Cannabis retailers in Los Angeles are refusing to pay their city taxes until regulators or law enforcement solves the illicit market problem.
According to a recent Fox News report, Elliot Lewis, the outspoken founder and CEO of Catalyst Cannabis, is among the retailers who have \stopped paying local cannabis taxes in Los Angeles, where licensed operators owe as much as $400 million.
In addition to state taxes, cannabis businesses in LA are charged local gross receipts taxes of as much as 10%.
More than 500 of the LA’s 738 marijuana businesses owe outstanding taxes, according to SFGate.
That includes Catalyst, which operates 33 marijuana stores statewide, Lewis said.
“In the city of LA, we have stopped paying our taxes,” he told Fox.
Lewis said his business struggles because every time he opens a store in LA, another two to three unlicensed stores will open nearby and suck his customers away.
“It’s like the wild, wild West except that you have the government with a boot on your throat and a six-shooter in your mouth 24/7,” he said.
Cannabis tax revolt follows tax and fee woes amid illicit market growth
California is the largest legal cannabis market in the U.S. However, legal sales have begun to shrink under pressures from high taxes and the illicit market.
Legal sales have declined by nearly $1 billion since 2021, from $5.7 billion that year to $4.88 billion in 2024, according to state data.
Illicit cannabis production could be as much as ten times the legal market demand, a state-commissioned report released earlier this year found.
Amid these struggles, in August, Los Angeles’s Department of Cannabis Regulation chose to raise fees.
More recently, city officials signaled the possibility of relief.
LA will waive penalties if licensed marijuana businesses arrange payment plans to repay their taxes, according to an Oct. 2 letter from Treasurer Diana Mangioglu.
“Due to widespread non-compliance with tax and permit regulations feeding a thriving black market, combined with a tax burden which vastly exceeds the rates paid by other industries, legally permitted cannabis businesses face a daunting task,” Magioglu wrote in the letter.
But even with the penalties forgiven, the city would likely only recoup $30 million in tax revenue because many of the companies are out of business or the tax bills are too old to collect, according to the letter.
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