Nevada alcohol distributors make case to move marijuana

CARSON CITY — A Carson City district judge is expected to make a ruling Tuesday in a dispute over recreational marijuana distribution in Nevada.

Judge James Wilson’s ruling is expected to clarify whether liquor distributors have the exclusive right to distribute recreational marijuana from production facilities to retailers, or whether the state Department of Taxation can license others to perform the function.

An all-day court hearing on the dispute ended late Monday.

Alcohol distributors must apply to the Tax Department for a marijuana license to deliver of the product to retailers. About five have applied using different business entities.

Emergency Tax Department regulations would open up the opportunity to transport recreational marijuana to licensed marijuana businesses in addition to liquor distributors.

Alcohol distributors argue the agency it trying to shut them out by suggesting there was a lack of interest from the firms to engage in the distribution process.

Question 2, approved by voters last year, requires recreational marijuana to be regulated the same way as alcohol products in Nevada. Retail sales are set to begin July 1.

Outside the hearing, Tax Department Executive Director Deonne Contine said the agency is reviewing 300 applications from marijuana licensees, she said.

Contine said she is still working to get recreational sales up and running by the target date.

“I’m an optimist,” she said.

During her testimony, Contine said the emergency regulation included a concern liquor distributors would not want to participate out of fear of endangering their federal alcohol licenses. She said it was part of a “backup” plan to ensure recreational sales could begin on July 1.

Carson City attorney Kevin Benson, representing the Independent Alcohol Distributors of Nevada, said there was interest but the tax agency never responded to their expression of interest. He asked Wilson to prohibit the licensing of any businesses but alcohol distributors.

In his closing remarks, Chief Deputy Attorney General William McKean said the allegation of capricious decision making by the tax agency does not hold up.

“No decision has been made,” he said.

Any delay will ensure that marijuana users continue to rely on the black market and don’t pay taxes on the product, McKean said. It has been legal to use marijuana in Nevada since Jan. 1.

First to testify in the hearing was Kurt Brown, manger and owner of Capitol Beverages, who said he has the ability to distribute recreational marijuana to every retail establishment in Nevada. Brown said he has been in the alcohol distribution business for 45 years and has 160 retail customers.

Brown said he expressed interest in the business when the Tax Department announced in 2016 its intention to develop regulations for recreational marijuana and the distribution process.

Brown formed a new business, Paladin, to distribute marijuana from production and cultivation facilities to the retail dispensaries.

Echoing Brown’s comments was Allan Nassau, president of Red Rock Wines, a Las Vegas-area liquor distributor with over 300 customers, who said he could do the distribution work “in my sleep.”

It would not be a challenge to provide the product in the greater Las Vegas area, Nassau told the court.

Nassau said he was told by the tax agency that more than 20 alcohol retailers had expressed an interest in distribution recreational marijuana, and that the finding of insufficient interest was a surprise to the industry.

Benson said last week five liquor distributors of the 69 statewide have applied to the Tax Department to distribute recreational marijuana.