LOS ANGELES — A measure on the June 2 ballot is asking Los Angeles residents to approve a tax on unlicensed cannabis shops, a proposal that some in the industry say is misguided.

Roni Melton founded Zapata Cannabis Company and feels the measure, designed to boost revenue while the city looks to solve its budget challenges, legitimizes shops that haven’t played by the rules.

“We have to go through state approval, city approval, city permits, rent, all that good stuff, just to get it up and operable,” said Melton, whose products feature Frieda Kahlo and Pancho Villa — a nod to her Black and Mexican heritage.

Melton got into the cannabis business in 2020 and said she takes pride in her woman- and minority-owned business.

“I thought this would be a good chance to kind of put that in the storefront and kind of get some representation out there,” Melton said.

But the business has also been challenging, Melton said, which is why she’s opposed to this ballot measure.

Melton said she’s a member of the LA Department of Cannabis Regulation’s Social Equity Program, which aims to promote equitable ownership in the cannabis industry. Her costs include licensing, testing and state and local taxes, which can be as much as 40%.

She’s put in over $20,000 of her own money. Melton said taxing unlicensed operators puts legal owners, especially Social Equity operators, at a disadvantage after investing so much and waiting years just to become operational.

Melton hopes to open a retail storefront with a cafe alongside Amber Nicole, who owns Kijani Leaf. Nicole said she’s invested at least $250,000 into her business and said the city should focus on closing illicit shops instead of offering them a pathway to compliance.

“They will never encumber what we encumbered,” Nicole said.

Another legal cannabis store owner previously told Spectrum News it took two years to secure the proper permits before opening their space in North Hollywood.

The measure would apply the same business taxes to all storefronts: 10% on cannabis sales, 5% on medical sales, 2% for manufacturing and cultivating, and 1% on transportation, testing or research. City officials estimate it would generate $25 million a year and help pay for services like sidewalk repair, 911 response, the fire department and parks.

Councilmember Adrin Nazarian said the proposed tax measure levels the playing field, adding that the city can’t allow unlicensed shops to continue to operate with impunity.

“That’s not really going to speak well for the city; it’s not going to allure investment,” Nazarian said. “And it’s only going to create a more disorderly system, if anything.” 

Another hurdle to the potential measure is enforcement.

A previous investigation by Spectrum News found a network of unlicensed cannabis stores operated by limited liability companies that were formed with stolen identities.

“We anticipate that enforcement of the new tax requirements on these businesses will be difficult,” said Matthew Crawford, assistant director of the city’s finance department. “We have heard from other city departments seeking to enforce regulations on these businesses that ownership is often very difficult to ascertain.”

“These are businesses which, by their existence, have shown that they are willing to operate outside of the city’s laws,” he added.

Crawford said it’s unclear how many unlicensed cannabis shops operate in LA, but said there are at least as many unpermitted stores as permitted ones.

A public records request to the city’s Department of Cannabis Regulation found complaints about illegal cannabis businesses have grown from 126 in 2023 to 179 in 2024 and 184 last year.

Melton has expressed her misgivings to the City Council and said she hopes voters carefully consider the measure.

Meanwhile, she said she’ll work toward her dream of carving out her unique space in the cannabis industry.

“It’s been a rough, rough ride, and [I’m] like holding on by a thread,” Melton said. “But we are still here.”