Fear rides shot­gun as busi­ness­man pays taxes

The Denver Post - - NEWS - By Michael R. Blood Jae C. Hong, The As­so­ci­ated Press

LOS AN­GE­LES» Jerred Kiloh’s eyes nar­rowed as he checked his mir­ror again. The black Chevy SUV with tinted win­dows was still be­hind him.

It had been trail­ing Kiloh’s car ever since he nosed out of the park­ing lot be­hind his med­i­cal-mar­i­juana dis­pen­sary with $40,131.88 in cash in the trunk of his hatch­back.

Kiloh was un­armed, on his way to City Hall to make a monthly tax pay­ment. He was man­ag­ing only stopand-start progress in the mid­day traf­fic. He was afraid of one thing above all else: get­ting robbed.

That fear is a con­stant part of do­ing busi­ness in the flour­ish­ing cannabis in­dus­try in Cal­i­for­nia, as well as Colorado and other states in which trans­ac­tions are con­ducted mostly in cash, some­times in stun­ningly large amounts.

“The thing I need the least right now is to have to go through any sort of money dis­ap­pear­ing,” Kiloh said.

On Jan. 1, recre­ational pot will be­come le­gal in Cal­i­for­nia, cre­at­ing what could be the world’s largest le­git­i­mate mar­i­juana econ­omy. It comes more than two decades af­ter the state gave its bless­ing to med­i­cal cannabis.

But the emerg­ing mar­ket­place with a pro­jected $7 bil­lion value has a po­ten­tially crip­pling flaw: Many peo­ple who work in it can’t use a bank. Banks don’t want the risks of do­ing busi­ness with com­pa­nies whose prod­uct re­mains il­le­gal un­der fed­eral law.

So while the sneaker shop next door to Kiloh’s store­front on Ven­tura Boule­vard can send a check to City Hall to cover its taxes, or wire the money from a lap­top, Kiloh has to make a stress-filled, 15-mile free­way drive each month to down­town Los An­ge­les.

Cal­i­for­nia is to mar­i­juana what Iowa is to corn, and what Ken­tucky is to bour­bon — the na­tion’s bud bas­ket, its heart­land for pro­duc­tion. The trans­for­ma­tion of such a vast il­le­gal econ­omy into a le­gal one hasn’t been wit­nessed since the end of Pro­hi­bi­tion in 1933.

The state ex­pects to col­lect $1 bil­lion in new tax rev­enue an­nu­ally from pot within a few years. In L.A. — which is al­ready es­ti­mated to have any­where from 1,000 to 1,700 med­i­cal mar­i­juana dis­pen­saries, only about 200 of which paid city taxes in 2016 — the take is pro­jected at $50 mil­lion next year alone.

How­ever, gov­ern­ments will al­most cer­tainly miss out on money with­out an easy, se­cure way for busi­nesses to pay. With no bank records, it will be harder to reg­u­la­tors to track funds and iden­tify shady op­er­a­tors. And those who op­er­ate by the book will be un­der­cut by those who don’t.

With­out banks, “ev­ery­one loses,” said Ni­cole How­ell Neu­bert, a mar­i­juana in­dus­try lawyer.

Kiloh, a 40-year-old with a gray­ing mo­hawk and a de­gree in eco­nom­ics, counts 15 years in the pot in­dus­try as a seller and cul­ti­va­tor and is a part­ner and busi­ness man­ager at a San Fran­cisco dis­pen­sary and the owner of the one in Los An­ge­les.

In the ab­sence of a bank, Kiloh has be­come his own.

Twist and turn through a war­ren of rooms in­side his shop, go through a door with a key­pad lock, and you will come to a closet-like space that con­tains twin steel vaults, stand­ing head­high. The walls around them are re­in­forced with steel.

Over­head, more than 50 cam­eras scan his of­fices and hall­ways and keep watch out­side the build­ing as well. An armed guard stands at the door to the sales floor.

On a typ­i­cal day, $15,000 can change hands in his dis­pen­sary, where a steady stream of cus­tomers pick from shelves stocked with 700 prod­ucts, from fra­grant buds and per­fectly rolled joints to cannabis-in­fused lip balm and po­tent con­cen­trates known as “shat­ter” that look like thin sheets of am­ber glass.

For Kiloh, the cash is a daily has­sle. It needs to be counted re­peat­edly to safe­guard against loss. State and lo­cal taxes must be set aside and stored, some­times for a month or more. When ven­dors show up, they get paid in cash, too.

“When now ev­ery­one makes pay­ments through their cell­phone, it’s tough to see that I’m left to the ar­chaic ver­sion of count­ing money,” he said.

With all the cash on hand — he grossed $4 mil­lion last year — crime is a gnaw­ing fear. His dis­pen­sary on a bustling com­mer­cial strip has been robbed twice — once by thieves break­ing in through the roof.

The Los An­ge­les Po­lice Depart­ment did not im­me­di­ately re­spond to a re­quest for statis­tics on crimes against mar­i­juana dis­pen­saries, and many cases are be­lieved to go un­re­ported any­way, since many busi­nesses are loath to go to the po­lice.

Last year, though, a dis­pen­sary owner shot and wounded two armed men dur­ing a holdup in the Los An­ge­les sub­urbs. And a se­cu­rity guard at a dis­pen­sary was killed in an at­tempted rob­bery in Aurora, Colorado, an­other one of the nine states to le­gal­ize recre­ational pot.

To keep crim­i­nals guess­ing, Kiloh avoids ar­riv­ing at the same time each day and stag­gers the times he leaves. He goes in and out dif­fer­ent doors. He keeps an eye on cars parked around his shop.

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