Los Angeles Cannabis Retailers Halt Tax Payments Amid Illicit Market Concerns
Cannabis retailers in Los Angeles are withholding tax payments to pressure regulators to address the thriving illicit market undermining their businesses
Key Points
- 1LA cannabis retailers refuse to pay city taxes due to illicit market issues
- 2Elliot Lewis of Catalyst Cannabis leads the tax revolt
- 3Legal cannabis sales in California have dropped nearly $1 billion since 2021
- 4LA offers penalty waivers for businesses arranging tax payment plans
- 5Illicit cannabis production may be ten times the legal market demand
In a bold move, cannabis retailers in Los Angeles have collectively decided to withhold their city tax payments until action is taken against the illicit market that is undermining their businesses. Elliot Lewis, CEO of Catalyst Cannabis, is leading this tax revolt, highlighting the significant financial strain legal operators face. The city’s licensed cannabis businesses are reportedly behind on as much as $400 million in taxes, a situation exacerbated by the proliferation of unlicensed competitors
Los Angeles imposes a local gross receipts tax of up to 10% on cannabis businesses, adding to the already high state taxes. According to SFGate, more than 500 of the city's 738 cannabis businesses owe back taxes. Catalyst Cannabis, which operates 33 stores across California, is among those refusing to pay. Lewis expresses frustration, noting that for every new store he opens, multiple illicit shops spring up nearby, siphoning off customers
The legal cannabis market in California, the largest in the U.S., is under immense pressure. Legal sales have dropped significantly from $5.7 billion in 2021 to $4.88 billion in 2024, according to state data. A state-commissioned report suggests that illicit cannabis production might be ten times the legal market demand. This has created an unsustainable environment for legal operators, compounded by the city's recent decision to increase regulatory fees
In response to these challenges, Los Angeles's Department of Cannabis Regulation has offered some relief. An October 2 letter from Treasurer Diana Mangioglu announced that penalties would be waived for businesses that set up payment plans for their taxes. Despite this, the city anticipates recovering only about $30 million due to many companies being out of business or having uncollectible, aged tax debts
The situation in Los Angeles highlights the broader issues facing the legal cannabis industry, where high taxation and a thriving illicit market threaten its viability. As the city grapples with widespread non-compliance, the actions of retailers like Lewis underscore the urgent need for regulatory reform and enforcement to ensure a fair playing field for legal businesses