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Tax Refund Check with W-2 and 1040 U.S. Individual Income Tax Return Forms
Senior Director of Strategic Alliances
LexisNexis Risk Solutions - Government

It is legal to plant, grow, cultivate, harvest, and prepare marijuana plants to be sold to consumers in California as long as you have a permit. What is not legal is defrauding the government by avoiding taxes and conducting business in an irresponsible manner.

Monica Herrera owned and operated a marijuana business in Salinas, California between August 2017 and June 2018. Holistic Farms, LLC was a cannabis cultivation business licensed to operate within certain parameters.

In 2018 it was discovered that Herrera moved the operating location of her business to one that was not covered by the license. Upon further investigation it was discovered that she had illegally avoided paying payroll taxes by paying her workers in cash. (Hererra couldn’t limit herself to committing just one crime at a time.)

It is also illegal in California not to invest in workers’ compensation insurance as it is required by state law for all businesses with employees. Hererra never purchased workers compensation insurance for her business, leaving her employees unprotected if injured while on-the-job.

Herrera admitted to prosecutors that she was intentionally avoiding taxes and not purchasing workers compensation insurance. (Perhaps she was trying to get herself out of the “weeds” by cooperating with officials.) She pleaded no contest to charges of felony payroll tax fraud and misdemeanor failure to maintain workers’ compensation.

Prosecutors are asking for Herrera to be sentenced to probation, fines of up to $30,000, and community service. Her sentencing is scheduled for August 25, 2020. This is the latest in a series of cases prosecutors have brought against cannabis businesses owners in Monterey County for violating the restrictions of their licenses.

In another case, California’s Top Shelf and Top Shelf Family company was shut down by the state’s Department of Fish and Wildlife when they determined that the companies’ marijuana growth was impinging on nearby waterways. (Don’t mess with mother nature.) This led to the discovery that the company was authorizing workers to grow more than 10,000 square feet of marijuana than allowed by their license.

The owners of the company, Gino and his father Francesco Galofaro, paid a $1.1 million dollar settlement during a lawsuit that alleged they tried to smuggle marijuana plants out of the overgrown location to prevent authorities from discovering they were violating their license.

Prosecutors have determined a large civil penalty tends to be a better deterrent for those considering operating beyond the scope of their license or without a license.

Today’s Fraud of the Day comes from an article, “Salinas cannabis business owner pleads to insurance, tax fraud,” published by The Californian on July 8, 2020.

The owner of a marijuana business in Salinas admitted to avoiding taxes and not paying for worker’s compensation insurance, the Monterey County District Attorney’s Office said.

On Tuesday, Monica Herrera, 43, of Newman, pleaded no contest to felony payroll tax fraud and misdemeanor failure to maintain workers’ compensation charges.

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