Nevada Weighs Killing Its 15% Wholesale Cannabis Tax. A 14-Store Chain Says Shoppers Will Pay

Jon Marshall put his objection on paper the day Nevada lawmakers heard the numbers. On Oct. 21, as the Joint Interim Standing Committee on Revenue convened at 9:30 a.m. in Room 165 of the Legislature's building on Amigo Street in Las Vegas, a letter from the chief operating officer of Deep Roots Harvest went into the committee's public record. It opposed an idea the committee was about to hear as agenda item five: abolish the state's 15 percent wholesale tax on cannabis and make the money back at the register. (S2, S3)

Deep Roots is not a bystander. The vertically integrated company has held a Nevada license since 2014, has operated since 2016 and runs 14 dispensaries across Clark, Nye, Elko, Lyon and Washoe counties, according to the letter. Marshall built his case from the state's own study. Its model assumed cultivators would not cut wholesale prices once their tax disappeared. If growers kept that 15 percent as margin while the retail tax went up, he wrote, "costs at the register to consumers would rise." (S1, S2)

He was writing as the owner of both ends of the trade, a grower that would shed a tax and a retailer whose customers would pick up a bigger one. He came down on the side of the customer, and he closed with a hedge that lobbying letters rarely carry. (S2)

The committee took no action, Nevada Current reported, but the report it heard now goes to the 2027 Legislature with a detailed public accounting of what a decade of legal sales has done to Nevada's cannabis tax base. Required by Section 54.7 of Assembly Bill 76 of the 2025 session, the study draws on 8,374 county-by-product-by-month records from the state's Metrc tracking system, January 2019 through December 2025: about $5.46 billion in sales and 150.7 million transactions. It describes a market selling more product to more customers at steadily lower prices, and a school fund getting less from it. (S1, S4)

Cannabis excise money transferred to the State Education Fund peaked at $159 million in fiscal 2021 and fell to $95.8 million in fiscal 2025, a 40 percent drop. Much of the coverage described that 40 percent as the decline in excise revenue. The report's own table shows combined wholesale and retail collections fell from $157.8 million to $111.8 million over those years, about 29 percent; the steeper figure is what reached the schools. The table puts fiscal 2026 collections at $103.8 million, a year the report says was not yet finalized. (S1, S4)

The wholesale side is eroding fastest. Nevada has charged 15 percent on the "fair market value" of wholesale cannabis since recreational sales began in fiscal 2017, alongside a 10 percent excise on adult-use retail sales and state and local sales taxes of 6.85 to 8.375 percent. Wholesale collections fell from $65.6 million in fiscal 2021 to $33.5 million in fiscal 2026, roughly half, while the retail excise slid from $92.1 million to $70.4 million. Cultivators have long argued that the state's fair-market-value formula trails falling prices, leaving them taxed on value their product no longer fetches. (S1, S4)

Prices are the story under the numbers. The average price of flower, the largest category at $2.13 billion in sales over the seven years, fell from $9.02 a gram in 2019 to $4.46 in 2025, a 50.5 percent decline. Infused edibles went from $19.77 to $11.81 an item. Small and popcorn buds dropped 55.2 percent. Nine of the 10 top-selling categories ended the period cheaper; tinctures were the exception. Meanwhile the gross weight cultivators shipped rose from about 278,355 pounds in 2019 to 617,442 pounds in 2025, up 121.8 percent, a measure the report warns can count the same material more than once as it moves between licensees. (S1)

The swap is not a new idea. Republican Assemblywomen Danielle Gallant of Henderson and Lisa Cole sponsored Assembly Bill 307 in 2025 to eliminate the wholesale tax and raise the retail excise. The bill never cleared committee, but language to study the concept was folded into AB 76, which ordered the Cannabis Advisory Commission to form a Subcommittee on Taxation of Cannabis. Erica Scott, an economist at the Nevada Department of Taxation, chaired it; David Goldwater, Frederick Steinman, Mauricio Solorio Arteaga and Mitchell Britten served as members. (S1, S2, S4, S6)

Working under a mandate to study rather than to recommend, the subcommittee kept its answer narrow. If the Legislature eliminates the wholesale tax, the retail excise would have to rise from 10 percent to between 12 and 15 percent to keep the school fund whole. On fiscal 2025 numbers, dropping the wholesale tax would cost the fund roughly $21 million. At 12 percent, the elasticity models project licensed taxable sales falling 1.8 to 2.8 percent and add $11.8 million to $12.7 million in retail excise revenue. At 15 percent, sales fall 4.3 to 6.8 percent and revenue rises $28.3 million to $30.9 million. "The subcommittee does not make a recommendation as to whether the Wholesale Cannabis Tax should be eliminated," the report says. (S1)

Everything turns on one assumption. The model holds wholesale prices flat after the tax disappears, on the theory that licensed cultivators "would be incentivized to maintain the 15 percent former tax amount as an offset to prior lost margins." The report also lists what its data cannot capture, including whether shoppers would respond by buying from the illicit market or across state lines. Medical sales, a steady 4 percent of the total across all seven years, are exempt from the retail excise, so under that same flat-price assumption patients would see little change. (S1)

Michael Miles, executive director of the Cannabis Compliance Board, presented the item with Scott and the board's deputy director, Steve Gilbert. Miles described the trade as one that should balance over time. "We are getting rid of one big tax, a 15% excise tax on wholesale, and increasing retail tax anywhere from 2 to 5%," he told the committee, according to Nevada Current. It is "not guaranteed it's going to even out, but the idea is that it should even out." He added that Nevada is considered "average or below average" in how heavily it taxes cannabis nationally. (S3, S4)

Scott, for her part, told lawmakers the price slide "could be reflective of a combination of factors," from competition and production efficiencies to "greater availability of lower priced products, which in this market would be illicit products and intoxicating hemp." (S4)

Marshall reads the same tables the other way. Retail excise collections, which track taxable sales at an unchanged 10 percent rate, have fallen every year since fiscal 2021, he notes, and the industry is "coming off two consecutive years of 8% market contraction." The report's projected sales loss could mean customers buying less, leaving the market or turning to unlicensed sellers, and "each of these scenarios is plausible," he wrote. Cost-conscious shoppers would shrink their baskets, he argued, and lower demand against the same supply would push prices down further for many operators. (S2)

“However, if the tax shift is enacted and lowers costs for consumers, we would be happy to be proven wrong.”

— Jon Marshall, Chief Operating Officer, Deep Roots Harvest, in an Oct. 21 letter to the committee

The report puts figures on that risk without settling it. Drawing on a 2024 state market study, it estimates Nevada's illicit market at about $145 million against a licensed market of about $725 million in 2025, and says the projected drop in licensed sales could translate into a $13 million to $49 million gain for illicit sellers, while cautioning that not every lost sale would move there. It also sizes a competitor that has never been tracked in Metrc: intoxicating hemp, at roughly $43 million a year, extrapolated from Minnesota data. Some news accounts put that figure at $45 million; the report's text says $43 million. It recommends taxing hemp at whatever rate cannabis ends up paying. (S1, S4)

Congress may make that recommendation moot. The report notes that Section 781 of the 2026 agriculture appropriations law redefines hemp by total THC and caps finished consumer products at 0.4 milligrams per container, with the effective date pushed from Nov. 12 to Dec. 11. It calls the change essentially a "hemp ban." (S1)

Then there is the plumbing. The wholesale tax pays for a $5 million distribution to local governments and for the Compliance Board's operating budget. The subcommittee suggests lawmakers ask whether counties still need the $5 million, since every county with legal sales already collects license fees that state law allows up to 3 percent of gross receipts, and it recommends that the board's share move to the higher retail tax. (S1)

Nevada is not the only maturing market rethinking where in the supply chain to collect. In Michigan, a lawmaker who voted for a 24 percent wholesale tax now wants it suspended for a year, and in Connecticut a potency-based tax lifted collections while sales stayed flat. (S8)

Several lawmakers on the revenue committee asked for more data on consumer behavior and on what other states saw after raising retail excise taxes, according to Nevada Current, and one suggested the change would be more transparent to customers. The committee may revisit the question as the 2027 session approaches. (S4)

Marshall's letter does not ask for a counterproposal. It asks lawmakers to reject the shift and promises that Deep Roots will "remain engaged in discussions with proponents." Its 14 stores stretch from Elko to the Las Vegas valley, and each would be the place where the theory gets tested. If growers pocket the 15 percent and shelf prices stay where they are, his customers pay about five points more. If growers cut their prices, he has already put in writing that he would accept the result. (S2)

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