I think it was the right move, and I think it was a move that potentially saved lives,” Klimas said.
Klimas said the board is still on schedule to fill the two open seats on the five-person board by July, and the state will continue to regulate and monitor the industry thoroughly.
“We’re going to do everything that we can to get the industry back to normal,” said Klimas.
Jenny Kane covers arts and culture in Northern Nevada, as well as the dynamic relationship between the state and the growing Burning Man community. She also covers the state’s burgeoning cannabis industry (Check out her podcast, the Potcast, on iTunes.) Support her work in Reno by subscribing to RGJ.com right here.
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