While California garners more than $4 billion in taxes from legal cannabis sales, many businesses still struggle to make ends meet.
One of those brands is none other than Garcia Hand Picked—established by relatives of Grateful Dead icon Jerry Garcia. Due to their struggles, they’ve removed all products and ended all operations in California.
The move isn’t too surprising. Many experts predicted high taxes (up to 25% per sale) and licensing fees (up to $100,000 annually) would cause a number of California marijuana businesses to bust.
To further these financial issues, federal law prohibits cannabis companies from deducting business taxes on their federal filing.
So, with that said, it really isn’t a surprise most brands are turning to the black market with the last of their supply. Beyond the fact that there’s more money to be made illegally, California’s industry has already seen an overabundance in supply—causing the price of cannabis to drop significantly.
While this black market problem is crossing state lines, it’s also happening directly in the Golden State. According to Forbes, 80% of all marijuana sold in California since legalization has been from illegal sources.
Many of these illegal sales are coming from storefronts that appear to be legal. You may assume such actions come with great risk, but illegal store owners have nothing to worry about. If caught, their repercussions likely won’t be anything more than a misdemeanor.
In fact, Howard Fuchs, Lieutenant of the Sheriff’s Department’s Narcotics Bureau openly admitted to the Los Angeles Times that law enforcement doesn’t even bother going after such storefronts – as long as the crime is limited to selling cannabis.
As he noted in the interview: “There’s this attitude: It’s just cannabis, we’re not going to incarcerate people for that. Well, you’re just telling the legal market, ‘Good luck.’”
Garcia Hand Picked is One of Many Being Hit By California’s Poor Industry Management
Unfortunately, the legal market hasn’t had that luck. And for Garcia Hand Picked to suddenly leave the state was difficult.
“This was a hard decision for them, they love California,” Andrew DeAngelo, cannabis consultant, told SFGate. “They were born and bred here. This is very painful for them, I guarantee that.”
DeAngelo furthered his statements by claiming that if a brand with Garcia’s name backing it up can’t make it in California, it’s a bad sign for the state’s industry. And this problem will have a negative effect on thousands of people.
“It’s going to be a mass extinction event here shortly,” Matt Yamashita, distributor of Grizzly Peak, told the Daily Mail. “In the next 12 months, I think half the retailers are going to be in business. I think 80 percent of the people in business will be gone. It’s inevitable. The bubble is going to burst.”
As this bubble bursts, we can only expect to see more illegal marijuana spreading across both the state and the country. Furthermore, there’s a good chance more illegal shops will continue to pop-up.
We’ve already seen this trend in New York City where cannabis sales still aren’t authorized. While law enforcement has done what it can to prevent such sales from occurring, it’s impossible to stop at this point.
“If one goes down, another one just pops up,” Amanda Reiman, a researcher for New Frontier Data, told CNBC.
