The Los Angeles City Council on Tuesday instructed city staff to develop a tax amnesty program for licensed cannabis businesses. Officials say the program could help recover some of the roughly $400 million owed by more than 500 cannabis operators that have fallen behind on taxes.
The council approved the proposal in a 13 to 0 vote. Councilmembers Traci Park and Hugo Soto-Martinez were absent during the vote.
The proposal was introduced by the city’s Office of Finance, which said the goal is to recover unpaid cannabis taxes that might otherwise never be collected.
“There’s still work to do with the tax amnesty program,” said Councilwoman Imelda Padilla, who chairs the council’s Government Operations Committee, which is leading discussions on the matter.
“The city finds itself with a unique opportunity to bring businesses into compliance,” Padilla added, noting that any dollars collected from the proposed program would further support existing operators and ensure they stay in the city.
The program would still require final approval. The Los Angeles City Council and Mayor Karen Bass would need to pass an ordinance later this year before the program could take effect.
City officials previously offered a similar program in 2020. That effort generated about $20.6 million after more than 6,000 cannabis businesses participated. The earlier program allowed businesses to pay their back taxes through a 12 month installment plan.
Under the new proposal, businesses could receive a full waiver of penalties and interest. Companies that enroll would be allowed to pay their remaining tax balance through installment agreements lasting up to 36 months.
Funds collected through the program would be distributed across several city priorities. About 20 percent would support the city’s General Fund and the Office of Finance. Another 40 percent would go toward the Los Angeles Police Department and the City Attorney’s Office for enforcement against illegal cannabis businesses. The remaining 40 percent would be directed to the Community Investment Department to support grants for Social Equity Cannabis Businesses.
City finance officials reported that Los Angeles had 738 licensed cannabis business accounts as of Oct. 2, 2025. Cannabis businesses must report their gross receipts each month and pay taxes based on revenue generated the previous month.
The tax rate for cannabis in Los Angeles exceeds 40 percent when all local and state taxes are included. That total includes a 10 percent local cannabis tax.
Finance officials said many businesses have struggled to keep up with those tax payments.
Of the estimated $400 million owed, about $35 million represents interest charges and roughly $100 million consists of penalties. Among the more than 500 delinquent operators, about 329 businesses owe less than $200,000. Another 48 businesses each owe more than $2 million.
Officials also noted that a portion of the unpaid taxes may never be collected because they fall outside the three year statute of limitations. Some debts are tied to businesses that are no longer operating but never formally closed their tax accounts.
City officials estimate that roughly $20 million in penalties would be forgiven under the amnesty program. They believe the initiative could generate about $30 million in recovered tax revenue during its first year.
The Office of Finance said the city rarely offers tax relief programs targeted at a single industry. However, officials said the cannabis industry faces unique challenges, including competition from illegal dispensaries and higher tax burdens than many other industries.
Daniel Sosa, who owns four licensed cannabis businesses in Los Angeles, urged the city to move quickly to support legal operators. He also criticized city officials for failing to shut down illegal cannabis shops.
“So, not only are we competing against the illicit market, but we’re competing against licensed dispensaries that the city is allowing to stay open, who have made it their business model to not pay taxes,” Sosa said during Tuesday’s council meeting.
Sosa said the proposed tax amnesty program could help the city take stronger action against illegal operators.
“This program is just a small band-aid to a gaping wound. We need systemic change for our industry. We need lower taxes,” Sosa said.
