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Nevada Has a Legal Marijuana Shortage But Still Expects $120 Million In New Revenue

States that have legalized recreational marijuana are enjoying an upsurge in new business and tax revenue that prohibition states are likely to envy.

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Nevada businesses have already raked in millions in marijuana sales – and state government is getting its fair share, too.

Ethan Miller | Getty Images

Recreational marijuana sales started in July in the Silver State. In just that first month, dispensaries in Nevada sold $27.1 million worth of marijuana -- more than businesses in either Colorado or Oregon made in their first month of recreational sales -- with the state pocketing $10.2 million in taxes and fees.

Nevada Gov. Bob Sandoval originally said that he expected the state to take in $100 million in tax and fee revenue in the next two years, but that estimate could be far short of what actually happens. The state Department of Taxation already has revised that figure to $120 million, department spokesperson Stephanie Klapstein told USA Today.

The money is not going exclusively to schools, as originally planned. Instead, it is being put into the state's "rainy day" fund, which typically is saved for emergencies. A portion – about a third - will still provide funding for schools.

Related: How Will Businesses Handle Legalized Marijuana in the Workplace?

Legal wrangling

The wild success of marijuana sales in Nevada shows how much cash the industry can potentially generate. But it also has spotlighted problems with putting a regulated recreational marijuana program into place.

The issues in Nevada center on who is allowed to transport marijuana from growers to dispensaries, a lucrative business in its own right. Language in the November 2016 referendum approved by voters that legalized recreational marijuana gave exclusive rights to marijuana transportation to the state's alcohol distributors for 18 months.

However, state officials determined this summer that there are not enough distributors to handle the job. Sandoval declared a state of emergency, allowing others to bid for the right to transport marijuana. That set off several rounds of legal moves.

First, the state Taxation Department ruled at an August hearing that Sandoval's emergency declaration was justified after hearing arguments from attorneys on both sides. Alcohol distributors appealed that decision. In October, it reached the state Supreme Court. Attorneys for both sides are arguing their case. No decision has yet been made on the case.

Related: The Munchies Factor: Survey Finds McDonald's Is the Fast Food Restaurant Pot Smokers Prefer

Shortage continues

While attorneys argue, Nevada marijuana dispensaries are unable to restock their marijuana supply because no one has the legal right to transport it from growers. That's left some dispensaries waiting for new marijuana plants to mature. According to Stacy Castillo of MYNT Cannabis in Reno, some dispensaries are working to cultivate plants of their own. Many hope that the Supreme Court will allow marijuana businesses to function as their own distributors.

"A lot of companies are moving in the direction of creating more square footage so they can create more grow space and creating more product; so that's why if we do experience any kind of delay in product it's because we're waiting for the product to be made," Castillo told News 4 in Reno.

While these legal kinks are being worked out, demand continues for marijuana. Much of it is driven by the huge tourist industry in Las Vegas and other Nevada cities, such as Reno. As when Colorado started recreational sales in 2014, "pot tourists" are coming to Nevada because of the legalization of recreational marijuana.

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