California’s hashish taxes are a catastrophe, endlessly. I’ve written concerning the state’s tax issues extensively, however at the moment I wish to speak about what the state can do on the subject of tax assortment.
Late hashish taxes? Get used to hefty penalties
If a licensed hashish enterprise fails to well timed or totally pay its hashish taxes, it’s going to owe a considerable quantity larger than the precise tax quantity. Particularly, the state’s hashish laws mandate a penalty of fifty p.c of the unpaid quantity, on high of the ten p.c general penalty payable for late tax funds. The identical licensees may even be required to pay curiosity on the unpaid quantities. In case you’ve ever seen a California Division of Tax and Charge Administration (CDTFA) assertion of account, you might have observed an extra cost listed as “different,” which allegedly consists of miscellaneous assortment charges.
Think about an organization owed $100,000 and didn’t well timed pay. Given the above, that very same firm would owe at the very least $160,000 (and doubtless nearer to $170,000 or extra) contemplating the penalties. Moreover, after I say “well timed,” I imply it actually – we’ve seen the CDTFA impose penalties when a licensee was a day late.
Now chances are you’ll level out that the CDTFA does entertain cost plans, and should even waive a number of the penalties in some circumstances. However – and this can be a large “however” – waivers are by no means assured, cost plans take time and assets (i.e., cash) to barter, and failing to observe a cost plan to the letter might lead to it being revoked.
The underside line is that if a licensee fails to pay the state’s absurdly excessive hashish taxes by even a day, the licensee can be in a world of ache.
Threatening notices and calls for
Now let’s say the oppressive tax penalties will not be sufficient to get a licensee to pay. What subsequent? The licensee can count on to obtain a “discover of state tax lien” that’s filed with the California Secretary of State. The discover will inform the license that the assessed legal responsibility constitutes a lien on all private property of the licensee. This can make it very tough for the licensee to safe financing, on condition that its belongings are encumbered.
The CDTFA may challenge a “discover of doable disciplinary motion” threatening to report the licensee to the Division of Hashish Management (DCC – the licensing authority) which may discipline a licensee for failing to pay taxes. And naturally that self-discipline can embrace license revocation.
Threats of particular person legal responsibility are doable
Let’s say a hashish enterprise confronted with these calls for decides to shut up store and wind down. Are the taxes discharged? Nope. In actual fact, if a hashish enterprise dissolves, terminates, or is deserted, the individuals who have been in charge of the enterprise will be personally liable for the hashish taxes of the previous enterprise. I’ve seen the CDTFA even demand that house owners of a hashish enterprise negotiating a cost plan acknowledge in writing that they are often responsible for unpaid taxes if the enterprise folds earlier than the tax is paid.
This places companies house owners and operators in an actual bind. On one hand, these of us know that they can’t proceed to function — chapter isn’t a viable choice and receiverships and different non-bankruptcy processes don’t go practically far sufficient. The DCC could forestall them from working and earning money to pay again taxes, as well. However, these house owners can’t merely stroll away with out being personally liable.
When the state comes to gather
Generally, the entire above issues fail to work, and the state comes to gather. The problem is that there is probably not an entire lot for the state to gather and dump, and chances are you’ll find yourself with absurd conditions just like the state auctioning off seized bongs and snow cone machines for a whopping $2,075 in proceeds. This is a true story!
California’s hashish taxes and penalties are method, method too excessive, and mainly warranty that the state won’t be able to gather and must spend good cash chasing licensees. Licensees and the state are primarily designed to be in an infinite sport of negotiations, with licensees hoping that the regulation will change or that a few of their penalties can be forgiven.
None of that is tenable. If the state wished to vary issues, it might. Nevertheless it hasn’t, and it’s failure to behave speaks volumes.