Why illegal cannabis dispensaries call transactions ‘donations’

Have you ever wondered why unlicensed cannabis dispensaries call transactions ‘donations?’ Or why your purchase may come with a ‘gift?’

Well, there’s actually a pretty simple explanation. 

By the dispenser calling it a donation, or saying they’re gifting cannabis, they’re able to circumvent the law. 

Unlicensed dispensaries do this because they believe they’re not technically ‘selling’ you cannabis. 

By calling the exchange a ‘donation,’ they’re attempting to frame it as a charitable act, rather than a commercial transaction. 

Simply put, these sellers use the term ‘donation’ as a way to avoid legal consequences for their actions.

Dispensaries Operating Without a License

It’s no secret that a gray area still exists in the cannabis industry.

While operating a dispensary without a license is illegal, it is not unheard of. 

People operate a dispensary without a license for a variety of reasons. A few are because of a lack of access to legal options, financial gain, or even a desire to provide medical cannabis to those in need. 

However financially rewarding operating a dispensary without a license is, it is still risky business. Doing so can put the safety of both the merchant and customer in jeopardy. 

From theft to toxic products or even legal consequences, such as fines, imprisonment, or the seizure of assets– are all very real possibilities. 

Unlicensed dispensaries are especially known to not have the same quality control standards or safety regulations as licensed dispensaries do. That puts the health and well-being of their customers at risk. 

These reasons are why it is always recommended to shop at a licensed dispensary. You’ll know you’re in one when you see certificates of compliance upon entering the store.

The Term ‘Donation’

Donations have long been considered a safe way of giving money to trusted organizations, and even individuals in need. 

However, over the years, donations have been caught being used for fraud, or other illegal activity.

In areas where the black market thrives, such as New York City and Los Angeles, donating cannabis has become increasingly common.

The idea behind ‘donating’ or ‘gifting cannabis’ is often associated with a culture of sharing within the cannabis community. Many consumers share their home-grown or legally purchased cannabis with friends or acquaintances.

As law-makers in states across the country relax restrictions and roll out regulations, some legacy market operators continue to sell without a license. 

Without the legal implications associated with a sale, those operating an unlicensed dispensary can avoid paying taxes.

Avoiding taxes enables them to sell their product cheaper than the regulated stores. This in turn attracts customers, sometimes even those underage. 

Unlicensed dispensaries in general are aware that even though they consider it to be a donation, the law still applies. 

Cannabis must be sold and purchased from a legal, regulated store. 

It is important to note that the legality of gifting cannabis varies by state. Even where it is legal, there are limits on the amount that can be given.

The Purchase and Donation

Consumers shopping for cannabis from an unlicensed dispensary will typically buy an item such as a T-shirt that costs equivalent to the amount of weed they want. 

A $20 shirt suddenly becomes valued at $200, but it’ll also come with an ounce of cannabis as a gifted ‘donation.’ 

However seemingly equitable these transactions appear, there is no guarantee of product safety or efficacy. 

The Tax Issue

Shopping at unlicensed dispensaries can seem like an attractive offer when the prices are lower than licensed, tax-paying dispensaries. 

Instead of registering purchases through a sales system, these unlicensed disparities are engaging in tax fraud. 

Gifting cannabis is not a tax accepted form of transaction, and participating in such exchanges is not only questionable, but could potentially carry harsh penalties.

One illegal dispensary in New York City was recently fined $50,000, and had one worker arrested, for operating without a license.

While illegal dispensaries might initially present an appealing bargain, their lack of compliance in multiple areas could risk both personal and financial repercussions in the future.

While many dispensaries have implemented a donation model for their products, what they’re effectively doing is exploiting their customers with what appears to be an innocent giving system. 

These seemingly equitable transactions often involve overpriced products and no guarantee of product safety or efficacy. 

As a result, both recreational and medical cannabis consumers need to be aware that these donation models may take advantage of them if not utilized wisely.

All in all, calling a transaction a ‘donation’ helps create the illusion of legitimacy for these unlicensed dispensaries. By framing their business as a non-profit or donation-based organization, some dispensaries think they’ll be able to attract customers who believe they are supporting a good cause.

What’s important to note is that by calling a transaction a “donation” does not make it legal, and illegal dispensaries can still face legal consequences for selling cannabis, regardless of the terminology they use.

If you live in a state where cannabis is legal, always shop at a compliant state-regulated dispensary.