California became the first state to allow medicinal cannabis when it passed the Compassionate Use Act in 1996. Today, cannabis is legal in California for medicinal and adult recreational use, and has become a significant industry in the state, with sales reaching $4.4 billion in 2020.
Though the sale and use of marijuana is legal in California, there are several rules and regulations that you must adhere to if you are an entrepreneur wanting to start your own cannabis business. The laws and licenses needed are different in each state, and it is important to comply with the laws where your business is located.
Who is responsible for the rules and regulations of cannabis in California?
In California, the marijuana industry is governed by the Department of Cannabis Control (DCC). The DCC licenses and regulates cannabis businesses by regulating matters such as the growing of cannabis, the manufacture of cannabis products, transportation and tracking of cannabis goods throughout the state, sale of cannabis goods, events where cannabis is sold or used and the labeling of goods sold at retail.
How does the application process work?
Before applying for a license, you must first complete any permitting requirements for the city or county in which your business will operate and be able to adhere to the DCC’s standard operating procedures.
Licenses are issued by the DCC based on the type of cannabis activity your business will perform, and if you will do more than one activity, you may need more than one license. You must have a valid DCC license to grow, transport, sell, or make cannabis or cannabis products, as well as to hold cannabis events.
An entrepreneur seeking to open a dispensary should consider which of the following license types they will need for their business, depending upon what cannabis related activities their business will perform:
- Cultivation licenses (based on the type of production & lighting used as well as the number of plants grown/size of the canopy)
- Manufacturing licenses (based on the activities performed, chemicals used for extraction and post processing, and whether the manufacturer works in a shared-use facility)
- Distribution licenses
- Testing laboratory licenses
- Retail licenses
- Microbusiness licenses
- Event licenses
It is important to note that each license has various “types” depending on what kind of business you will perform. For example, a Type N manufacturing license allows manufacturers to make cannabis products through infusion as well as package and label cannabis, while a Type P manufacturing license only allows manufacturers to package and label cannabis products.
After determining which license is applicable, the next step is filling out the appropriate forms required by the state. You must also ensure any required paperwork is submitted, including your tax number and other relevant documentation.
How do I maintain compliance?
It is important to be aware of all city and county rules regulating cannabis businesses. In California, county rules may differ from city rules. You should be aware of all DCC regulations regarding your area(s) of activity. Each state has its own software tracking provider used for seed-to-sale traceability, tracking, and reporting to ensure compliance. California uses Metrc as its Cannabis Track-and-Trace System (CCTT).
The DCC routinely inspects licensees in order to efficiently settle any state law compliance issues. If you are in violation, the DCC may issue a Notice to Comply, which gives the licensee the opportunity to fix the compliance problem. Violations and recurring issues are enforced through citation (up to $5,000 for licensees and up to $30,000 for unlicensed persons), embargo, license suspension, license revocation, and other related fines.
Local cannabis restrictions and laws
Though cannabis use is legal in California, cities and counties have the right to prohibit some or all types of cannabis businesses. Currently, 44% of counties and cities allow certain types of cannabis businesses to exist.
Counties can decide which types of cannabis businesses they license or prohibit, but county rules only apply to the unincorporated parts of the county. They do not apply to incorporated cities that are within the county. Some cities and counties license a type of cannabis business, but then also include various restrictions. For example, counties may limit how many businesses can receive a license.
It is important to be aware of the rules and regulations for the city or county in which you plan on opening your cannabis business. If you or your business is interested in entering the cannabis industry, you should contact an experienced cannabis law attorney. Romano Law attorneys are here to help. Contact us to speak with someone at our firm today!
