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Massachusetts May Tax Black Market Weed Dealers Instead of Fining Them

Take note California: A new state task force would impose state taxes on large black market weed dealers, with the eventual aim of encouraging them to transition to the legal market.

So far, Massachusetts' foray into legal adult-use sales has been a solid success, but like other adult-use states and countries, the legal weed industry still faces strong competition from the black market.

While other states rely on law enforcement to eradicate illicit weed growers and sellers, Massachusetts officials are trying to brainstorm a more effective way to weaken the black market. A recent report by the state Attorney General's office and the Cannabis Control Commission (CCC) proposes the creation of a new, multi-agency task force that would focus on cracking down on unlicensed pot operations.

The necessity of such a task force was driven home by the recent outbreak of vaping-related lung illness, which is linked mainly to illegal cannabis vapes. “I think the vape crisis really drove home the need for there to be an ability to respond in perhaps a broader way and provide a mechanism to collaborate with other agencies in ensuring that the public is kept safe,” said CCC commissioner Britte McBride to MassLive.

The report proposes a relatively unique approach to tackling black market sales — encouraging illegal growers to get involved in the legal market rather than slapping them with excessive criminal penalties. On top of this, the report recommends the state tax department be given the authority to tax illegal pot sales at the same rate that legal sellers must pay.

The report, as it stands, is only a recommendation, since the power to create the proposed tax force lies in the hands of the state legislature. Some lawmakers are already on board, though, and Sen. Michael Moore and Rep. Hannah Kane have already introduced a bill to create an anti-black-market task force. They are currently refining the language of the bill, but it’s likely that the final version has a good chance of being passed into law.

“One of the things that need to change in the law is we need to give the Department of Revenue the ability to assess excise tax on the illegal, illicit market players the same way we do on the legal marketplace,” said Rep. Kane to MassLive. “In the instance of some of these large-scale recent takedowns of illegal players," the Department of Revenue "would be able to assess the excise on top of the product amount that was caught as part of that bust.”

The task force will focus its efforts on large-scale black market operations, rather than cracking down on home-growers that sell a little weed to their friends. As an example, a woman from Milton was recently arrested for running an illegal pot business that sold $14 million of weed over two years. If this new proposal were already law, this operation would be forced to pay nearly $3 million in taxes, based on the current state weed tax rate of 17 to 20 percent.

“Moving away from criminal penalties and really reserving criminal penalties for instances where there are intentional, knowing, harmful actions is a really key piece to understanding why it’s important to have these groups around one table and then shifting to something that allows for an administrative penalty,” McBride explained.

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