Catalyst takes California to court over cannabis tax rates

Catalyst takes California to court over cannabis tax rates
Sep
21
Tue

By Jimi Devine

Late 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.

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.

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