State authorities seize $200,000 from Eddie Alvarez’s Santa Rosa cannabis dispensary for unpaid taxes

State authorities seized about $200,000 in unpaid business taxes Thursday from a cannabis dispensary owned by Santa Rosa Vice Mayor Eddie Alvarez.

California Highway Patrol officers and state tax officials served a warrant on the Russell Avenue business around 1:30 p.m., and authorities spent three hours collecting and counting cash from the safe and register, Alvarez told The Press Democrat.

Alvarez owed nearly $455,000, including $375,000 in unpaid taxes from 2019 through 2021 plus $80,000 in interest, penalties and fees, to the California Department of Tax and Fee Administration, according to the warrant, which Alvarez shared with the newspaper.

Alvarez, who opened The Hook dispensary in northwest Santa Rosa in 2019, said he hadn’t paid state taxes since opening.

He said he attempted to pay on various occasions but complained the state’s process is onerous and options to pay in-person have been limited during the pandemic, which hit shortly after he opened his shop.

“I told them if you’re going to make it so hard for me to go in and give you your money I’ll just wait for you to come and pick it up and they finally did,” Alvarez said.

He said he knew that stance appeared unorthodox.

“I know that’s going to rub people the wrong way but that’s the way I had to do it,” he said.

Tamma Adamek, a spokesperson with the California Department of Tax and Fee Administration, could not confirm the tax status of Alvarez’s cannabis shop or if a warrant was served at the location, citing laws she said require confidentiality in such cases.

Speaking generally about the tax collection process, Adamek said the department sends letters and calls business owners if they are behind on taxes and escalates efforts if the liability isn’t paid.

Officials will work with CHP to serve what’s called a “till tap” or “keeper warrant,” where officials can confiscate all cash and checks from the business to satisfy the debt, as one of the last resorts, she said.

The money is applied to the unpaid taxes and officials work with the business to pay any additional money owed, she said.

This process is done regularly to collect unpaid taxes on all types of businesses, including cannabis outlets. Businesses are notified ahead of time that a warrant will be served.

Liens are another method the agency uses to collect unpaid taxes. Eight liens were placed on Alvarez’s business by the state tax agency and the California Employment Development Department between February 2021 and January 2022, according to state records.

Alvarez was elected in 2020 to represent Roseland in District 1. He helps oversee as one of seven city council members Santa Rosa’s $478.8 million annual budget.

He is supposed to make quarterly tax payments to the state and payments range between $40,000 and $70,000, he said.

About 30% of the business’s gross revenue goes toward local and state sales tax and excise fees, he said.

Alvarez said he expects officers will return to retrieve the rest of the money owed to the state but he doesn’t know when they’ll be back to collect it.

“They took two years so I’m hoping they don’t take as long because I don’t want to be protecting the state’s money for that long,” he said.

Thursday’s seizure took place on Alvarez’s 46th birthday.

In addition to the unpaid taxes, Alvarez must pay about $21,000 to the California Bureau of Cannabis Control to renew his state license to operate a retail cannabis business. That license recently lapsed.

He attempted to pay online but the payment wouldn’t go through so he plans to drive to Sacramento and pay the fee in person, he said.

Alvarez said he is up to date on city and county taxes and licenses but working with the state has been difficult. Officials with Santa Rosa and Sonoma County couldn’t be immediately reached to confirm Alvarez’s account.

He said the state tax department requires money be delivered in clear bags and that all the bills face the same way among other hoops. The office was often closed during the pandemic and there were no customer service representatives available, he said.

Alvarez said the incident highlights the difficulties of operating a marijuana business when marijuana is still illegal at the federal level, pointing to limited access to financial services because institutions that are federally insured won’t take on cannabis-related accounts.

Other business owners can go to the bank, get a cashier’s check and mail in their payments but that’s not an option for him, he said.

“If anything, this shows why the federal government needs to hurry up and figure out how to work with the cannabis industry,” he said. “All we want to do is survive in this industry.”

Adamek, of the state tax agency, acknowledged cannabis businesses face extra hurdles because of federal regulations but the office has long accepted cash payments, even before marijuana was legalized in the state.

Businesses that want to pay in cash must set up an appointment and take extra security precautions, such as using an armored car to deliver the money. Though appointments may have been limited in the pandemic, the office didn’t stop making appointments or taking cash payments, she said.

Payments plans and financial assistance also are available to businesses facing financial hardships, she said.

The business tax seizure marks the second time this year in which Alvarez has been subject to a warrant. Santa Rosa police in January served him with a warrant and seized three cellphones in connection with the department’s investigation of a September 2021 shooting outside a bar in southwestern Santa Rosa.

Police officials have declared Alvarez is not a suspect in the shooting but have declined to say why they served a warrant on him. The documents a judge ordered unsealed in May do not indicate what grounds police had when they got permission from a judge to serve the warrant on Alvarez.

You can reach Staff Writer Paulina Pineda at 707-521-5268 or paulina.pineda@pressdemocrat.com. On Twitter @paulinapineda22.