The city of Los Angeles has already raked in more than $2.35 million from companies applying for temporary permits to sell recreational marijuana.
That’s the revenue for application fees alone. Since January 3, 112 businesses have received short-term licenses to sell in the city. Less than half have also obtained a separate state license needed to actually start selling the drug. All told, 47 businesses are now licensed by both the city and state to sell marijuana for recreational use in the city of Los Angeles.
The impact of marijuana sales on the city’s finances could be significant. In 2016, city officials estimated that recreational sales could generate more than $100 million in tax revenue annually. Business taxes won’t be fully collected until July, but that money, along with funds brought in through the application fees will pad the city’s general fund.
Buyers face plenty of additional fees tacked onto the drug’s sticker price. The state collects a 15 percent excise tax on recreational cannabis sales, while the city of Los Angeles has imposed a separate 10 percent business tax. That’s on top of the countywide 9.5 percent sales tax.
Applications themselves are turning out to be lucrative for the city, and the city’s newly formed cannabis department is stretched thin due in part to the sheer number of permitting requests it has received so far, according to director Cat Packer.
Packer told a City Council committee earlier this month that the department—staffed by just three people—is still reviewing some applications, and that an additional 42 businesses are eligible to apply for priority processing under the city’s permitting system.
The number of pot shops that will eventually be allowed to operate within the city will be limited by land use requirements on where they’re allowed to operate (for instance, stores can’t open within 700 feet of schools, public parks, or drug treatment centers). According to the planning department, these restrictions will effectively limit the number of storefronts carrying recreational marijuana to 390 citywide.
Plenty of pot shops without required permits are also open for business. In a press conference two weeks ago, Los Angeles Police Department deputy chief John Sherman said the department was dealing with “ongoing challenges” presented by “illegal and clandestine” retailers.
Sherman estimated that between 200 and 300 businesses are now operating illegally throughout the city.
LAPD Captain Steve Carmona said that the department has arrested 16 people since the beginning of the year for operating unlicensed marijuana businesses.