California Cracks Down on Unlicensed Dispensaries with Tax Warrants

The California Department of Tax and Fee Administration is using tax warrants in cannabis enforcement, announcing on Wednesday that it initiated actions against 12 illegal retailers in Los Angeles and San Bernardino counties.

The warrants are more commonly known as liens.

The agency said it had seized nearly $1 million in illicit cannabis products along with $100,000 in cash during a crackdown in conjunction with the California Highway Patrol. The cash will be applied to tax liabilities, the CDTFA said.

CDTFA Director Nick Maduros called the inter-agency collaboration “an important deterrent to tax evasion.”

“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.” – Maduros in a statement

The agency did not name the targets of the enforcement action but said violators are subject to fines and possibly jail time.

California levies a 15 percent excise tax on recreational sales cannabis in addition to the state’s 7.25 percent sales tax and local taxes of up to 1 percent. Cannabis businesses taxes are decided by municipalities and can run from 0 percent up to 15 percent. The state also imposes a cultivation tax of $9.65 per ounce.

As of March 10, California raised $1.03 billion in cannabis taxes since the industry’s launch in January 2018, according to the OC Register. After regulatory costs, cannabis taxes are utilized for childcare for low-income families, cannabis research, public safety grants, and environmental remediation for lands harmed by illegal cannabis grown.

Last month, Gov. Gavin Newsom (D) downgraded the state’s cannabis excise tax projections from $479 million to $443 million for the fiscal year which started July 1. Newsom said the lowered estimates were due to the coronavirus pandemic and related recession.