California’s tax agency cracks down on $168 million in illicit cannabis, tobacco

Complementing law enforcement operations that focus on illegal cultivation, manufacturing, and trafficking, CDTFA protects California’s tax system and legal marketplace by ensuring businesses comply with tax laws, investigating fraud and tax evasion, and removing illicit cannabis and tobacco products from retailers. Those taxes and fees help support critical state programs. 

“When California voters approved Proposition 64 and legalized cannabis, they also approved a tax structure to ensure that cannabis contributes to the state’s revenue,” said California Government Operations Secretary Nick Maduros. “We can’t let illicit operators siphon away dollars that are needed for schools, roads, parks, first responders and all the other services on which Californians rely.”

Those investigators and inspectors play a unique role in identifying tax fraud, recovering unpaid revenues, and preventing illicit products from undermining California’s regulated marketplace. 

“CDTFA inspectors and investigators have the authority to take action on illicit activity by examining businesses’ financial records to see if they are complying with the state’s laws,” said California Department of Tax and Fee Administration Director Trista Gonzalez. “Through strong partnerships and strategic enforcement, we are holding bad actors accountable while safeguarding critical tax revenue that supports essential public services.”

Whole-of-government approach to take down illicit products

California has made historic investments to build and protect the nation’s largest legal cannabis market.

In June, Governor Newsom announced $227 million in grants to local governments to combat illicit cannabis activity and strengthen coordinated enforcement efforts across the state. Those investments build on California’s broader strategy to dismantle the illicit cannabis market through the Unified Cannabis Enforcement Task Force, which brings together state, local, and federal partners to coordinate criminal, regulatory, and tax enforcement.

California highlighted the seizure of more than $1.3 billion in illicit cannabis through coordinated Unified Cannabis Enforcement Task Force enforcement operations. Participating agencies — including the Department of Cannabis Control, the California Department of Fish and Wildlife, the California Highway Patrol, the Department of Justice, and CDTFA — work together to protect public safety, safeguard natural resources, ensure tax compliance, and strengthen California’s legal cannabis marketplace. 

Hemp and Kratom

California’s enforcement work also extends beyond cannabis. Across state government, departments are partnering to enforce laws governing other illicit products sold at retail. Those coordinated efforts have resulted in a 99.32% compliance rate with California’s intoxicating hemp restrictions among California’s Alcoholic Beverage Control licensees after 23,174 site visits, with 7,403 illegal products removed from store shelves. Enforcement against prohibited kratom and 7-OH products has likewise achieved a 97.62% compliance rate since enforcement began, following 7,333 site visits and the removal of 6,981 prohibited products.

Together with CDTFA’s tax and regulatory enforcement, these efforts reflect California’s comprehensive strategy to protect consumers, support law-abiding businesses, and strengthen regulated markets.