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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
(Score: 4, Insightful) by ElizabethGreene on Monday May 22, @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, @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.