San Diego enjoyed a $1.4 million sequential increase in marijuana tax revenue during the three months to June 30 after city officials ramped up collection efforts.

Marijuana producers should pay a tax on any sales they make within the city limits thanks to a measure approved by voters in 2016. However, many producers were unaware of this city tax, and officials have recently boosted efforts to collect what is due.

Most of the $1.4 million increase came from businesses outside the city that sold cannabis to licensed retailers within San Diego. The boost helped the city reach $8.2 million in marijuana tax revenue for the 2019 fiscal year.

Jessica McElfresh, a local attorney representing several local marijuana businesses, said many find the concept of the city tax confusing. She added that a lack of jurisdictional coordination among cities has made it challenging to collect the tax.

Many simply dislike the idea of San Diego taking a city tax on sales. “Some of these businesses find this concept very offensive,” McElfresh said. “There are people who don’t have any respect for the concept. Period.”

It increased from 5% to 8% in July, and city budget officials now believe they will earn $12 million from marijuana tax in fiscal 2020.

California faces a number of challenges as it bids to claim its fair share of tax from the cannabis industry. Businesses are forced to trade in cash as marijuana is illegal at a federal level and they therefore cannot access the banking system, which hampers the state’s ability to collect taxes.

The thriving black market represents another major obstacle, as there is an abundance of cheap illicit cannabis across the state. However, a clampdown is gathering momentum.

Golden State authorities revealed they seized more than $1.5 billion worth of illegal marijuana in fiscal 2019, which is roughly equivalent to the size of California’s legal market.

The authorities raided 345 illegal grow sites and confiscated more than 950,000 plants. They also arrested 148 people.

Attorney General Xavier Becerra said illegal cannabis is devastating communities, poisoning waters and disregarding life, and warned that illicit growers will continue to be brought to justice.

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