SACRAMENTO >> Thirteen medical marijuana dispensaries owe more than $12 million in unpaid state taxes, according to a report recently published by the Board of Equalization.
The list includes several pioneers of the medical marijuana movement, who opened dispensaries not long after California became the first state to legalize weed as medicine in 1996.
Many of the businesses on the list have long been shut down, though a few continue to sell marijuana in some fashion.
The list comes from the Board of Equalization, which is required by law to publish details every quarter on the state’s 500 largest delinquent taxpayers. The idea is to encourage Californians to settle up, since their names are removed from the public list as soon as they make arrangements to start paying their debt.
Among the many tax-dodging car dealers, fast food franchisees, contractors and gas station owners on the list are a baker’s dozen of pot shops.
Together, these canna-businesses owe nearly $12.2 million, with the first three dispensaries alone racking up nearly $5 million in debt.
That’s hardly an exhaustive number, though. Some debts on the top 500 list are tracked only by the individual business owner’s name, or by business names that are meant to be tough to pinpoint. And the state only lists debtors who owe at least $100,000.
“Let’s face it: It’s been an underground industry,” said Diane Harkey, Board of Equalization member representing Southern California.
“One of the big problems with this industry is that they don’t keep books and records and they only use cash, so no bank accounts,” she said, with marijuana’s federally illegal status blocking bank access. “That makes it very difficult to assess what they really owe.”
Many marijuana businesses do pay state (and often local) taxes, Harkey pointed out — though their payments are often based largely on self reporting.
California collected $58 million in sales tax revenue in 2015 from nearly 1,000 registered medical marijuana dispensaries, and it was predicted to nearly double that figure when fourth-quarter figures from 2016 are totaled.
But the Board of Equalization has estimated that only around 40 percent of pot shops have historically complied with state tax laws. And Harkey said she believes it might be closer to 25 percent, with the agency forced to rely on citizen complaints and information posted to sites like the online dispensary guide Weedmaps.com to track down businesses.
With California’s cannabis industry expected to start raking in $7 billion in profits and paying $1 billion in state taxes each year after recreational pot shops open Jan. 1 under Proposition 64, the compliance issue is at the forefront of many legislators’ minds.
There are at least three bills now pending in the California Senate and Assembly that aim to address tax issues in the industry. That includes one that would make it easier for marijuana business owners to pay their bills and another — backed by Board of Equalization member Jerome Horton — that creates stiff penalties and an enforcement team to go after those who don’t.
Once new legislation and comprehensive regulations for the state’s marijuana industry kick in for the first time Jan. 1, Harkey said she’s optimistic that compliance will go up. And that will mean fewer canna-businesses will be listed among these debtors, who are all included on the Board of Equalization’s most recent delinquent taxpayer list.
