After two weeks of bills and moves coming out of Sacramento that will have major consequences for the cannabis industry moving forward, the industry’s gaze traveled south to Los Angeles, following one of the state’s premier operators experiencing a major tax raid.

Last Tuesday saw The Jungle Boys’ headquarters at TLC raided by the California Department of Tax and Fee Administration (CDTFA). Joining the CDTFA in the raid was local enforcement, who approached management with their guns out and told them to hit the ground. 

In the following couple of hours, the CDTFA cleared out all the cash at TLC. While the Jungle Boys were in the midst of a $66,000 dispute over a fine with a hearing scheduled, CDFTA would take over $100,000 extra from TLC’s coffers. All this happened to an organization that contributed $18 million in taxes last year to the state. And the fine? The Jungle Boys would point to the CDTFA’s hours of operation during the pandemic as the cause of their payment delay in the first place. 

The raid sent shockwaves through the entire cannabis community. Especially once the general background details were understood a day later. But unlike the Jungle Boys, most aren’t willing to talk about it. 

Others hit us up telling us they had felt the CDTFA’s wrath as recently as February, but they were scared. Small operators are already barely holding on by a thread, the idea of going toe-to-toe with the state in standing up for their rights is too daunting. I don’t hold it against them. 

Other Operators Weigh In

But Elliot Lewis is not one of those small fish. He controls one of the largest retail footprints in the state and has continuously called the tax situation BS over the years. He’s also gone through multiple CDTFA enforcement efforts and audit, but was quick to admit nobody ever pulled a firearm on him in the process. 

“We did have Riverside County come down with Homeland Security, raid perfectly legal business, and they still have our fucking ATM machine,” Lewis told L.A. Weekly. “And we still don’t know why. It’s part of some other investigation, and they won’t give it back. That was the guns out rate. The CDFTA has been by our places multiple times. And then even while we were being audited, they sent another team over to do a random inspection. It’s just all free-look bullshit.”

Lewis found the additional layers of enforcement unhelpful while he was already in the process. While the enforcement action the Jungle Boys face was the result of a fine, he believes many of the state’s tax enforcement actions are the result of haters. He says you get 10 people with basic internet literacy to file complaints and then the CDTFA will come to take a look. 

Lewis next noted that many shops have a past due on taxes. He wonders the methodology being used to determine who faces the most scrutiny. 

“I’m looking at dispensaries right now and they all have past dues to the CDTFA. Based on what did they come by our place? Or the Jungle Boys’ place? It’s just all based on they have a hunch or whatever and they want to take a free look, so that they get into your shit. They fuckin’ audit us all up and down everywhere, like the fucking most painful audit ever.”

We asked Lewis if he was surprised that smaller operators are scared to share their stories of dealing with the state on tax issues? He quickly replied he’s had more than 100 conversations with people that wish they could speak up. 

“But then that’s the common theme where people are afraid because the government has fucking magic powers,” Lewis said. “They can do whatever they want. I mean, I’m not worried about the raid, bring them on, motherfucker, look some more. My thing is it just takes time. You know, the audits are so time-consuming and we run our business with really low corporate overhead. Who refunds me for the time?” 

Expect Lewis to continue to be at the center of the tax debate. 

“I think the industry is rallying around this Jungle Boys issue. It’s already been rallying around the tax issue,” Lewis said. “I think you’ll see rallies and more resolve in the industry to push forward and make a change. There are some bills in the state, but again, the special interests are probably going to fuck them up.” 

 

LA Weekly