from the shocked-that-stoners-forget-to-pay-their-bills dept.
Industry insiders are warning that hundreds of pot shops could go out of business this year:
California's pot industry could be on the verge of an "extinction event," with pot shops going out of business as they miss tax payments and sink under millions of dollars of debt.
Debt problems have plagued the industry for years — a 2022 report estimated that the industry was collectively sitting on over $600 million in debt — but a change in tax law that took effect this year has stakeholders worried the mounting debt bubble will finally become fatal. A San Francisco politician introduced a law this year in the state legislature that would crack down on pot businesses that don't pay their debts.
State law recently shifted the burden for paying cannabis excise taxes from distributors to retailers, with the first tax payments due May 1. Retailers have historically had the most trouble paying their bills, and it appears that many shops lack the cash to pay their state excise taxes, according to new state tax data obtained by SFGATE.
Over 13% of California's retailers, or 265 pot shops, failed to make any tax payment by the May 1 deadline, according to the California Department of Tax and Fee Administration. Those businesses are now facing a 50% penalty on the taxes they owe, which could be a death blow to many shops.
[...] The entire cannabis supply chain has faced a chronic debt problem: Farmers report never getting paid for thousands of dollars in product, distributors say retailers don't pay them and have started blacklisting some shops, and even the federal government is getting stiffed. An analysis done last fall by Green Market Report found that 10 of the largest pot companies in the country owed over $500 million combined in unpaid taxes.
Related: How State Cannabis Legalization Became a Boon for Corruption
Related Stories
How state marijuana legalization became a boon for corruption
In the past decade, 15 states have legalized a regulated marijuana market for adults over 21, and another 17 have legalized medical marijuana. But in their rush to limit the numbers of licensed vendors and give local municipalities control of where to locate dispensaries, they created something else: A market for local corruption.
Almost all the states that legalized pot either require the approval of local officials – as in Massachusetts -- or impose a statewide limit on the number of licenses, chosen by a politically appointed oversight board, or both. These practices effectively put million-dollar decisions in the hands of relatively small-time political figures – the mayors and councilors of small towns and cities, along with the friends and supporters of politicians who appoint them to boards. And these strictures have given rise to the exact type of corruption that got [Jasiel] Correia in trouble with federal prosecutors. They have also created a culture in which would-be cannabis entrepreneurs feel obliged to make large campaign contributions or hire politically connected lobbyists.
For some entrepreneurs, the payments can seem worth the ticket to cannabis riches.
For some politicians, the lure of a bribe or favor can be irresistible.
[...] It's not just local officials. Allegations of corruption have reached the state level in numerous marijuana programs, especially ones in which a small group of commissioners are charged with dispensing limited numbers of licenses. Former Maryland state Del. Cheryl Glenn was sentenced to two years in prison in July for taking bribes in exchange for introducing and voting on legislation to benefit medical marijuana companies. Missouri Gov. Mike Parson's administration is the target of law enforcement and legislative probes into the rollout of its medical marijuana program.
(Score: 5, Insightful) by Snotnose on Monday May 22 2023, @03:57AM (5 children)
Those bozos saw a goose that could lay golden eggs and decided to eat it instead. Except they even fucked that up; they burned it and sent out for Taco Bell instead. Onerous licensing fees, outrageous taxes, a bunch of other nickle and dime fees; all on top of a mass of red tape only a bureaucrat could love.
Then you've got the local idiots. One county commission decided all licenses would go to people of color who had spent time in prison for weed related offenses. Really? Don't you think it would be smarter to look at, I dunno, maybe a business plan? Or a track record?
Of course I'm against DEI. Donald, Eric, and Ivanka.
(Score: 2, Troll) by Username on Monday May 22 2023, @05:57AM
The problem is they have high taxes AND no border security. People will just buy the Mexican weed. When you double down on socialism you'll need strong borders like north korea or the people won't do it.
(Score: 1) by khallow on Monday May 22 2023, @07:00AM
My take is that the point of the business license in theory is to pay for the overhead of regulation of the local industry. They shouldn't care if you even know what a business plan is. But then they shouldn't be caring if you've spent time in prison for weed-related offenses either.
(Score: 4, Insightful) by Thexalon on Monday May 22 2023, @12:33PM
In their defense, they had a serious case of the munchies.
But really, the problem is that there are still a lot of people who think cannabis is horrible and bad and wrong, or just like having an excuse to use the government to attack hippies and black people at random, so all the bureaucracy is in place to try to make the system not function.
"Think of how stupid the average person is. Then realize half of 'em are stupider than that." - George Carlin
(Score: 2) by GloomMower on Tuesday May 23 2023, @01:02PM
> One county commission decided all licenses would go to people of color who had spent time in prison for weed related offenses.
I remember hearing about this a little, they were saying that running a pot shop would be such a huge windfall, they were doing them a service for "wrong imprisonment". But sounds like it was more of a disservice, shows that in complex systems it is hard to know what your actions will really do. Prison and debt, sweet!
(Score: 0) by Anonymous Coward on Wednesday May 24 2023, @05:19AM
Are they already getting bank robbers to start banks?
Oh but I think they're already letting fraudsters get involved, so kinda same thing or worse since it's less obvious.
(Score: 4, Insightful) by MIRV888 on Monday May 22 2023, @06:26AM (5 children)
Economics 101.
If your weed guy who's been reliable and delivers is cheaper than the dispensary, that's not much of a choice.
The legal states also have a huge off the books mailing (fedex/ ups actually) business. Illegal states love mail order dro.
Road trips to Colorado are a regular thing. The taxes / regulation are a clusterf*ck for sure, but the black market is still cheaper and easier.
(Score: 2, Informative) by Anonymous Coward on Monday May 22 2023, @09:27AM (4 children)
This happens because the government takes enough action against the untaxed stuff.
So if they want taxes on weed they need to do enough about the untaxed weed too.
(Score: 2) by looorg on Monday May 22 2023, @11:02AM (1 child)
Have the police/DEA in states with legal pot done more or less to counter the non-legal weed sources? Naturally they have to deal with the illegal competition if they want to tax the legal side. Otherwise that business will be very lopsided in favor of the dark side.
That said it seems like there will be a lot of anxious weed dealers, that can't pay their taxes. Good thing for them they have a product that apparently is supposed to cure that. To bad it would break the drugdealing rule #1 -- don't get high on your own supply.
(Score: 1) by Runaway1956 on Monday May 22 2023, @02:58PM
Please keep the DEA out of this. They rank among the most corrupt government agencies. Keep it among the local police departments, some of which are corrupt, some of which are pretty honest, and just trying to do their jobs.
“I have become friends with many school shooters” - Tampon Tim Walz
(Score: 2) by DannyB on Monday May 22 2023, @04:11PM (1 child)
You just made me realize that what we need is . . .
A War On Drugs!
That will fix it!
As long as it is properly funded like SLS.
The amount of rust code in Linux has grown.
The amount of rust code in Linux has groan.
(Score: 0) by Anonymous Coward on Tuesday May 23 2023, @10:12AM
Will the current War on Drugs then be known as World War on Drugs I or the Great War on Drugs and the new one will be the World War on Drugs II?
(Score: 5, Insightful) by VLM on Monday May 22 2023, @11:41AM (1 child)
13% of small businesses closing is an extinction event. OK, LOL
Thats better than average for small retail businesses.
(Score: 2) by GloomMower on Tuesday May 23 2023, @01:14PM
That is true, but it sounds like this might cause a domino effect, as they have set up lines of credit between themselves because they can't use banks. I don't know exactly why it is that different still, in the article it sounded like the credit was standard NET30 or NET60 deals that a lot of other businesses do.
(Score: 4, Insightful) by ElizabethGreene on Monday May 22 2023, @01:45PM (1 child)
These businesses are still blocked from banking services by federal law. It's not a huge shock that all-cash businesses would struggle with managing their finances. Managing cash in a normal business is hard. Managing cash when you have to physically store and secure the currency, have no access to insure it against theft or loss, and have to drive to a grocery store to buy money orders to mail out to pay your bills is absurdly difficult and unnecessary.
It's a problem.
(Score: 3, Touché) by Entropy on Monday May 22 2023, @06:31PM
People handing you piles of cash is a problem? I'll take some of that problem.
As to securing it from theft, well--that's a California engineered problem. Theft
and crime in general is rampant in California because of really stupid policies
that let criminals do what they want and "bail reform" lets them get away with it.
Saying dealing with piles of cash is a hard problem for a business to deal with is
missing a few important concepts.
(Score: 5, Insightful) by DadaDoofy on Monday May 22 2023, @03:10PM
There are literally idiots running CA. They are taxing it in to oblivion. Many major retailers have decided they can't do business in CA anymore due to the taxation, rampant theft of their merchandise and lack of security for their employees. They have simply closed up shop, and this trend is accelerating. In case you were wondering, this is what a "socialist utopia" looks like in real life. It's a far cry from what they've been selling you.
(Score: 2) by Entropy on Monday May 22 2023, @06:23PM
That's impressive. Easily one of the most profitable industries fundamentally and California manages to screw it up.
The best lesson we can learn from California is don't do anything like California.
(Score: 2) by istartedi on Monday May 22 2023, @10:56PM
"There will be a lot of fees, forms to fill out, and rules to comply with because as we all know, people who are in to weed are sticklers for those kinds of things".
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