California Hits Illegal Cannabis Operators With Al Capone Strategy
California is taking a page out of Eliot Ness' Al Capone playbook.
The California Department of Tax and Fee Administration announced Wednesday that it has served tax warrants to 12 illegal cannabis retailers in Los Angeles and San Bernardino counties. The operation was a joint effort with the California Highway Patrol.
The CDTFA also said it seized nearly $1M in illegal cannabis products, which will be destroyed, and $100K in cash, which it said will be applied to the businesses' tax liabilities.
“The CDTFA’s collaboration with the CHP is an important deterrent to tax evasion,” 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.”
California's latest move is part of a larger effort to curb the illicit sale of cannabis, which accounts for nearly 75% of all cannabis sales in the state, and stop illegal operators from operating. The CDTFA is responsible for collecting sales and use, fuel, tobacco, alcohol and cannabis taxes.
Marijuana for medical use has been legal in the state for more than two decades. Cannabis for recreational use was legalized in 2018. California has since struggled to curtail the cannabis black market. The black market is more than three times the size of the legal weed industry, the LA Times reports.
Legal operators say local cities and the state are not doing enough to stop illegal operators. As of September 2019, there were more than 2,835 unlicensed cannabis dispensaries and 873 licensed operators in the state, according to an audit by the United Cannabis Business Association.
Since the legalization of recreational weed, the state has collected more than $1.03B in taxes from the cannabis industry, according to the CDTFA. Last year, the Bureau of Cannabis Control introduced QR code readers as a way for consumers to identify weed products from a licensed operator.
Earlier this year, California Assemblywoman Blanca Rubio, a Democrat from Baldwin Park, introduced new legislation that would fine property managers, landlords, building owners and even advertisers $30K for each offense of aiding and abetting illicit commercial cannabis activity.