Jimi DevineLate last week, Catalyst Santa Ana filed a lawsuit against the Department of Cannabis Control (DCC) through the Superior Court of California.
In its filing, Catalyst cites the huge number of “burner distributions” which are the types of operations that continue to supply the illicit market by transitioning product grown in full legal compliance to the illicit market through a middle man. It’s so prominent at this point that I don’t feel like I’m even blowing anyone’s spot in writing about it.
How prominent? Some argue that the smaller players in the legal market that have survived this long wouldn’t even exist due to the licensing and tax burden if these burner distros weren’t scooping up product at rates better than California retail operators are able to offer because they are basically living under the same expensive reality as the cultivators. So the burner distro comes in, offers a higher price, does its electronic magic, and then kids in Miami and NYC are smoking heat in no time. But it’s not all leaving the state. It’s sold on the street at a price the dispensary can’t compete with.
Catalyst Bellflower
Another thing that helped their rise to prominence at the state level is the vast swaths of California that don’t have access to legal cannabis. In some places, it can take hours to drive to the nearest dispensary. Obviously, this provided a ripe environment for these distros to grow in scale.
Catalyst calls the burner distribution companies a direct result of the oppressive tax and operating laws in place for those operating in the legal market. Their suit claims the state of California has imposed such excessive taxes on cannabis companies that most cultivators have to resort to using burner distros as middlemen to the street in order to make a decent living.
“I want to be clear – our goal is to outline a problem that the state has created by failing to work with the cannabis industry on fair taxes,” said Elliot Lewis, CEO of Catalyst Cannabis Co. “The cannabis industry has the biggest potential for job growth and good-paying jobs with tons of upward mobility since the tech boom.”
Elliot Lewis
Lewis went on to reinforce that the burner distros are a result of the problem, not the cause.
“The burner distributions are a symptom of the state’s complete incompetence as well as their unwillingness to admit what they know, they have screwed up the entire legal cannabis market,” Lewis said. “They know that burner distributions exist but will not admit it publicly because they want to pretend like this problem they helped create doesn’t exist.”
Lewis believes the state is smothering the cannabis industry and is treating it as a second-class member of the business community with a tax policy discriminating against the entire industry.
“It’s laughable that the state officials want to talk about good-paying jobs, racial justice, social equity, and safe access while putting in place policies that will never allow any of this to happen,” Lewis said. ”Congratulations California, you have figured out how to continue the War on Drugs. Up your game!”
You can expect plenty more drama in the years to come over California’s tax rate. Hopefully, some of the smaller-scale producers will be able to survive that long.
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