Legal sales of marijuana for recreational use began last July in Nevada and in January in California. Although California sells a lot more legal weed than Nevada, California sales are much lower than projected while Nevada’s are much higher.
First the good news. From July 2017 through March 2018 (the first nine months of Nevada’s fiscal year), combined taxable sales of marijuana totaled $386 million, of which nearly $305 million represents sales for recreational use. Sales in March posted a record total of just over $41 million. Through March, the state has collected almost $49 million in taxes, about 97% of its estimated full-year take of $50.32 million.
The less-good news about recreational pot sales comes from California, where the latest projections based on sales to date estimate sales will be about half the original estimates.
According cannabis industry analyst firm New Frontier Data, sales in California this year will total $1.9 billion, exactly half the original estimate of $3.8 billion. Giadha Aguirre De Carcer, CEO of New Frontier, told the Los Angeles Times that strict rules on growers, distributors, and retailers combined with low governmental authorization in California cities are to blame.
Only about 30% of California’s 540 cities have have so far permitted commercial cannabis activity. The effect has been to send consumers to the black market where they pay no taxes and illegal sellers easily undercut legal prices.
In February the Los Angeles Police Department shut down 8 illegal pot stores but the deputy chief told the Los Angeles times that another 200 to 300 illegal stores were still operating in the city.
Marijuana tax collections in California totaled $33.6 million in the first quarter of 2018, virtually guaranteeing that the state would not reach its estimated 6-month total of $175 million in tax collections.
California’s estimated legal and illegal marijuana market totals around $7.8 billion. About $2.3 billion comes from sales of medical marijuana. If the legal market is only taking about $1.9 billion of the total, the rest ($3.6 billion) is going to the illegal market.
And that illegal market is only for sales inside the state. California also exports (illegally, of course) tons of marijuana. State residents consumed about 2.5 million pounds of marijuana (most of it illegally) in 2016 and produced about 13.5 million pounds. Those 11 million pounds are sold, illegally, to out-of-state buyers.