AP Exclusive: Inside the scary cash dash of paying pot taxes

Jerred Kiloh’s eyes narrowed as he checked his mirror again. The black Chevy SUV with tinted windows was still behind him.

It had been hanging off Kiloh’s bumper ever since he nosed out of the parking lot behind his medical-marijuana dispensary with $40,131.88 in cash in the trunk of his hatchback.

Kiloh was unarmed, on his way to City Hall to make a monthly tax payment, and managing only stop-and-start progress in the midday traffic. He was afraid of one thing above all else: getting robbed.

That fear is a constant part of doing business in California’s flourishing medical cannabis industry, in which transactions are conducted mostly in cash, sometimes in stunningly large amounts.

The Associated Press
On a typical day, $15,000 can change hands in Jerred Kiloh’s medical marijuana dispensary, Higher Path, in Los Angeles.

“The thing I need the least right now is to have to go through any sort of money disappearing,” Kiloh said.

On Jan. 1, recreational pot will become legal in California, creating what could be the world’s largest legitimate marijuana economy. It comes more than two decades after the state gave its blessing to medical cannabis.

But the emerging marketplace with a projected $7 billion value has a potentially crippling flaw: Many people who work in it can’t use a bank. Banks don’t want the risks of doing business with companies whose product remains illegal under federal law.

The Associated Press
Preparing his monthly tax payment, $40,131.88 in cash, Jerred Kiloh, owner of the Higher Path medical marijuana dispensary, runs his business in all cash.

So while the sneaker shop next door to Kiloh’s storefront on Ventura Boulevard can send a check to City Hall to cover its taxes, or wire the money from a laptop, Kiloh has to make a stress-filled, 15-mile (24-kilometer) freeway drive each month to downtown Los Angeles.

California is to marijuana what Iowa is to corn, and what Kentucky is to bourbon — the nation’s bud basket, its heartland for production. The transformation of such a vast illegal economy into a legal one hasn’t been witnessed since the end of Prohibition in 1933.

The state expects to collect $1 billion in new tax revenue annually from pot within a few years. In L.A. — which is already estimated to have anywhere from 1,000 to 1,700 medical marijuana dispensaries, only about 200 of which paid city taxes in 2016 — the take is projected at $50 million next year alone.

The Associated Press
Two security guard watch over the…

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