• Taylor H.

The Cost of Noncompliance in Nevada

Compliance has become an integral part of the Nevada cannabis community and will soon reflect the state’s world-class gaming gold standard with the creation of the Cannabis Compliance Board (CCB).


The Nevada Department of Taxation is actively increasing expectations of cannabis businesses, including increasing the degree in which they analyze operations and issue citations for compliance violations. The Nevada Department of Taxation is committed to enforcing cannabis regulations and have developed protocols to handle cannabis businesses that fail to comply.


The degree of compliance violations is broken down into five (5) categories. To determine the penalty fine amount, the department considers:

  • The seriousness of the violation

  • The economic benefit

  • The size of your business

  • How compliant you’ve been in the past

  • What you’ve done to remedy the violation(s)

  • How it's going to affect your business or any other rights you have


You may think you're in the business of cannabis cultivation, production or dispensing, but really, you're in the business of compliance. There is not a single cannabis company who can afford to be without a deep understanding of the myriad of regulations and issues that may affect your operations and jeopardize your license. Below are the five categories of compliance violations and their subsequent fines.



COMPLIANCE VIOLATION CATEGORIES

Category One: violations that make someone ineligible to receive a license

  1. Convicted of other felonies

  2. Operating without all required permits/certificates/licenses

  3. Intentionally making false statements

  4. Intentionally destroying or concealing evidence

  5. Intentionally failing to pay taxes

  6. Noisy, disorderly, or unlawful activity results in death or serious injury and involutes the unlawful or attempted use of a deadly weapon against another person or results in sexual offense

  7. Operating with a license that is suspended or revoked

  8. Transporting medical marijuana products across state boundaries



Category Two: violations that pose a present threat to public health/safety

  1. Unintentional false statement or representation of fact

  2. Failing to allow regulatory/enforcement personnel onto premises in a prompt manner

  3. Unintentionally destroying or concealing evidence

  4. Changing ownership & not notifying the Department

  5. Denying access to regulatory/enforcement agents onto premises during regular business hours

  6. Noisy, disorderly, or unlawful activity results in death or serious injury and involutes the unlawful or attempted use of a deadly weapon against another person or results in sexual offense

  7. Allowing anyone under 21 to work or volunteer at the establishment

  8. Refusing to allow personnel to inspect or obstructing officers from performing duties

  9. Failing to stop all operations & report imminent health hazards to Department

  10. Purchasing cannabis from unapproved sources

  11. Purchasing cannabis that has not passed the analysis required by testing facilities without written approval

  12. Operating an unapproved extraction unit/device/method

  13. Selling amounts of cannabis over transaction limits

  14. Failing to maintain required security alarm/surveillance systems

  15. Failing to verify the age of, or selling/providing cannabis and cannabis products to any person under 21 years of age.**



Category Three: violations that create a potential threat to public health & safety

  1. Allowing anyone 21 & under to enter or remain in establishment or transport vehicles without registry I.D. card or letter of approval

  2. Permitting sales by a person without a cannabis establishment agent registration card unless temporarily registered pursuant to NAC 453D.340

  3. Allowing anyone to consume alcohol, cannabis, or other intoxicants on the premises of the cannabis establishment or in areas adjacent to the premises of the establishment that are under the license’s control, including the parking lot

  4. Failing to properly maintain any required records, including seed-to-sale tracking requirements

  5. Failing to tag all plants as required

  6. Failing to follow the approved security plan

  7. Allowing disorderly conduct

  8. Allowing any activity that violates the State law

  9. Failing to notify the Department within 24 hours after discovery of a serious incident or criminal activity on the premises of the cannabis establishment

  10. Unintentionally failing to pay taxes to the Department

  11. Selling unauthorized products

  12. Failing to notify the Department of modifications or expansions of the facilities of the cannabis establishment or a change in equipment or menu of the cannabis establishment

  13. Violating packaging or labeling requirements

  14. Storing or delivering an unapproved cannabis product

  15. Failing to meet requirements for the disposal of cannabis waste

  16. Using unauthorized pesticides, soil amendments, fertilizers or other crop production aids

  17. Exceeding the maximum serving requirements for cannabis products

  18. Exceeding a reasonable time frame for delivery without approval from the Department

  19. Transporting or storing cannabis from an unlicensed source or diversion of cannabis or cannabis products

  20. Picking up, unloading, or delivering cannabis at an unauthorized location

  21. Failing to comply with necessary hygiene requirements such as hand washing and employee hygiene, including using bare hands on cannabis products

  22. Failing to maintain the proper temperature of potentially hazardous food or cannabis products

  23. Failing to comply with requirements for water temperature

  24. Failing to prevent back-flow of plumbing

  25. Selling or failing to dispose of cannabis, cannabis products, or cannabis food items that are spoiled or contaminated



Category Four: violations that create a climate conducive to abuses associated with the sale or production of cannabis and cannabis products

  1. Failing to display or have in the immediate possession of each cannabis establishment agent registration card or proof of temporary registration

  2. Removing, altering, or covering a notice of suspicion of a license or any other required notice or sign

  3. Violating advertising requirements

  4. Displaying products in a manner visible to the general public from a public right of way

  5. Failing to respond to an administrative notice of a violation or failure to pay fines

  6. Violating restrictions on sampling

  7. Failing to maintain a standardized scale as required

  8. Transporting cannabis in an unauthorized vehicle

  9. Improper storing of cannabis, cannabis products, or food

  10. Failing to properly wash, rinse, sanitize product contact surfaces as required

  11. Failing to maintain hand-washing facilities that are stocked, accessible, and limited to hand washing only

  12. Infestation by pests that are not multi-generational or on contact surfaces

  13. Failing to properly use sanitizer as required

  14. Violating any transportation or delivery requirements not described in another category of violations



Category Five: violations that are inconsistent with the orderly regulation of the sale or production of cannabis or cannabis products

  1. Failing to submit monthly tax or sales reports or payments

  2. Failing to notify the Department of a temporary closure of the cannabis establishment

  3. Failing to post any required signs

  4. Failing to notify the Department of change in the name of the cannabis establishment

  5. Making a payment with a check returned for insufficient funds

  6. Failing to comply with any other requirements not described in another category of violations



EMBRACE COMPLIANCE

Long-term success in the cannabis industry is intimately linked with regulatory compliance and remains a vital part of all day-to-day operations for your cannabis business in order to maintain your license. Non-compliance can arise out of any aspect of your business, including age verification, inventory tracking, and product labeling. While you can specify the height of a counter and the angle of a camera, you cannot control the human element. Employees are the single biggest reasons many cannabis businesses fall out of compliance.


The cost of noncompliance is far more than a penalty fine and citation from the Department of Taxation. The suspension of your license - whether it be for three days or 30 days - tarnishes your brand, the loyalty of your customers and results in an insurmountable loss of revenue. If your license is revoked, well my friend, you are past the point of rescue.


Treat compliance as an asset: monitoring compliance and continuously train your employees will keep your businesses viable, avoid disruptions, remain competitive and agile in a stringent regulatory system, and sets you up for long-term success. Operational compliance can even help you sell your cannabis business (if you are hoping to do so one day).


Take proactive steps today to secure your business and your future. Consider consultation services provided by independent companies for an objective compliance assessment of your operations. The J. Whitney Group aids in growing Nevada’s gold standard by offering compliance assessments on a quarterly and annual basis. Consultation services are separate from the Department of Taxation and reduce your risk of violations and penalties.


When your cannabis business complies, you are helping to fabricate quality standards in the cannabis industry and the Nevada cannabis community. Don’t meet the standard, be the standard.


***Note: The J. Whitney Group is not a legal firm and this content was not written or reviewed by a lawyer. The information contained herein should be considered informational and should not be considered legal advisement. For legal advice about marijuana businesses in Nevada, contact a licensed legal practitioner in the state of Nevada.

© 2019 by The J. Whitney Group.

All Regional Laws Apply to The JWG Services

Cannabis Business Consulting
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The J.Whitney Group, LLC

8565 S. Eastern Ave. 

Las Vegas, NV 89123

Bldg. 150 | Ste.172

P: 702.623.5543

E: cannabusiness@jwhitneygroup.com