HESPERIA — Roberta White uses an indica-type strain of cannabis and CBD gummies to help her sleep and for her constant back pain.
The 68-year-old retired retail manager from Apple Valley said her daughter orders the “life saving” products for her from an unlicensed delivery service, mostly to save money.
“My daughter said it’s about 10 to 20 percent cheaper from an unregistered dealer,” White said. “That’s about a $12 savings every month. On my fixed income, every penny helps.”
Like White, 59-year old Tommy Alberts of Victorville said he purchases his “medication,” mostly “Purple Rain” and “Papa’s OG” indica strains of cannabis, from an unlicensed delivery business that operates about a block from his house.
“Some of the unlicensed dealers are greedy and will jack up the prices,” said Alberts, a truck short distance truck driver, who uses cannabis to relax and for joint pain. “The smart dealers will keep the prices down to attract and keep their customers.”
Alberts and White represent an army of cannabis consumers across the High Desert who say they buy cannabis from unlicensed dealers, who operate beneath the radar of the State Bureau of Cannabis and local municipalities.
By some estimates, up to 80 percent of cannabis-related products are sold under the table, snatching profits from legal cannabis businesses and tax revenue from governmental entities.
Many in the legal cannabis industry told the Daily Press that overregulation, high taxes, limited banking options and minimal law enforcement have created a flourishing black market, in the High Desert and throughout California.
Around $2.5 billion worth of cannabis products were sold legally in the state last year, about half-a-billion dollars less than in 2017, when only medical cannabis was legal, according to sales tracking company GreenEdge.
Local cannabis business owners who have legal operations say they’re frustrated.
“Some of us followed the rules, paid our fees and spent thousands of dollars to open our businesses legally,” said Medical Cannabis Educational Center CEO Rick Casas, who opened the first licensed cannabis facility last year in Hesperia. “Meanwhile, you have unlicensed businesses raking in the money all over the state.”
Casas and industry experts across the state point to the less-than-expected cannabis tax income collected by the state as proof that most consumers continue to purchase tax-free cannabis-based products on the black market.
Earlier this year, the state announced they expect to bring in nearly $355 million in marijuana excise taxes by the end of June. That number is about half of what was once expected after legal sales began last year.
Currently, cannabis retailers pay a 15 percent excise tax, while growers pay $9.25 per dry-weight ounce of cannabis flower and $2.75 per dry-weight ounce of cannabis leaves.
Local governments, such as Adelanto and Hesperia, have also added taxes on sales. Adelanto also taxes cultivators.
After the November approval of Measure T, the Hesperia City Council implemented a four percent tax on all cannabis-based products sold by business owners in the city’s green zone. The only cannabis businesses allowed by the city are type M- 9 medical cannabis delivery services.
In Adelanto, a variety of tax rates from one-half to four percent are associated with transportation, retail, distribution, manufacturing, testing and events. There’s also a fee of $0.42 per square foot per month for medical and recreational businesses.
Casas praised Hesperia City Manager Nils Bentsen, Assistant City Manager Mike Blay and Administrative Analyst Tina Bulgarelli for supporting businesses in the city’s green zone.
“They understand the industry and licensing, and they helped us tremendously with our transition into the green zone,” Casas told the Daily Press. “I think code enforcement is doing their job, but the state could be more proactive.”
Casas also claims the current Hesperia Council is “out of touch” with cannabis patients in their city and the legal businesses that cater to them.
“City staff has done their homework and they understand the needs of the people, but the Council needs to open their eyes and start helping business owners if they want to see revenue flowing into city hall,” Casas said. “They need to make some concessions like allowing us to deliver after 7 p.m. and not raising taxes right after we started doing business.”
One unlicensed cannabis dealer, who wished to remain anonymous, told the Daily Press that he’ll operate until he receives a “cease and desist letter” from the state or when code enforcement comes knocking on his door.
“It’s still the Wild West out here and the money is good,” the dealer said. “I don’t advertise on Weed Maps so I have to rely on word of mouth for customers, but so far that working out.”
Not all cannabis users are willing to buy from an illegal business. Ray Tillman, 44, said he refuses to give his “hard earned money” to people who “sidestep the law” and give the cannabis community a “bad name.”
“I won’t give them a damn dime,” said Tillman, who lives in Victorville and uses CBD and several indica strains for an ailing neck and back injury. “I’m a business owner who pays my fair share of taxes. If I have to pay, they should too.”
There are currently six legal cannabis businesses operating in the city’s green zone. Over the last 14 months, 53 cannabis-related cases have been reported to the Code Enforcement Department, with only two cases open at this time, Hesperia spokeswoman Rachel Molina said.
“Illegal cannabis businesses that are reported to our Code Enforcement are handled like any other Code Enforcement case,” Molina said. “A case is opened, an officer is assigned to the case. The officer will attempt contact at the property to see if a violation is present. If a violation is present, the officer will issue the appropriate notices and/or take the appropriate actions.”
In Adelanto, statistics regarding cannabis-based businesses and the black market are difficult to come by. The city no longer has an employee who oversees cannabis businesses and a public information request sent to the city has not been returned.
In January, Gov. Gavin Newsom recommended a sharp increase in spending for regulatory programs, although some question whether it will be enough to help restore the state’s pot economy.
The state’s budget recommends just over $200 million for marijuana-related activities in the fiscal year that starts July 1, which would be more than a 50 percent boost from the current year.
Earlier this year, Bureau of Cannabis Control Chief Lori Ajax said the state intends to get more businesses licensed and operating in 2019 while cracking down on rogue operators who continue to proliferate across the state, the Associated Press reported.
Reporter Rene Ray De La Cruz may be reached at 760-951-6227, RDeLaCruz@VVDailyPress.com, Twitter @DP_ReneDeLaCruz
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