Las Vegas Review-Journal

Taxing problem for L.A. County: Illicit pot shops

Legal dispensari­es net far less than predicted

- By Michael Balsamo The Associated Press

LOS ANGELES — A slight marijuana smell wafted out as a steady stream of customers walked into a warehouse, its doors and windows covered by bars.

Police swooped in.

“Sheriff ’s department! Search warrant!” a Los Angeles County deputy shouted as the team thundered through the front door and began hauling out people in handcuffs.

The Compton 20 Cap Collective just south of Los Angeles, which was raided this spring, is one of hundreds of illegal marijuana stores operating in L.A. County, where possessing and using marijuana is legal for anyone 21 and older, and retailers must be licensed to sell to them.

Broad marijuana legalizati­on arrived in California at the start of the year. From the beginning, there was concern the legal market would be undercut by the massive black market that has existed for decades.

And that’s what’s happening. Nowhere is it a bigger problem than in the state’s biggest legal local marijuana market: Los Angeles County.

The number of outlaw dispensari­es in the county greatly outnumbers about 150 licensed storefront retailers.

That reality is a buzzkill for those trying to play by the rules.

Legal pot shops are losing customers who can get products more cheaply at illegal outlets that don’t charge or pay taxes, said Adam Spiker, executive director of the Southern California Coalition, a trade organizati­on that represents cannabis growers, distributo­rs and dispensary owners.

It’s an “unfair competitiv­e situation for licensed businesses,” Spiker said.

“I think if you turn the tables and took cannabis out of the equation — if it was another industry that didn’t have the stigmas — the government would do everything they could to give those licensed business paying taxes a level playing field.”

One of the selling points for legalizati­on was it would generate a tax windfall. However, during the first quarter, the state reported only $34 million from cultivatio­n and excise taxes, putting it on pace to fall well below the $175 million forecast for the first six months.

In April, state regulators sent nearly 1,000 cease-and-desist letters to cannabis businesses they suspected were operating illegally. An analysis by the trade publicatio­n Marijuana Business Daily found about 64 percent of the businesses were in the Los Angeles metropolit­an area.

Last month, the Los Angeles city attorney’s office charged 142 people as part of a crackdown on illegal dispensari­es. It also sent cease-anddesist letters but declined to say how many.

Los Angeles County boasts the nation’s largest sheriff ’s department, but even it has nowhere near the manpower to take down all the illegal pot shops. A task force overseen by Lt. Frank Montez raids an average of one dispensary a week.

The voter-approved ballot measure legalizing cannabis in California included a provision that made possessing more than 28.5 grams only a misdemeano­r. That means officers can seize businesses’ cash and marijuana, but employees and owners rarely face jail time, and illegal operations often quickly reopen.

“It’s a money-lucrative business so there are people willing to take the risk,” said Capt. Holly Francisco, who commands the sheriff ’s department’s narcotics unit.

 ?? Jae C. Hong ?? The Associated Press Undercover Los Angeles County sheriff ’s deputies gather March 15 inside an illegal marijuana dispensary during a raid in Compton, Calif. California ushered in broad marijuana legalizati­on nearly six months ago, but the illegal...
Jae C. Hong The Associated Press Undercover Los Angeles County sheriff ’s deputies gather March 15 inside an illegal marijuana dispensary during a raid in Compton, Calif. California ushered in broad marijuana legalizati­on nearly six months ago, but the illegal...

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