Dealing with creditors is never a fun experience. However, some creditors are more severe than others, especially in the cannabis industry. One of those is the California Department of Tax and Fee Administration (CDTFA), which administers California’s sales and use, fuel, tobacco, alcohol, and cannabis taxes, as well as a variety of other taxes and fees that fund specific state programs. It’s no secret that CDTFA cannabis taxes are crippling the California cannabis industry. For example, I recently recorded a Cannabis Law Now podcast episode with Anthony Almaz, general counsel for Catalyst. Catalyst is challenging various emergency rules promulgated and adopted by CDTFA that would further expand taxable items in California’s cannabis industry. This post though is about the CDTFA cannabis creditor relationship and the myths and truths around it.
cannabis insolvency
California Cannabis ABCs
California’s cannabis industry continues to struggle in this seemingly unending shake out period. Namely, hundreds of licensed cannabis companies are getting stiffed on A/R with an overwhelming inability to collect as those debtors go out of business. It’s gotten so bad that California considered passing a bill where cannabis companies that fail to pay their overdue invoices will suffer regulatory violations. And the Credit Management Association, at the request of a significant number of B2B California cannabis businesses, was set to compile a list of bad actor retailers that left wholesalers and distributors hanging. Such dire financial times require creditors to get both aggressive and creative. Their options in cannabis are limited since bankruptcy isn’t really available and because of the cannabis regulatory red tape. However, assignments for the benefit of creditors (“ABCs”) are definitely a (surprisingly) great way to deal with cannabis debtors in California (and potentially elsewhere). So, if you’re swimming upstream with a cannabis debtor, you may contemplate using a California cannabis ABC.