Cannabis companies in California are facing a massive debt issue, with unpaid taxes totaling $732 million. The bulk of this debt, approximately 72%, is owed by businesses that have already shut down, posing a huge challenge to the state to recover these funds.
Greenwave Advisors analyzed data from the California Department of Tax and Fee Administration (CDTFA) and discovered that in addition to the debts from defunct companies, there is also $173 million in taxes on unlicensed cannabis sales. These illegal sales could represent about a quarter of the market, with an estimated total of $1.2 billion.
In 2023, the legal cannabis market in California reported $4.4 billion in revenue, up 16% from $3.8 billion the previous year. Despite this growth, financial issues persist within the distribution and sales infrastructure.
For instance, Herbl, a major distributor went bankrupt in September, severely affecting payments throughout the supply chain, noted Green Market Report.
Further complicating the situation, Greenwave estimates that distributors across California might collectively owe the state around $1.2 billion in taxes, an increase from the previous year’s $1 billion.
This includes debts both to the state and directly to cannabis brands themselves, suggesting a broader systemic issue with financial liquidity in the sector.
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Author: Faith N
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