Today the Los Angeles City Council held a special meeting, where a passionate and energized public audience made it clear that they want to see the tax revenue collected from the commercial cannabis industry to be reinvested into social equity programs. The specific tax revenues being discussed were the proposed “Cannabis Reinvestment Act,” as well as a provision that would increase tax rates once the cannabis industry within LA reaches an aggregate of $1.5 Billion in total gross receipts.
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.
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 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 Provision” of 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 City’s 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 zone’s 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 City’s 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 Francisco’s 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.
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.
As of this year, cannabis business is legal in Los Angeles, but the process of drafting and refining the laws and regulations that will actually govern the legal cannabis industry is still in its early stages.
To that end, over the past month, the LA city council met to adopt the following items:
- Item #21: Cannabis Advertisement
- Item #22: Prop D Dispensaries, MMD's, AUMA
- Item #23: MAUCRSA, Prop D, Land Use, Preparation of Ordinance, AUMA
- Item #24: New hires at the DCR, Cannabis Business Fees, Interim Position Authority
- Item #25: Medicinal and Adult-Use Cannabis Regulation and Safety Act / State-Chartered Bank / Cannabis Banking Activities
While none of these items are extremely surprising in their own right, they may have significant consequences for the nature of Los Angeles’ cannabis industry.
For instance, Item #23 lays out a path to adjust the LA municipal code, adding “provisions to allow for the Cannabis Regulation Commission to make exceptions to the 600-foot school restriction for non-retail cannabis activities subject to a California Environmental Quality Act of 1970 analysis of environmental impacts and conditions to address public health, safety and welfare considerations, as well as a public hearing.” This means that buildings that were not in the correct zoning could be, if the City finds after the environmental analysis that there are not negative effects from having a cannabis cultivation or manufacturing operation near a school. A change to this rule would potentially mean that, as long as they were in keeping with public health and safety, cannabis businesses could be located in far more locations across LA. Note that under state law, local jurisdictions can allow for closer than 600 feet.
Other ideas in these items may also have major impacts on the LA cannabis industry. For instance, Item #23 also provides for mixed-light cultivation and social consumption lounges, two activities that the city’s cannabis ordinances haven’t allowed in the past, while Item #25 expresses the city’s support for a State-chartered bank that would allow cannabis businesses to bank their money in California. Each of these changes would be a major step toward full legal legitimacy for marijuana in the Los Angeles area.
While these items are significant in their own right, they also reflect a trend of increasing acceptance of the cannabis industry in LA. Establishing regulations however, is an ongoing process. For more information, check our guide to California cannabis business law or contact us at firstname.lastname@example.org to speak with one of our Los Angeles cannabis lawyers.
Since mid-December, California has been issuing temporary state licenses to cultivators, manufacturers, retailers, distributors, microbusinesses, testing laboratories, and event organizers operating in the commercial cannabis market. These temporary licenses became effective as of January 1, 2018, and are currently being reviewed and approved by the Bureau of Cannabis Control (BCC) and the California Department of Food and Agriculture (CDFA) per the Business and Professions Code, section 26050.1. As of today, over 2,500 temporary state licenses have been issued.
So what is this license and why do you need it? The temporary license is a conditional license that allows cannabusinesses to engage in commercial cannabis operations in the state of California for 120 days (about 4 months). The license is only available to applicants that have first obtained a local license, and allows cannabusinesses to operate before receiving their full state license. Within this 120 day period, the temporary licensee must apply for the state license. However, if the state license isn’t received by the end of that four-month period, California may grant extensions of 90-days to the temporary license as necessary. According to Lori Ajax, Chief of the BCC, California will routinely extend the licenses if the failure to obtain a state license is no fault of the licensee. “If it’s on us,” she says, “we will continue to give extensions so you can keep operating.”
What is required for the temporary license? Besides obtaining a local license, the temporary license application requires a number of additional pieces of information from the applicant, including:
- Applicant & Business Information: Physical address of the premises and name of the applicant(s) or business entity requesting the license, including the primary contact information of the applicant(s)
- Owner information: The name, mailing address, and contact information for each “owner” of the business, as defined in Business and Professions Code §26001
- License information: Specification of the license types applied for (such as distribution, or microbusiness, for example)
- Operational Activities: product type and activity information
- Local Jurisdiction: Local jurisdiction contact information
- Local Authorization: Documentation of authorization to operate from the city/county in which the business premises are located, consisting of a copy of the valid license, permit or other authorization
- Property Authorization: Either documentation of title or deed to the property or a lease agreement (or other such authorization) from the landlord demonstrating a right to occupy the premises and engage in the applied-for commercial cannabis use
- Property Site Plan: A diagram of the physical layout of the property and business premises
The required information varies depending on the type of license a business is applying for. For example, the Manufactured Cannabis Safety Branch of the Department of Public Health processes temporary license applications for manufacturing, while the BCC processes the applications for distributors, microbusinesses, testing laboratories, and event organizers. For more information on the licensing process, check our guide to California cannabis laws.
If you have obtained your local license, or are close to receiving it and looking to obtain your temporary state license, contact our cannabis attorneys today!
As the January 1 deadline for legalization approaches and Los Angeles prepares to open applications for cannabis businesses, the question on cannabis entrepreneurs’ minds is: How many cannabis microbusinesses will LA allow, and where will they be?
California classifies type 12 cannabis activity, or “microbusiness,” as an operation which engages in at least three different cannabis activities between cultivation, manufacturing, distribution, and retail sales. Since microbusinesses are, by definition, small-scale and permitted to engage in multiple different kinds of cannabis business, many see a microbusiness license as the best entry point to the marijuana industry for local entrepreneurs and small business operations. However, LA’s particular location restrictions may make getting one easier said than done.
Earlier this month, the City Council released the city’s proposed restrictions on commercial cannabis activity. For each neighborhood, there will be an upper limit on the number of licenses granted, so that no more than a certain amount of licenses will be given out for each type of business. For instance, Hollywood plans to give out a total of 20 licenses for marijuana retail businesses. However, when it comes to microbusiness, many neighborhoods’ upper limits are very small – for instance, Venice will only give out 5 licenses. Additionally, microbusinesses engaging in on-site retail or cultivation will count toward the total numbers for retail and cultivation.
What all this means is that the cannabis licensing process will be particularly competitive for microbusinesses, since, in many neighborhoods, a large number of applicants will be competing for a small number of slots. While it will still be possible for a small business owner to break into the Los Angeles marijuana industry, any aspiring microbusiness operators should get their applications in order as soon as possible.
Cannabis attorney Allison Margolin addressing the LA City Council on the new zoning regulations on Monday:
Today the LA City Council will vote to determine all of the City's. the city's new restrictions on where a cannabis business may be located. The current California cannabis law requires that cannabis businesses be located more than 600 feet from all schools.
On top of that, LA's most recent draft of its location ordinance required businesses intending to conduct on-site retail sales to be located 750 feet away from sensitive-use areas, including schools, public parks, libraries, and drug treatment facilities, as well as any existing marijuana retail business.
While this is a more lenient approach to sensitive-use areas than LA's previous zoning restrictions, which called for an 800-foot buffer zone, some cannabis businesses and marijuana advocates, including our Los Angeles Cannabis lawyers, argue that introducing two different distancing standards will only complicate the already-opaque standards for marijuana zoning.
The City Council's vote will take place at 10 A.M. tomorrow, December 5th, at 200 N. Spring St.