California’s Department of Tax and Fee Administration (CDTFA) hoped to recoup millions of dollars from 10 illegal cannabis businesses that owed more than $14 million in unpaid taxes. However, the state’s attempt to sell their seized property, including glass bongs, snow cone machines, and office supplies, resulted in a disappointing revenue of only $2,075.
How did the state seize the property?
The CDTFA conducted more than 2,200 inspections statewide and seized nearly $90 million in products and cash from unlicensed cannabis operators, according to its website. The agency said that nine out of 10 of the businesses whose property was auctioned off on Feb. 16 operated illegally and did not comply with the laws approved by California voters.
“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 a news release. “These businesses are not licensed under the laws approved by California voters, and many of their products are unregulated.”
Where and when the auction take place?
The state held the public auction on Feb. 16 in the California Highway Patrol’s parking lot in Los Angeles. The auction was open to anyone who registered online and paid a $500 refundable deposit. The items were sold as-is and without warranty, and the buyers had to pay in cash or a cashier’s check.
The auction included TVs, furniture, computers, printers, cash registers, security cameras, and other miscellaneous items from the 10 cannabis businesses. However, the most eye-catching items were the water pipes and bongs, which ranged from simple glass tubes to elaborate designs with multiple chambers and percolators.
Why was the auction a flop?
The CDTFA expected to recover some of the taxes owed by the illegal pot shops by selling their seized property. However, the auction turned out to be a flop, as the state only made $2,075 from the sale of 1,590 items, according to the North Bay Business Journal. That means the average price per item was less than $1.50.
The low turnout and low bids could be attributed to several factors, such as the lack of publicity, the inconvenient location, the short notice, the limited payment options, and the low quality of the items. Some of the bidders also complained that the items were dirty, damaged, or incomplete.
The CDTFA did not respond to requests for comment on the outcome of the auction or the plans for the remaining unsold items.
What has the state done before?
This was not the first time that the CDTFA tried to recoup unpaid taxes from illegal cannabis operations by selling their seized property. In March 2022, the agency auctioned off a commercial property in Whittier that was used for an illegal cannabis operation. The operators owed the state $850,000 in unpaid taxes, but the property sold for only $200,000.
Earlier that month, another seized property in Compton sold for about the same amount. The CDTFA said that the proceeds from these auctions would be applied to the tax liabilities of the businesses.
The CDTFA also warned that it would continue to crack down on illegal cannabis operations and enforce the tax laws. The agency urged anyone who operates or plans to operate a cannabis business in California to obtain a license and pay their taxes.