California Tax Department Auctions Off Illicit Cannabis Property
Adobe Stock

California Tax Department Auctions Off Illicit Cannabis Property

The California Department of Tax and Fee Administration sold commercial property in Whittier, where operators owed more than $850K in taxes.

Subscribe
March 24, 2022

In an effort to recoup lost revenues, the California Department of Tax and Fee Administration (CDTFA) auctioned off a commercial property March 23 that was seized in connection with illicit cannabis retail operations.

The property, in Whittier, a city southeast of Los Angeles, was part of an investigation into illegal cannabis sales, which uncovered that operators at the site owed more than $850,000 in unpaid taxes, according to a CDTFA news release

The March 23 auction marked the second time this month that CDTFA officials used seized property to partially reclaim unpaid taxes from illicit cannabis sales. On March 2, the department sold a property in Compton for $256,000 in conjunction with the Los Angeles County Sheriff’s Department.

While CDTFA officials hoped the March 23 auction would provide $220,000 in revenue from the Whittier property, that sale exceeded expectations at $330,000, the Whittier Daily News reported.

“Unlicensed cannabis operators not only undercut legitimate businesses, but they also cheat California communities out of revenue for vital programs,” CDTFA Director Nick Maduros said in the news release. “These businesses are not licensed under the laws approved by California voters, and many of their products are unregulated.”

Taxable sales of cannabis, cannabis products and tangible personable property at licensed adult-use dispensaries netted nearly $1.3 billion in total tax revenue in 2021 in California.

In part, that money is used to invest in cannabis equity programs and various local services, including transportation, police and fire departments, public safety and health, libraries, schools, social services, and natural resource management programs.

While the Whittier and Compton auctions were geared toward combating illegal cannabis sales, California state Rep. Thurston Smith introduced a bill earlier this year that intends to combat illegal cannabis cultivation through classifying unlicensed operations as a felony.

At the Whittier and Compton properties, consumers may have unknowingly purchased unregulated products that may have been unsafe for use, according to CDTFA.

The commercial property in Whittier was located along a major roadway and was valued at more than $588,000 when it was previously sold in May 2018, the Whittier Daily News reported. The incoming tenants from that transaction then ran an illicit cannabis dispensary at the 3,162-square-foot lot, the news outlet reported.

The winning bidder of Wednesday’s auction intends to restore the property to a functioning restaurant—it was previously occupied by the owners of Mary’s Tortilleria & Deli, before the 2018 transaction—and hopes to sell it for more than $900,000 when complete, Whittier Daily News reported.

The new owner will be responsible for paying any liens and penalties associated with the property.

Since 2020, CDTFA has performed more than 1,000 inspections and observations of cannabis businesses and seized more than $32 million in cash and products.