US (NV): "Quirks of cannabis tax formula mean heavy burden for cultivators as prices drop"

In Reno cultivator Sarah Rosenfeld's recent experience, the top dollar a pound of cannabis bud or flower might fetch at wholesale prices is about $1,800 to $2,000, and that's if it's packaged and has a high concentration of the active ingredient THC. Something in bulk with less potency might be closer to $900.

But according to the Nevada Department of Taxation's newest determination this summer, the fair market value of cannabis flowers or buds is $2,074 a pound, and state law requires a 15 percent wholesale tax to be applied to that value. Farmers say the assumption that they're receiving approximately that high price at every sale is causing strain as they've struggled with falling cannabis prices since a pandemic peak at the same time they're reckoning with rapid inflation.

"It's just made the profit margin completely disappear," said Rosenfeld, owner of MMG Agriculture. Industry groups want the Cannabis Compliance Board (CCB) and Nevada Department of Taxation to revisit the way they determine the tax rate. Under the existing model, the fair market value calculation is based on the price of cannabis over a six-month period that is at least one full quarter behind the current one.

That means prices from as far back as October 2021, when sales prices were higher than they are now, are influencing the tax rate almost a year later and forcing cultivators to pay effective tax rates that can be closer to 30 percent or double the 15 percent that the Legislature intended.

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