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.
Update: This blog post does not apply to Los Angeles, as the distribution of free samples is non-compliant under the LA Ordinance 185344 Rules and Regulations for Cannabis Procedures, Regulation No. 10. Operational Requirements and Violations. Section D.
Since the pot-prohibition era has ended, there has been much ambiguity around the transition from an illegal market to one that is becoming strongly regulated. The cannabis tax rates for California were definitely met with much opposition, with both merchants and customers appalled by the exorbitant tariffs on California’s favorite vice (read more here).
Only a week is left until Culver City starts accepting applications for cannabis business
permits - except storefront retail, which is scheduled to open by May. With delays in the City of LA's application process, the City's original slogan,"All Roads Lead to Culver City" is beginning to ring true for many cannabis businesses.
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.
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.
On January 1, 2018 the state of California began issuing temporary licenses for cannabis operators. We are about halfway through the 120-day period allotted for temporary licenses and the state has allowed an additional 90 day extension so long as businesses submit a complete application for the annual license. Our Los Angeles cannabis attorneys are facing many questions about what happens when the temporary license expires. The answer is that you need to submit for an annual cannabis license from the state.
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!
It’s been over a month since the state of California began issuing licenses for commercial cannabis businesses. The epicenter of this emerging legal market is right here in Los Angeles. While the City passed their final ordinance in December, the licensing process has been off to a slow start.
The agency that regulates cannabis in Los Angeles, the Department of Cannabis Regulations (DCR) has begun to issue licenses for Phase 1 existing dispensaries. These applicants can apply through a streamlined process for a temporary license which allows them to then apply for a temporary state license and operate legally in the City. At this moment, there are 98 eligible businesses operating in Los Angeles with Temporary Approval from the DCR for Local Operation – in other words, a temporary license for legal cannabis activity.
Los Angeles’ Department of Cannabis Regulations has divided cannabis applications into three distinct phases, each with their own set of criteria to qualify. Phase 1 will remain open through March 4, 2018. This is the most exclusive phase with likely only 200 or so stores qualifying. The current phase is reserved for applicants who are candidates for “Proposition M Priority Processing”, which comes with a strict set of requirements that effectively limit eligibility to preexisting medical marijuana dispensaries. For this reason, existing operators working in cultivation and manufacturing and entrepreneurs looking to launch new businesses are eagerly awaiting Phase 2. Under the Los Angeles Ordinance, Phase 2 is supposed to end in early April 2018. For this reason, we expected applications to open for Phase 2 in early February. We have contacted the DCR almost daily, and as of yesterday, there was still no time estimate on when Phase 2 licensing applications will open.
When it does begin, Phase 2 will require that applicants have a preexisting cannabis business – it’s reserved for “Non-Retailer Commercial Cannabis Activity Prior to January 1, 2016 Processing.” To qualify, a business must meet the following standards, as imposed by the LA Municipal Code:
1) the Applicant was engaged prior to January 1,2016, in the same Non-Retailer Commercial Cannabis Activity that it now seeks a License for; 2) the Applicant provides evidence and attests under penalty of perjury that it was a supplier to an EMMD prior to January 1, 2017; 3) the Business Premises meets all of the land use and sensitive use requirements of Article 5 of Chapter X of this Code; 4) the Applicant passes a prelicense inspection; 5) there are no fire or life safety violations on the Business Premises: 6) the Applicant paid all outstanding City business tax obligations; 7) the Applicant 13 indemnifies the City from any potential liability on a form approved by DCR; 8) the Applicant provides a written agreement with a testing laboratory for testing of all Cannabis and Cannabis products and attests to testing all of its Cannabis and Cannabis products in accordance with state standards; 9) the Applicant is not engaged in Retailer Commercial Cannabis Activity at the Business Premises; 10) the Applicant attests that it will cease all operations if denied a State license or City License; 11) the Applicant qualifies under the Social Equity Program; and 12) the Applicant attests that it will comply with all operating requirements imposed by DCR and that DCR may immediately suspend or revoke the Temporary Approval if the Applicant fails to abide by any City operating requirement.
Of these criteria, an essential component is the Social Equity Program; not only is it still in development by the city, but it also divides candidates into separate tiers within the program itself, which could add further complications to the application process.