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New York State Faces Challenges Collecting Fines from Unlicensed Cannabis Shops

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New York State has imposed over $25 million in fines on unlicensed smoke shops for selling cannabis products since last year, but only a small fraction of these fines has been collected by the state Tax Department and the Office of Cannabis Management, according to THE CITY. The two agencies, which gained increased authority to enforce the 2021 cannabis law, initiated joint raids against unlicensed shops last summer. While the Office of Cannabis Management (OCM) reports collecting $22,500 in fines, the Department of Taxation and Finance has not collected any fines as of now.

Last October, THE CITY reported that OCM had temporarily halted enforcement hearings due to resource constraints. Despite this pause, raids on unlicensed shops continued. Some shops received letters from the tax department warning of fines exceeding $150,000, even as OCM withdrew certain cases. The discrepancy in fine collection highlights the complexity of enforcing cannabis laws in a state with a thriving gray market.

Aaron Ghitelman, a spokesperson for OCM, stated that the state is prioritizing shutting down illegal shops and seizing unlawful products. Fines may be challenged through appeals or administrative hearings, prolonging the timeline for collection. Ghitelman emphasized the state's seizure of tens of millions of dollars in illicit products during enforcement.

In New York City, unlicensed smoke shops are prevalent, estimated to number in the thousands. OCM reportedly has only 14 investigators on staff. The challenges in enforcing cannabis laws extend beyond the state agencies, as the Sheriff’s Department and NYPD are also involved in inspections. Governor Kathy Hochul has expressed the need for additional enforcement powers, seeking collaboration with local leaders to address illegal cannabis stores.

Senator Jeremy Cooney, Chair of the Senate Cannabis Committee, acknowledged the necessity for enhanced enforcement but emphasized the parallel need for expanding legal stores. Cooney expressed concern about the delay in resuming OCM's administrative hearings and stated that efforts should encompass both closing down illegal stores and facilitating the opening of legal ones.

Despite the challenges, fines levied by the Tax Department follow a formula assessing shops' owed amount based on the illicit cannabis seized. However, the right to appeal these fines contributes to the delay in collection. Lawyers representing unlicensed smoke shops argue that clients believed the cases were resolved when OCM withdrew proceedings.

This information was originally reported by THE CITY, a nonprofit newsroom serving the people of New York.

Lydia K. (Bsc. RN) is a cannabis writer, which, considering where you’re reading this, makes perfect sense. Currently, she is a regular writer for Mace Media. In the past, she has written for MyBud, RX Leaf & Dine Magazine (Canada), CBDShopy (UK) and Cannavalate & Pharmadiol (Australia). She is best known for writing epic news articles and medical pieces. Occasionally, she deviates from news and science and creates humorous articles. And boy doesn't she love that! She equally enjoys ice cream, as should all right-thinking people.