Cannabis Licensing Law

Cannabis Licensing

Important Update: Our office no longer assists with the obtaining local and state licenses for industry professionals.  The following content is informational in purpose and intended to provide context to the reader for cases that have been filed or evolved into criminal charges.  

California’s long-awaiting cannabis licensing and regulatory scheme provides many opportunities for entrepreneurs to enter a formerly prohibited market.  Since 2018, California allow designated several agencies with the authority to oversee cannabis (marijuana) business activities in a handful of specialized sectors.  Cannabis Licensing includes: cultivation, manufacturing, distribution, retail, laboratory testing, and microbusinesses.  Essentially, cannabis licensing law was born and is still in its infancy.  The following are some important distinctions for anyone considering investing or operating in the industry.

Local Cannabis Licensing Regulations

It cannot be understated that the state regulatory scheme is a dual-license structure for purposes of full compliance.  In other words, local (city or county) laws must be complied with in order to effectively support the state license you wish to engage in.  That’s why it’s incredibly important to check within the geographic area you intend to do business in on whether your exact activity is supported by local law.

Cannabis License for Extraction/Manufacturing

Cannabis LicensingThe most important distinction in a manufacturing license is that it is governed under the Department of Public Health through the Manufactured Cannabis Safety Branch (MCSB).  Due to the high concentration of THC along with the nature of volatile substances used in the manufacturing process, a separate regulatory environment was needed to handle this specific part of the industry.  You can learn more about cannabis manufacturing licenses at this post.

Owners of of a manufacturing business are considered those with an aggregate interest of at least twenty percent (20%), an executive officer, board member, or someone who participates in the direction, control, or management of the business.

There are different designated licenses for manufacturing: M-License for medical use, and A-License for adult use.  Applicable to both designations, a license can either be a Type 7 (for volatile solvent extraction activities) or a Type 6 (for nonvolatile solvents).  Also, a Type-N license is available for edible products and tinctures, as well as a Type-P for packaging or repackaging.

Prior criminal convictions must be disclosed to the department during the cannabis licensing phase and must be taken very seriously.  Regardless of how long ago the offense(s) occurred, the agency will need additional information such as statements of rehabilitation and copies or documents that support the applicant’s status.  Denial of manufacturing licenses can be for many reasons, and prior convictions that are substantially related to the duties and functions of a manufacturer.

CBD Extraction and CBD Products

A more current activity in the cannabis licensing space is the CBD infusion and CBD products explosion.  Many consumers are far more interested in the medicinal benefits of the cannabis flower without seeking any psychoactive effects.  A problem exists in the regulatory front however with using any help derived or CBD based oils into food additives.  Regardless, many businesses that wish to enter the cannabis market seek guidance in obtaining licenses that allow them to operate with CBD products.  This is surprisingly more complicated than manufacturing concentrated cannabis extracts for the following reasons: CBD Law and CBD Products.

Marijuana hash oil laws are among the most misunderstood in California, and must be approached with diligence and care.

Testing Labs

Cannabis LicensingUnder the Bureau of Cannabis Control (Bureau), testing lab licenses can be obtained so long as very strict requirements are met.  Primary above all, an ISO/IEC Accreditation is needed.  Specifically, an ISO/IEC 17025.  Testing lab licenses are not to be taken lightly and will often have the most regulatory structure associated with them.

Additionally, a licensee must develop a chain of custody protocol for the purposes of documenting the handling, transport, storing, and ultimate destruction of samples tested under the license.  In accordance with the ICO accreditation, the lab must produce a certificate of analysis for each and every primary sample  the licensee has analyzed.  Thus, the duties of the testing lab licensee in the value chain of the industry is crucial.

Cannabis Licensing & Retailers

Also under the Bureau, a person can obtain one of two types of retail permits within the cannabis licensing program.  A Type 10 Retailer operates from a storefront premises and may also make deliveries to customers.  A Type 9 Retailer, on the other hand, does not operate from a storefront but may sell and deliver cannabis products from a licensed premises that is not open to the public.  A long list of prohibited activities is included with both licenses, mostly comprised of packaging, delivery limits, packaging, employee restrictions, and operating hours.  Keep in mind that most local jurisdictions will have their own set of regulations that may be far more restrictive than the state guidelines and must be complied with under the dual-licensing structure.

Microbusiness License

A hybrid of some or all of the license types is the micro business license (also governed under the Bureau).  A Microbusiness engages in at least three of the four cannabis licensing activities (cultivation, manufacturing, distribution, retail).  Generally, if the micro business engages in cultivation, the activity can only be done so on less than 10,000 square feet.  Similarly, if manufacturing is involved, only nonvolatile substances can be used.  It should go without saying that all activities engaged in must be in full compliance.

Cannabis Licensing & Distributors

The Bureau of Cannabis Control extends a wider definition of licensed distributors that one would expect.  For instance, a distributor not only transports cannabis goods to customers, but also for testing purposes.  Additionally, distributors are expected to exercise quality assurance review of the goods they handle and may also be responsible for storage.  What’s an often overlooked quality of distributor licenses is that they are prohibited from transporting goods to retailers unless the delivery is for immature live plants and seeds  from a licensed nursery.  There are additional requirements that are intuitive with the duties and responsibilities of distributors, such as: obtaining or having a seller’s permit, shipping manifests must be generated, installing alarm systems in all transport vehicles, and packaging compliance.