California Continues Cracking Down on Unpaid Cannabis Business Taxes
- Jun 10, 2022
Since legalizing adult-use recreational cannabis in January of 2018, California has generated nearly $4 billion in tax revenue from its sales. But, since its rollout, the California Department of Tax and Fee Administration (“CDTFA”) reports that cannabis businesses, both licensed and unlicensed, owe nearly $200 million in unpaid state taxes.
As a result, in recent months the CDTFA has increased raids and seizures of unauthorized cannabis production properties and assets. While the growth of cannabis is legal in the state of California, because these unauthorized operations lack the proper permits for commercial production, they’re avoiding paying the same state taxes that licensed cannabis businesses pay.
In an interview with MJBizDaily, CDFTA spokesperson Tamma Amamek explained the increased enforcement is happening across all industries, and is a result of a return to more standard government and department functions and practices as we come out of the pandemic.
By seizing illegal cannabis properties and more strictly enforcing tax regulations, the CDFTA is protecting both the industry and consumer. This creates more equal business conditions for tax paying operations and keeps cannabis production compliant with the state’s safety standards.
Since the CDFTA began partnering with the California Highway Patrol, local law enforcement, and municipal governments in 2020, they've performed over 1,000 business inspections and seized more than $32 million in cash and products from unauthorized cannabis businesses. The CDFTA has held various auctions of seized commercial assets from non-authorized cannabis operations.
“Unlicensed cannabis operators not only undercut legitimate businesses, but they also cheat California communities out of revenue for vital programs,” said CDTFA Director Nick Maduros in a press release. “These businesses are not licensed under the laws approved by California voters, and many of their products are unregulated.”
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Eric Altstadter CPA is an Audit Partner and Chair of the firm's Cannabis and Hemp practice with over 30 years of experience working with public companies and privately held businesses
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