For as long as the people of California have sought marijuana, the black market has existed. Even when the state legalized medicinal use in 1996 and then paved the way for lawful recreational use with a ballot measure last year, Los Angeles marijuana lawyers know the reality is illicit pot shops and sales have always outpaced the legal market. The hope was we’d see a shift, a significant tapering off of demand for illegal marijuana now that with recreational pot now available. But as of right now, they have retained a larger hold than facilities operating according to the stringent regulatory guidelines set forth by state and local officials.
Los Angeles marijuana lawyers had seen many long-time operators on the California cannabis scene try to work their way into the newly-forged legal market to finally be legitimate, only to end up continuing to work the riskier – bit more lucrative – illicit market. This includes unlawful medical marijuana collectives, cannabis delivery services and cultivation farms that haven’t been properly vetted according to stringent state law.
Some of these individuals are focused on pursuing “OT” money, generated from “out-of-towners.” Of course, such sales are especially risky because, as our Los Angeles marijuana lawyers know, rules can vary from city to city and certainly from state-to-state and country-to country. Black market sales are playing with fire given the uncertainty of how federal authorities are going to handle future sales. Despite the Jan. 1st legalization of recreational use and sales in the Golden State, cannabis is considered an illegal crop from the top-down under the Controlled Substances Act, and as a Schedule I narcotic, it’s one of the most most heavily regulated – despite being one of the most commonly-cultivated and sold. And it’s going to be extremely difficult to move away from that given its history with illicit sales and use.
Earlier this year, Gov. Jerry Grown put forth a measure that would set aside an additional $14 million from the state budget to police illegal sales of marijuana in California. The idea was to give the state attorney general five teams that would focus on large-scale illegal marijuana operations with big financial and tax fraud schemes. However, it was ultimately tossed early in the summer when neither side could agree how they were going to pay for it.
Los Angeles marijuana lawyers have seen that six months since the city rolled out its own rules and became the largest legal marijuana market in the U.S., we’re still beset with unlawful marijuana sales and businesses. In fact, most agree it is the majority of the market.
Los Angeles Marijuana Lawyers Anticipated This Issue
This was not an unexpected problem. The primary reason for this issue is any would-be cannabis business in this community is beset by a host of daunting financial demands. These involve not just taxation, but the regulation for things like security and building code upgrades, product quality testing and, yes, attorneys’ fees to ensure compliance. (Though, we’d argue attorney’s fees are much more reasonable and cost efficient than coping with a criminal case.) They must pay for things like workers’ compensation and pesticide control. There are also additional regulations that must be sifted through that can vary from county-to-county, city-to-city.
On top of that, there is a 15 percent excise tax plus a sales tax and certain local fees. Some say this encourages customers to look elsewhere for cheaper marijuana options (and Los Angeles marijuana businesses may go where margins are wider).
There was an effort in Sacramento that sought to lower the bar and make it easier for these unlawful operations to “get legal” by lowering the excise tax there to 11 percent, but it ultimately was put aside for the time being.
Our attorneys have read about some L.A. dispensaries trying to sidestep the issue of hefty taxation by operating an above-board store front on one end and selling black market stock for 40 percent less out of the back to help bolster their incomes. That is taking a huge risk, and those companies need to discuss their concerns with a dedicated marijuana attorney.
For some, it’s not even so much about the money as it is the disgust for cannabis corporatization, which rubs many of the industry founders the wrong way. As Los Angeles marijuana attorneys who have been invested and advising the L.A. cannabis industry since it was first forged, we certainly understand this. But what you do not want to do is toss caution to the wind and risk forever forfeiting your shot of operating fully above-board.
The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.
Additional Resources:
California’s Illegal Weed Industry Is Doing Better Than Ever, Sept. 6, 2018, By Hayley Fox, VICE News
More Blog Entries:
Los Angeles Logjam in Marijuana Business Licensing and Lawsuits, Nov. 10, 2018, Los Angeles Marijuana Lawyers Blog