Have you paid your sky-high California cannabis taxes yet? If not, the state will come for you!

Cannabis companies in California could face a difficult time as the state seeks to crack down on those with unpaid taxes. The issue of paying taxes has been a concern for both the government and business owners over the years. However, it seems that the relevant bodies are trying to take new and strict steps to ensure compliance. Read on as we examine what this could mean for cannabis business owners in the state at large.

Licensed and unlicensed cannabis companies in California have amassed approximately $200 million in unpaid taxes. With such an astronomical amount, it’s no surprise that the California Department of Taxes and Fees Administration (CDTFA) is already waving enforcement. It hasn’t been business as usual for cannabis companies to evade taxes, as the CDTFA has enacted new measures to checkmate them. Some of these unlicensed businesses have undercut licensed ones in the state through the gray underground market. However, the CDTFA appears to be able to end the trend.

The state of California and its residents have always credited the CDTFA for productivity, and it’s easy to see why. The corporation has launched multiple raids to curb the illegal and unlicensed cannabis trade in the state. The properties confiscated in such raids were also auctioned off to cover the unpaid taxes of such companies. These and many more are the steps taken by the corporation to account for unpaid taxes from unlicensed cannabis businesses in the state.

The panel also addresses the issue of underpayment or non-payment by licensed companies. There is a steady escalation of efforts aimed at ensuring compliance by business owners. The department sees these moves as an indication of normalcy after the pandemic brought most things down. In an email to MJDIZDaily, CDTFA spokeswoman Tamma Adamek explained why the department decided to be more resolute at this time. He explained that the department is fully aware of the impact of the pandemic on many businesses and how many have faced difficulties. However, with the economy slowly recovering, it is only right that the Department is returning to its normal approach to enforcement.

The spokesman went on to say that the department is aware of legal cannabis dealers because they require a permit from the agency. This means the CDTFA always knows who you are, where you are and what your tax status is. It makes it easier to checkmate their activities than to target illegal gray market sellers.

As previously mentioned, the CDTFA has started this new approach and has achieved commendable results so far. A quick review of some of the department’s accomplishments over the past three months shows how effective they have been. The Department auctioned off a property confiscated in Compton for $50,000. This was the third of its kind from the Property Confiscated Division for Unlicensed Businesses. Also in March, the department in Whittier, east of Los Angeles, sold $310,000 worth of properties after they were confiscated from illegal cannabis sellers. Those particular operators had accumulated $850,000 in unpaid tax debts, according to the CDTFA.

The department has successfully partnered with other parastatal government security agencies to ensure defaulters are held accountable. After a raid with the LA County Sheriff’s Department, the department seized a property in Compton and then sold it for $256,000. The agency continues to work in synergy with the Highway Patrol, local and city law enforcement agencies, county licensing agencies, and so on. The result is over 1,000 inspections since 2020, resulting in multiple arrests and successes. The department has recovered over $32 million in product and cash equivalent during this period.

Cannabis retailers in California have complained bitterly about the complexity and impact of the state’s taxes on businesses. After the state legalized recreational use in January 2018, a total of $187 million was amassed from licensed and unlicensed cannabis companies. This was mainly attributed to harsh tax policies for most legitimate businesses.

The policy for cannabis retailers is that they must obtain approval from the CDTFA to sell, after which they must file a declaration and pay taxes on the sale. Growers and traders are also required to do the same for excise and crop taxes. These high taxes have led to the complete shutdown of many cannabis companies, according to various analysts. Likewise, it has also favored black market operators who avoid such taxes and operate without regulatory requirements.

Despite the CDTFA’s accolades and achievements, particularly with cannabis companies, some still have issues with the agency. A recent March 1 bust with TLC Collective of Jungle Boys has garnered a lot of attention as it belongs to a licensed owner. There was an extreme show of force when various unidentified gunmen stormed the premises and there was widespread criticism of the act. Many believe that such extreme aggression by the CDTFA will attract more cannabis companies to work with them.

bottom line

The cannabis company tax situation in California requires a strong arm, and the CDTFA is currently doing just that. The department has gotten serious of late, and their crackdown is being felt by many in the cannabis industry. Slowly, the department is aiming to ensure compliance along with other agencies through enforcement. With some successes already being achieved, time will tell how effective recent moves will ultimately be. The effectiveness and adequacy of tax returns will certainly mean good news for the state and legal cannabis companies.

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