A marijuana brand that bears the name of one of the world’s most famous stoners has pulled out of California as the state’s cannabis taxes undermine legal operations and allow the black market to thrive.
Garcia Hand Picked – formed by the relatives of Grateful Dead guitarist Jerry Garcia – moved its products and operations out of California because state laws combined with federal taxes have left legitimate producers paying up to 80 percent in taxes.
As companies overcome hurdles to produce and sell marijuana, black market businesses and illegal farms have managed to operate without legal barriers and undermine the efforts of legitimate markets.
Garcia Hand Picked’s withdrawal comes as experts have predicted numerous marijuana businesses in California could go bust as years of loss-making work to stay ahead of regulations comes to a head.
Grateful Dead guitarist Jerry Garcia smokes a joint. He was a well-known weed smoker in his day
Marijuana sold by Garcia Hand Picked, a brand operated by Jerry Garcia’s relatives
California legalized the production and sale of cannabis in 2016, but since then the path to profit has been blocked by regulatory bureaucracy.
Required retail licenses can cost up to $100,000 per year, and businesses are taxed at up to 25 percent per retail sale.
Federal laws also prevent corporations from deducting corporate taxes from federal taxes, resulting in exorbitant taxes being paid across the board.
From 2017 to 2022, California also levied a crop tax that billed farmers based on the square footage of their farms rather than the actual yield of their product, allowing large corporate farms to thrive off gutted small-scale producers.
Since cannabis was legalized in California, the state has raised at least $4 billion, according to Marijuana Moment.
Garcia Hand Picked pre-rolled joints. The brand recently left California
A hand-picked Garcia grinder filled with marijuana. The brand is still available outside of California
Jerry Garcia’s relatives formed Garcia Hand Picked. The singer died in 1995
While brands like Garcia Hand Picked have struggled to comply with the rules, illegal stores have been able to steal much of the market in California.
Without the cost of government fees and taxes, black market cannabis producers and stores have been able to sell their products at a significant discount compared to their legal competitors.
In the years following legalization, up to 80 percent of marijuana sold in California was still obtained from illegal sources, according to Forbes.
Illegal retail outlets have been operated with near impunity, as the consequences of being caught are often no more serious than misdemeanors.
Lieutenant Howard Fuchs of the Sheriff’s Department’s Narcotics Bureau told the Los Angeles Times that when crimes are limited to the sale of cannabis, authorities don’t bother to prosecute severely.
“There’s this attitude: It’s just cannabis, we’re not going to lock people up for that,” he said. “Well, you’re just saying to the legitimate market, ‘Good luck.’
An illegal marijuana storefront in Los Angeles. Since weed was legalized, stores have been booming
Shoppers browse marijuana products at a legal store in California
Born and raised in California, Jerry Garcia became a central cultural figure in normalizing marijuana use throughout his life. It was only natural for his family to locate their cannabis business in California.
“It was a tough decision for them, they love California,” cannabis consultant Andrew DeAngelo told SFGate. “You were born and raised here. It’s very painful for her, I guarantee it.”
DeAngelo said the departure of a prominent brand like Garcia Hand Picked is a grim sign of the times in the California market.
“You can’t make money in this market,” he said. “It’s not just Garcia that’s going, a lot of people are going.”
United Cannabis Business Association President Jerred Kiloh offered a bleak prognosis for the future of California’s cannabis market, arguing that years of debt-taking while maintaining taxes and regulatory fees were coming to a head
In the years following legalization, up to 80 percent of marijuana sold in California was still obtained from illegal sources, according to Forbes
United Cannabis Business Association President Jerred Kiloh offered a bleak prognosis for the future of California’s cannabis market, arguing that years of debt-taking while maintaining taxes and regulatory fees were coming to a head.
“It’s probably exploding fast now because people are out of dollars and there’s no light at the end of the tunnel and nobody’s investing,” he said, according to the Green Market Report.
The president of San Francisco distributor Grizzly Peak, Matt Yamashita, made a similar prediction in blunt terms, saying, “There’s going to be a mass extinction here before long.”
“I think in the next 12 months half of the retailers will be in business. I think 80% of the business people will be gone. It’s inevitable. The bubble will burst,” he said.