Cultiva Cannabis

California Enforces Tax Warrants Against Marijuana Businesses

Despite legalization in 2017, California is currently entrenched in an ongoing war with the illicit cannabis market. To that end, the state’s central tax collection agency served a dozen tax warrants to illegal marijuana sellers in Southern California in recent weeks.

California Rakes In $1 Million From Underground Marijuana Sellers

The tally from the seizure amounted to roughly $1 million in underground marijuana products and about $100,000 in cash, which had been taken with help from the California State Highway Patrol.

A tax warrant functions as a lien, which is a legal mechanism that permits the government to claim personal property or assets to satisfy unpaid debts and taxes.

The California Department of Tax and Fee Administration (CDTFA) reported in a news release that the tax warrants were issued over the past few weeks in both Los Angeles and San Bernardino counties.

When asked about the effect of tax evasion on law abiding taxpayers, CDTFA Director Nick Maduros said in a statement, “Tax evasion unfairly shifts the burden onto all other taxpayers and makes it tough for those businesses that are playing by the rules to survive.”

The identity of the 12 retailers who were issued warrants has not been revealed, but the agency pointed out that if found guilty, cannabis tax evasion carries a sentence which includes possible jail time.

Due to not paying any state or local taxes, unlicensed retailers can offer much lower prices than legal operators, which has in turn allowed California’s immense illicit marijuana market to thrive for years, keeping customers away from the legal market entirely.

The state expects to significantly ramp up enforcement against the underground marijuana market in the coming months and years, so it’s likely the CDTFA will serve more tax warrants.


Legal Cannabis Market In California Earned About $3 Billion In 2019, BDS Analytics Study Indicates

To get a better idea of the effect of the illicit market, consider that approximately 20 percent of the cannabis grown in California was sold through legal dispensaries, producing revenue of around $3 billion last year.  In comparison, the black-market cannabis market likely made about $8.7 billion, according to BDS Analytics, which provides data on the cannabis industry.

Tax liens aren’t the only enforcement mechanism being used by the state to shut down illegal marijuana operations. In Calaveras County, the Sheriff’s marijuana enforcement team regularly conducts raids on unlicensed cannabis growing locations. The deputies stormed a West Point, California residence on February 13, seizing 440 pounds of marijuana along with 1,400 plants being cultivated in an outbuilding with faulty wiring. The illegal haul was worth $2.4 million.

California clearly has a vested interest in protecting its citizens, but also ensuring it can raise the revenue to safely regulate the marijuana industry. In doing so, the state can not only give its citizens a safe way to enjoy their substance of choice but can also fund other important public services with the tax revenue. With billions of dollars at stake, the California simply cannot afford to continue to allow the underground cannabis market to exist.

Aaron Pelley

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