AB307 - Revises provisions governing the taxation of sales of cannabis and cannabis products. (BDR 32-149)

REQUIRES TWO-THIRDS MAJORITY VOTE (§ 5) A.B. 307 - *AB307* ASSEMBLY BILL NO. 307–ASSEMBLYMEMBERS GALLANT, COLE; AND GONZÁLEZ FEBRUARY 27, 2025 ____________ Referred to Committee on Revenue SUMMARY—Revises provisions governing the taxation of sales of cannabis and cannabis products. (BDR 32-149) FISCAL NOTE: Effect on Local Government: May have Fiscal Impact. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to taxation; eliminating the excise taxes on wholesale sales of cannabis; increasing the amount of the excise tax on retail sales of cannabis and cannabis products; revising the manner in which the revenues from the excise tax on retail sales of cannabis and cannabis products must be distributed; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law imposes an excise tax upon the first wholesale sale of cannabis by 1 a medical cannabis cultivation facility or an adult-use cannabis cultivation facility 2 to another cannabis establishment at the rate of 15 percent of: (1) the fair market 3 value at wholesale for sales made to an affiliate of the medical cannabis cultivation 4 facility or adult-use cannabis cultivation facility; or (2) the sales price of the 5 cannabis, if the sale is made to a cannabis establishment that is not an affiliate of 6 the medical cannabis cultivation facility or adult-use cannabis cultivation facility. 7 Existing law requires the revenues collected from those excise taxes to be 8 distributed: (1) to the Cannabis Compliance Board and to local governments in an 9 amount determined to be necessary by the Board to pay the costs of the Board and 10 local governments in carrying out the provisions of existing law governing the 11 medical and adult use of cannabis; and (2) if any money remains, to the State 12 Treasurer to be deposited to the credit of the State Education Fund. (NRS 13 372A.290) Section 5 of this bill eliminates those excise taxes on wholesale sales of 14 cannabis. 15 Existing law imposes an excise tax on each retail sale of cannabis or cannabis 16 products by an adult-use cannabis retail store or cannabis consumption lounge at 17 the rate of 10 percent of the sales price of the cannabis or cannabis products. Under 18 existing law, the revenues collected from that excise tax are required to be paid 19 over as collected to the State Treasurer to be deposited to the credit of the State 20 – 2 – - *AB307* Education Fund. (NRS 372A.290) Section 5 increases the amount of the excise tax 21 on retail sales of cannabis and cannabis products from 10 percent to 14.25 percent 22 of the sales price of the cannabis or cannabis products. Section 5 additionally 23 requires the revenues from that excise tax to be distributed: (1) to the Cannabis 24 Compliance Board in an amount determined to be necessary by the Board to pay 25 the costs of the Board in carrying out the provisions of existing law governing the 26 medical and adult use of cannabis; and (2) if any money remains, to the State 27 Treasurer to be deposited to the credit of the State Education Fund. 28 Sections 1-4 of this bill revise provisions relating to the excise tax on cannabis 29 to reflect the elimination of the excise taxes on wholesale sales of cannabis in 30 section 5. Section 6 of this bill revises provisions setting forth the sources of 31 revenue for the State Education Fund to eliminate references to the excise taxes on 32 wholesale sales of cannabis. Section 7 of this bill repeals provisions requiring the 33 Department of Taxation to establish procedures to determine the fair market value 34 at wholesale of cannabis, which are rendered obsolete by section 5. 35 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. NRS 360.2937 is hereby amended to read as 1 follows: 2 360.2937 1. Except as otherwise provided in this section, 3 NRS 360.320 or any other specific statute, and notwithstanding the 4 provisions of subsection 1 of NRS 360.2935, interest must be paid 5 upon an overpayment of any tax provided for in chapter 362, 363A, 6 363B, 363C, 363D, 369, 370, 372, 372B, 374, 377, 377A, 377C or 7 377D of NRS, [any of] the [taxes] tax provided for in NRS 8 372A.290, any fee provided for in NRS 444A.090, 482.313, 9 482C.230 or 482C.240, or any assessment provided for in NRS 10 585.497, at the rate of 0.25 percent per month from the last day of 11 the calendar month following the period for which the overpayment 12 was made. 13 2. No refund or credit may be made of any interest imposed on 14 the person making the overpayment with respect to the amount 15 being refunded or credited. 16 3. The interest must be paid: 17 (a) In the case of a refund, to the last day of the calendar month 18 following the date upon which the person making the overpayment, 19 if the person has not already filed a claim, is notified by the 20 Department that a claim may be filed or the date upon which the 21 claim is certified to the State Board of Examiners, whichever is 22 earlier. 23 (b) In the case of a credit, to the same date as that to which 24 interest is computed on the tax or the amount against which the 25 credit is applied. 26 – 3 – - *AB307* Sec. 2. NRS 360.417 is hereby amended to read as follows: 1 360.417 Except as otherwise provided in NRS 360.232 and 2 360.320, and unless a different penalty or rate of interest is 3 specifically provided by statute, any person who fails to pay any tax 4 provided for in chapter 362, 363A, 363B, 363C, 363D, 369, 370, 5 372, 372B, 374, 377, 377A, 377C, 377D, 444A or 585 of NRS, [any 6 of] the [taxes] tax provided for in NRS 372A.290, or any fee 7 provided for in NRS 482.313, 482C.230 or 482C.240, and any 8 person or governmental entity that fails to pay any fee provided for 9 in NRS 360.787, to the State or a county within the time required, 10 shall pay a penalty of not more than 10 percent of the amount of the 11 tax or fee which is owed, as determined by the Department, in 12 addition to the tax or fee, plus interest at the rate of 0.75 percent per 13 month, or fraction of a month, from the last day of the month 14 following the period for which the amount or any portion of the 15 amount should have been reported until the date of payment. The 16 amount of any penalty imposed must be based on a graduated 17 schedule adopted by the Nevada Tax Commission which takes into 18 consideration the length of time the tax or fee remained unpaid. 19 Sec. 3. NRS 372A.220 is hereby amended to read as follows: 20 372A.220 “Excise tax on cannabis” means [any of] the excise 21 [taxes] tax imposed by NRS 372A.290. 22 Sec. 4. NRS 372A.250 is hereby amended to read as follows: 23 372A.250 “Taxpayer” means : [a:] 24 1. [Cannabis cultivation facility; 25 2. Adult-use] An adult-use cannabis retail store; or 26 [3. Cannabis] 27 2. A cannabis consumption lounge. 28 Sec. 5. NRS 372A.290 is hereby amended to read as follows: 29 372A.290 1. [An excise tax is hereby imposed on the first 30 wholesale sale in this State of cannabis by a medical cannabis 31 cultivation facility to another cannabis establishment at the rate of 32 15 percent of: 33 (a) The fair market value at wholesale of the cannabis, if the sale 34 is made to an affiliate of the medical cannabis cultivation facility; or 35 (b) The sales price of the cannabis, if the sale is made to a 36 cannabis establishment that is not an affiliate of the medical 37 cannabis cultivation facility. 38  The excise tax imposed pursuant to this subsection is the 39 obligation of the medical cannabis cultivation facility. 40 2. An excise tax is hereby imposed on the first wholesale sale 41 in this State of cannabis by an adult-use cannabis cultivation facility 42 to another cannabis establishment at the rate of 15 percent of: 43 – 4 – - *AB307* (a) The fair market value at wholesale of the cannabis, if the sale 1 is made to an affiliate of the adult-use cannabis cultivation facility; 2 or 3 (b) The sales price of the cannabis, if the sale is made to a 4 cannabis establishment that is not an affiliate of the adult-use 5 cannabis cultivation facility. 6  The excise tax imposed pursuant to this subsection is the 7 obligation of the adult-use cannabis cultivation facility. 8 3.] Except as otherwise provided in subsection [8,] 3, an excise 9 tax is hereby imposed on each retail sale in this State of cannabis or 10 cannabis products by an adult-use cannabis retail store or cannabis 11 consumption lounge at the rate of [10] 14.25 percent of the sales 12 price of the cannabis or cannabis products. The excise tax imposed 13 pursuant to this subsection: 14 (a) Is the obligation of the seller of the cannabis or cannabis 15 product but may be recovered from the purchaser. 16 (b) Is separate from and in addition to any general state and 17 local sales and use taxes that apply to retail sales of tangible 18 personal property. 19 [4.] 2. The revenues collected from the excise tax imposed 20 pursuant to subsection 1 must be distributed: 21 (a) To the Cannabis Compliance Board [and to local 22 governments] in an amount determined to be necessary by the Board 23 to pay the costs of the Board [and local governments] in carrying 24 out the provisions of [chapter] chapters 678C and 678D of NRS; 25 and 26 (b) If any money remains after the revenues are distributed 27 pursuant to paragraph (a), to the State Treasurer to be deposited to 28 the credit of the State Education Fund. 29 [5. The revenues collected from the excise tax imposed 30 pursuant to subsection 2 must be distributed: 31 (a) To the Cannabis Compliance Board and to local 32 governments in an amount determined to be necessary by the Board 33 to pay the costs of the Board and local governments in carrying out 34 the provisions of chapter 678D of NRS; and 35 (b) If any money remains after the revenues are distributed 36 pursuant to paragraph (a), to the State Treasurer to be deposited to 37 the credit of the State Education Fund. 38 6. For the purpose of subsections 4 and 5, a total amount of 39 $5,000,000 of the revenues collected from the excise tax imposed 40 pursuant to subsection 1 and the excise tax imposed pursuant to 41 subsection 2 in each fiscal year shall be deemed sufficient to pay the 42 costs of all local governments to carry out the provisions of chapters 43 678C and 678D of NRS. The Board shall, by regulation, determine 44 the manner in which local governments may be reimbursed for the 45 – 5 – - *AB307* costs of carrying out the provisions of chapters 678C and 678D of 1 NRS. 2 7. The revenues collected from the excise tax imposed pursuant 3 to subsection 3 must be paid over as collected to the State Treasurer 4 to be deposited to the credit of the State Education Fund. 5 8.] 3. The excise tax imposed pursuant to subsection [3] 1 does 6 not apply to a sale of cannabis for the medical use of cannabis or a 7 medical cannabis product to the holder of a registry identification 8 card or letter of approval by an adult-use cannabis retail store that 9 has been deemed to be a dual licensee pursuant to NRS 678D.490. 10 [9.] 4. As used in this section: 11 (a) [“Adult-use cannabis cultivation facility” has the meaning 12 ascribed to it in NRS 678A.025. 13 (b) “Affiliate” means a person who, directly or indirectly 14 through one or more intermediaries, controls, is controlled by or is 15 under common control with, a specified person. 16 (c)] “Cannabis product” has the meaning ascribed to it in 17 NRS 678A.120. 18 [(d)] (b) “Letter of approval” has the meaning ascribed to it in 19 NRS 678C.070. 20 [(e) “Local government” has the meaning ascribed to it in 21 NRS 360.640. 22 (f) “Medical cannabis cultivation facility” has the meaning 23 ascribed to it in NRS 678A.170. 24 (g) “Medical cannabis establishment” has the meaning ascribed 25 to it in NRS 678A.180. 26 (h)] (c) “Medical cannabis product” has the meaning ascribed to 27 it in NRS 678A.200. 28 [(i)] (d) “Medical use of cannabis” has the meaning ascribed to 29 it in NRS 678A.215. 30 [(j)] (e) “Registry identification card” has the meaning ascribed 31 to it in NRS 678C.080. 32 [(k) “Wholesale sale” means the first sale or transfer of cannabis 33 by a cannabis cultivation facility to another cannabis establishment. 34 The term does not include a transfer of cannabis by a cannabis 35 cultivation facility to another cannabis cultivation facility when both 36 cannabis cultivation facilities share identical ownership.] 37 Sec. 6. NRS 387.1212 is hereby amended to read as follows: 38 387.1212 1. The State Education Fund is hereby created as a 39 special revenue fund to be administered by the Superintendent of 40 Public Instruction for the purpose of supporting the operation of the 41 public schools in this State. The interest and income earned on the 42 money in the Fund, excluding the direct legislative appropriation 43 from the State General Fund required by subsection 3, must, after 44 deducting any applicable charges, be credited to the Fund. 45 – 6 – - *AB307* 2. Money which must be deposited for credit to the State 1 Education Fund includes, without limitation: 2 (a) All money derived from interest on the State Permanent 3 School Fund, as provided in NRS 387.030; 4 (b) The proceeds of the tax imposed pursuant to NRS 244.33561 5 and any applicable penalty or interest, less any amount retained by 6 the county treasurer for the actual cost of collecting and 7 administering the tax; 8 (c) The proceeds of the tax imposed pursuant to subsection 1 of 9 NRS 387.195; 10 (d) The money identified in subsection 9 of NRS 120A.610; 11 (e) The portion of the money in each special account created 12 pursuant to subsection 1 of NRS 179.1187 which is identified in 13 paragraph (d) of subsection 2 of NRS 179.1187; 14 (f) The money identified in paragraph (d) of subsection 6 of 15 NRS 278C.250; 16 (g) The money identified in subsection 1 of NRS 328.450; 17 (h) The money identified in subsection 1 of NRS 328.460; 18 (i) The money identified in paragraph (a) of subsection 2 of 19 NRS 360.850; 20 (j) The money identified in paragraph (a) of subsection 2 of 21 NRS 360.855; 22 (k) The money required to be tra [Text truncated for display. 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