Los Angeles Times
by Patrick McGreevy
November 20, 2017
California’s shift to legal sales of marijuana for recreational use hits a milestone Monday when the state begins issuing tax permits to marijuana distributors.
State regulators estimate the California market could eventually generate $1 billion in taxes and fees annually. But the industry has resisted handing over its share of profits to the state treasury, and the pressure is on to reduce delinquencies and force scofflaws to pay up. Industry officials and state regulators say a proposed carrot-and-stick approach to taxes may lead to more compliance in the future.
The state is scheduled to begin licensing the growth, distribution, testing and sale of recreational pot starting Jan. 2, as approved by voters last November. But medical marijuana sales have been legal and taxed since voters approved the Compassionate Use Act of 1996.
A 2015 state study estimated that there were close to 3,100 dispensaries selling medical marijuana in California, and that 66% did not comply with state tax requirements. The delinquencies cost the state up to $105 million annually in unpaid sales taxes, according to the study by the state Board of Equalization.
Tax amnesty programs have been discussed in the past, but state officials say they are prepared to strictly enforce the law when the new system begins operating in less than two months.
“While we encourage maximum voluntary compliance, for those who seek to operate outside the lawful tax structure, we have the personnel and resources to go after them,” said Paul Cambra, a spokesman for the California Department of Tax and Fee Administration. “As with all areas of tax collection, enforcement is a primary method of deterring tax avoidance and we’re ready to enforce the law.”
Industry officials predict some pot sellers will stay in the black market rather than get a tax permit and state license to sell marijuana.