LA Phase II – July 2nd Update

Posted by Margolin & Lawrence on July 2, 2018

As of July 2nd, here is the latest news on Phase 2 of cannabis licensing for the City of LA:

  • Phase 2 will open August 1st and will be open for 30 business days. This phase is for existing cannabis cultivators, manufacturers, and distributors who were operating in the City of LA before 2016 and were suppliers to an EMMD (a pre-ICO medical marijuana collective in compliance with Proposition D) before 2017.
  • Detailed instructions for Phase 2 applications will be released on July 18th, and the full Phase 2 application will be released on August 1st.
  • Proof of participation in social equity program, and passing a pre-licensing inspection, will not be required for the provisional approval for Phase 2.
  • The City will create a process where Phase 2 delinquent taxpayers can pay their taxes for past years at the same time as they are applying for licensing.

Among the other recent changes to the LA ordinance that take effect today and July 23rd:

  • Both Tier 1 and Tier 2 social equity applicants will now receive priority processing for new retail applications on a 2:1 ratio with all non-social equity applicants (i.e., 2 out of 3 new retail licenses will go to Tier 1 and Tier 2 social equity applicants).  Previously, only Tier 1 social equity applicants received this priority for new retail licenses.
  • Eligibility for Tier 1 of the Social Equity Program is expanded to include applicants with a prior California cannabis arrest, but not a conviction.  Previously, the ordinance appeared to require a conviction. The new definition makes anyone eligible for Tier 1 Social Equity who is both low income and has “an arrest or conviction in California for any crime under the laws of the State of California or the United States relating to the sale, possession, use, manufacture, or cultivation of Cannabis that occurred prior to November 8, 2016” (excluding arrests or convictions for violating Proposition D).
  • Social equity program “incubators,” which will include everyone applying in Phase 2 who is not a Tier 1 or Tier 2 social equity applicant, will now be given the option to pay into a fund instead of providing 10% of their space to a social equity partner.

Final Release of California Cannabis Regulations

Posted by Margolin & Lawrence on June 7, 2018

After numerous iterations, the final regulations officially went into effect on June 6, 2018 and are set to expire on December 4, 2018. These amended emergency regulations were initially released to the public on May 18, and then filed with the Office of Administrative Law on May 25, 2018. The state’s regulatory agencies proposed changes to certain provisions in order to provide greater clarity to licensees and address issues that have arisen since the emergency regulations went into effect. The re-adoption of the emergency regulations have extended the effective period for an additional 180 days. After the California Office of Administrative Law (OAL) posted the proposed emergency regulations on their website, there was a five-day public comment period on the finding of emergency.

[UPDATE] WHERE CAN I GET A DISTRIBUTION LICENSE IN CA?

Posted by Margolin & Lawrence on May 18, 2018

Back in September, we published a blog post titled “Where Can I Get a Distribution License in California.” Now that the ordinances for the majority of jurisdictions in California have been reviewed and somewhat solidified, Margolin and Lawrence presents an updated list on the viable locations for distribution licenses in California.

The History of Cannabis by Margolin & Lawrence

Posted by Margolin & Lawrence on April 20, 2018

News: Ninth Circuit Hears Medical Cannabis Case

Posted by Margolin & Lawrence on April 17, 2018

Just last week, on March 29th, a three-judge panel for the Ninth Circuit Court of Appeals held a special setting at the University of Idaho College of Law. Judges Richard Tallman, N. Randy Smith, and Morgan Christen considered the case of Michael Assenberg v. Whitman County (Case No. 15-35757). Assenberg was appealing the district court’s summary judgment in an action against Whitman County, the Sheriff’s Office, Sheriff Brett Myers, and the Quad Cities Drug Task Force. Assenberg alleged that the search of his Colfax home for marijuana and his subsequent arrest violated his rights under the Fourth Amendment of the U.S. Constitution.

In 2011, law enforcement conducted a raid on his home, where Assenberg was running a medical marijuana dispensary. According to Assenberg, the raid came about after a confidential informant posing as a medical marijuana patient visited his dispensary. The Whitman County sheriff and Quad Cities Task Force seized approximately one hundred marijuana plants and Assenberg was charged with four felonies. However, the charges were later dropped in Whitman County Superior Court after it became clear the marijuana was stored incorrectly by the county.

Cannabis Compliance: Operating Legally in California in 2018

Posted by Margolin & Lawrence on April 10, 2018

California’s transition into a regulated market has many operators wondering what the universe of compliance looks like and where they fit into the process. In order to operate legally in California after January 1, 2018, you need both a local authorization and a state license. Temporary licenses from the state of California are sufficient to continue operating, though you will eventually need to obtain an Annual License. To date, 954 cannabis businesses in California have received Cease and Desist letters from the Bureau of Cannabis Control. While some were in error, others were operating without the required licenses for California.

It’s important to understand that licensure is not the end-all-be-all of compliance -- in fact, it is the minimum requirement for your business to operate legally. In addition to having a state license (which requires local authorization), you will need to begin thinking about how to set up your business with compliance processes that facilitate and enable adherence to state regulations for your activities: cannabis microbusiness, retail, manufacturing, cultivation or testing. The below infographic is an overview of the entire licensing/compliance process.


Where does your business fit in?


Current Status of San Francisco City Cannabis Licensing

Posted by Margolin & Lawrence on March 29, 2018

The City of San Francisco began its process of licensing retailers to sell adult-use cannabis on January 6, 2018. Any MCD (Medical Cannabis Dispensary) businesses that conducted delivery, cultivation, manufacturing, testing, or any other cannabis activity were required to register the activity with the Office of Cannabis between September 26, 2017 and November 30, 2017. Those that registered were then required to get their temporary permit(s) from the City. To continue each of these activities in 2018, temporary licensing must be obtained from the State. Any applicant who did not register as an existing business before November 30, 2017, must apply for a permit as a new cannabis business. The Transition Provisionof City Ordinance 230-17 declares that existing MCD applicants temporarily permitted to sell cannabis starting January 1, 2018 cannot cultivate cannabis without new licensing as of April 1, 2018.

Beginning in 2018, all applicants must apply to the Equity Program (see eligibility requirements) either as individuals or incubators before applying for cannabis licensing. Since San Francisco was consistently targeted by the War on Drugs, the City is determined to make amends through this initiative, and compliance is mandatory for all cannabis businesses.

All new businesses require a license from the San Francisco Office of Cannabis and the State of California in order to sell cannabis in San Francisco. To be eligible for a temporary permit in the City of San Francisco, applicants must comply with the Citys zoning codes. These can be found on the SF City Planning website - check out the zoning for cannabis retail businesses. The Land Use Regulations for the City are have also been outlined in a table by the San Francisco Office of Cannabis, which provides useful zoning requirements for all retail and non-retail cannabis businesses (including cultivation, manufacturing and distribution). Mobile cannabis dispensaries will not be permitted in San Francisco.

At this time all cannabis licensing is temporary, subject to review by each municipal zones governing body and the State before permanent licensing can be applied for through the Office of Cannabis. According to Section 1605 of Article 16 in San Francisco Citys Ordinance 230-17 Amending the Administrative, Business and Tax Regulations, Health, and Police Codes,all cannabis businesses awarded a temporary license must apply for permanent licensing within 30 days of the date when the Office of Cannabis makes such permits available. Once permanent licensing becomes available, temporary licensing will no longer be offered to new businesses.

In summary, whether you are looking to start a business in cultivation, manufacturing, retail, distribution, a combination of the above (microbusiness), or testing, you will need to obtain temporary licensing from the City of San Franciscos Office of Cannabis. The window for existing MCDs to register with the City has passed, but these businesses can still apply for new licensing along with all other new cannabis business applicants. The Office of Cannabis in San Francisco has not yet announced when permanent licensing will become available to businesses awarded temporary licenses by both the City and the State. More information about the application process and requirements can be found on the San Francisco Office of Cannabis website.

Federal Cannabis Update: 2018 Spending Bill Keeps Rohrabacher-Blumenauer Amendment

Posted by Margolin & Lawrence on March 27, 2018

Last week, despite controversy, criticism from both sides of the aisle, and talk of a veto, President Trump agreed to sign the federal government’s omnibus spending bill for 2018. To the relief of many in the legal cannabis industry, the spending bill retains a provision known as the Rohrabacher-Blumenauer (or Rohrabacher-Farr) amendment, which provides limited protection from federal prosecution for state-level legal cannabis activity.

Given both Trump’s and Attorney General Jeff Sessions’ tough talk on drugs and threats to crack down on the cannabis industry, the continued presence of this amendment is a silver lining for those anxious about the future of legal cannabis. While this won’t mean a change in the federal treatment of marijuana – the amendment has been included in every spending bill since 2014 – it does indicate that the government intends to keep on its current course with regard to cannabis, as the provision has to be renewed every year to remain in effect.

Likewise, though the actual protections afforded by the Rohrabacher-Blumenauer amendment are limited, its being signed into law was, and remains, an important indication of the federal government’s shift in attitude regarding cannabis: as the LA Times reported following the provision’s first inclusion in the spending bill, “Congress for years had resisted calls to allow states to chart their own path on pot. The marijuana measure, which forbids the federal government from using any of its resources to impede state medical marijuana laws, was previously rejected half a dozen times.” In this light, the amendment was a notable pivot from a top-down to a state-level approach to cannabis regulation.

California cannabis consumers and business owners shouldn’t get too comfortable, though: not only does the amendment not change anything about the federal government’s cannabis policy in and of itself, its terms only apply to medical marijuana, not recreational cannabis. So far, the government has rejected proposed amendments that would grant recreational cannabis operations the same protection from federal intervention. For the time being, California cannabis business owners’ best bet is to stay in full compliance with state and local law as the federal situation develops.

Will California Lower the Cannabis Tax Rates?

Posted by Margolin & Lawrence on March 23, 2018

Legalization has been a bumpy road for California cannabis operators, and since January 1, owners are learning that it also comes at a price. The state’s steep taxes on cannabis businesses – with effective tax rates as high as 57% for some cannabis activities – have many operators bracing, and calling for a reduction in these so-called sin taxes. Consumers are also encountering price increases -- prices are up about 15% compared to last year.

I Have My Temporary Distribution License. Now What?

Posted by Margolin & Lawrence on March 13, 2018

The state of California has officially begun to grant temporary licenses for cannabis distribution, pending applications and processing of full state licenses. Temporary licenses are “a conditional license that allows a business to engage in commercial cannabis activity for a period of 120 days.” They can only be granted to businesses which have already received their local licenses, and are intended to allow locally-licensed businesses to operate while waiting for their full state license to be reviewed.

When it comes to record-keeping, in particular, the requirements of temporarily-licensed cannabis distributors are different from those of annually-licensed ones. The reason for this difference is that the track-and-trace system which California will use to record the movements of cannabis products has yet to be fully implemented. While annual license holders will be required to use this system, based on the Franwell METRC software, to keep track of their inventory, CalCannabis states that temporary license holders must manually document their sales using “paper sales invoices or shipping manifests”.

For the temporary distribution licensee, then, keeping in compliance with state regulations is not only about following the operating requirements, but also about keeping track of a relatively complicated set of information for the sake of record-keeping. Distributors need:

  • Local cannabis recordkeeping requirements (usually keeping business, inventory, & patient records for a several-year period)
  • State cannabis record retention requirements (listed in California Code of Regulations, Title 16, Division 42, §5037) – financial, personnel, training, security, etc.
  • The California Board of Equalization’s general record-keeping requirements for businesses (keeping track of the sales & use taxes, receipts, deductions, and purchase prices for 4 years).
  • Paper sales invoices or shipping manifests for all sales
  • A resale certificate for all sales intended for resale

If a distributor plans on reselling cannabis rather than just distributing it, they’ll need to make sure their seller’s permit is in order as well. For more information on resale certificates, check our recent post on the subject.

While all this paperwork may seem daunting at first, a licensed distribution operation should be more than qualified to handle it – and, once the California METRC system is implemented, keeping records of sales and inventory should be streamlined considerably.

Categories

This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.