California Cannabis Operators Consider Withholding Taxes In Protest

The California cannabis industry is reportedly considering a mass exodus on tax payments, The Mercury News reports.

Some operators described the possibility as a “California Weed Party,” which hearkens back to the 1773 Boston Tea Party — one of the country’s first and most famous acts against England before the American Revolutionary War. But rather than dumping or destroying their cannabis crops, the industry would withhold tax payments in protest of the state’s unfair treatment.

The plan was proposed in reaction to California‘s recent move to raise the industry’s cultivation taxes by about 4.5% starting next year. The state’s cannabis tax rate is already far higher than the national average, reaching as high as 45% in some jurisdictions. And, while there are many hundreds of licensees in operation, the industry is also competing with the state’s well-established and relatively low-risk illicit marketplace.

Jerred Kiloh, who owns a cannabis retailer and serves as president of the United Cannabis Business Association, said he had previously considered a mass withholding of industry taxes but was told it would be “too drastic,” according to the report. Now, after several years of inaction by the state, the strategy is being revisited.

“This is the response you get when you feel like you’re being taxed and you don’t have representation. That’s really how it feels right now in cannabis. Everyone is taking the money and no one is doing anything to protect our industry.” — Kiloh, via The Mercury News

Michael Steinmetz, the co-founder of Flow Cannabis Co., described California‘s cannabis tax structure as “excessive” and “completely broken” in a November op-ed. “Instead of collecting more income for the state, it’s creating a thriving illicit market, putting people out of business and killing what could be one of the greatest industries of California,” Steinmetz wrote.

In addition to high taxes and other regulatory complications, many operators have been repeatedly targeted for armed robbery, vandalism, and burglary.

Some officials have recognized the untenable position facing many cannabis operators: in San Francisco, city officials recently decided to delay the implementation of a new cannabis tax to help local operators compete with unlicensed merchants.