Cannabis Wild West

by Lou Binninger

As state voters twice approved the usage of marijuana few considered what that would look like in terms of growing, sales, distribution and use. Well, the devil is in the details.

Sacramento authorized up to thirty dispensaries with abundant rules to keep the city leaders happy. However, a recent audit concluded that the dispensaries may be underreporting revenue and receipts, not paying enough taxes and are essentially running rogue.

Of the six dispensaries whose finances were targeted for audit, four did not cooperate. The city auditor asked the dispensaries for information in 8 categories including monthly receipt records, financial statements, tax returns, member names and vendor list.

Five of six audited did not provide gross receipts, finance statements or member names. None offered a list of vendors (providers of their merchandise).

Sacramento City Auditor Jorge Oseguera led the investigation and said his staff went to dispensaries to keep track of purchases. Based on what they observed, they were able to estimate how much the dispensaries should be reporting in revenue and paying in taxes. In one case, a dispensary was more than $100,000 short in taxes paid.

Dispensaries have trouble finding a bank to take their money so there is no ‘paper trail’ via deposits and bank statements. It is an all cash operation with plenty of opportunities to beat the government out of payola.

One dispensary, All About Wellness, refused to allow auditors inside, much to the frustration of Oseguera. “This is critical for the city to be able to do if we’re going to allow these dispensaries within the city," Oseguera said. "And to the extent that (the audits were) contested, well perhaps they shouldn’t be operating in the city.”

Dispensaries also failed to meet city code during surprise on-site inspections. Violations included not posting the required signs, not securing doors, selling medical marijuana to people other than qualified patients and allowing the on-site consumption of marijuana.

Last year, Sacramento collected $4.5 million in taxes from the dispensaries.

Yuba County prohibits dispensaries but the City of Marysville has authorized two outlets in spite of voters’ opposition. Local dispensary rules are many and detailed, but will the city face the same lawlessness as Sacramento?

In Yuba County some have estimated more than 1,000 people are growing illegally. While many rural residents concluded that local government had given up enforcing the law, there has been a change since two deputies were shot at a marijuana grow-site on August 1.

Since then, scores of grows and thousands of plants have been eradicated, honey oil labs removed, hundreds of thousands of dollars and many guns confiscated, and dozens of suspects arrested. Toxic chemicals have been discovered at the sites.

A recent sweep saw 18 apprehended. The interesting aspect is that most all of the accused are from elsewhere - Jamaica, New York, Maryland, Illinois, Mississippi, Georgia and Alabama. Chances are none of them were checking the quality of schools here to enroll their kids.

Those arrested were charged with 182PC/Conspiracy, 11358 H&S/Illegal Cultivation of Marijuana, and 11359H&S/Possession of Marijuana for Sale. There were also additional environmental and water violations for perpetrators associated with some locations.

No State of Emergency has been declared, but there is certainly a multi-agency effort to make a statement about what the will of county leaders is. It will take many more raids to alter the attraction for lawless profiteers to Yuba County. Great weather and soils combined with a poorly crafted growing ordinance and feeble enforcement created a perfect environment for a criminal element to thrive here.

Residents are firmly behind law enforcement restoring order and peace before the county has completely lost control. Marijuana industry entrepreneurs consider themselves exempt from the law and their responsibility to their neighbors.

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