The regulations that apply to all licensees are organized as follows in the California Code of Regulations.
Article 1: Definitions. They spell out everything from “branded merchandise” to “wholesale cost.”
Article 2: Applications. These sections explain what you need to apply for an annual license. The short answer is you need to show and tell a lot about yourself. Like documents about your business formation, corporate filings, and every DBA you’re doing business under. Like detailed descriptions of your operating procedures for inventory, transportation, quality control, security, and delivery. Like a detailed diagram of the premises that shows all boundaries, dimensions, entrances, exits, interior partitions, windows, and doorways. Like documents that show compliance with state environmental law. Like bank accounts; any debt or equity you’ve issued; and any gifts you’ve received for the business. Like a complete list of every owner as well as every non-owner with a financial interest. Owners must give detailed information about themselves under penalty of perjury.
There’s more. If you have twenty or more employees, you must enter into a labor-peace agreement and attach the signature page from it. And if you have more than one employee then at least one supervisor and one employee must complete a 30-hour Cal-OSHA training course.
The good news is it takes a lot less work to renew your license each year once you’re up and running.
Article 3: Licensing. These sections cover fees, renewals, grounds for denial, record retention, the duty to report changes to your application, and other rules. The application fee is $1,000. The annual fee depends on your license type and annual gross revenue. It can run from $1,500 for a distributor whose revenue is less than or equal to $1 million all the way to $300,000 for a microbusiness whose revenue tops $80 million per year.
On denials, the short answer is you can be denied a license for a lot of reasons, including if your application is not up to snuff or you’ve been denied some other license or permit by a state or local authority. If you’re in retail sales, you can even be denied if the Bureau says your area has enough retailers already, though you’re free to counter with evidence that a denial would hamper the legal market so as to perpetuate the illegal one. The agency cares about that and will consider it.
You must keep records of everything for at least seven years, and you must report certain events within hours or days. You must report any theft, loss, breach of security, or significant discrepancy in your inventory within 24 hours. You must report a revocation of a local license or permit within 48 hours. You must report an owner’s criminal conviction, civil judgment, or administrative order for violations of labor standards within 48 hours, too. You need not report changes to your operating procedures until you renew, but you must report changes to your trade name, legal name, ownership, or financial information within fourteen days.
There are other rules. You can’t do business with unlicensed actors. You can’t have booze on the premises. Everyone must be 21 or older. You can’t set up within 600 feet of any school from kindergarten through high school. You can’t physically alter the premises in a significant way without prior approval. And the list goes on.
Article 4: Advertising. Most of these aim to restrict your marketing to those 21 or older. So you can’t use anyone under 21 in your ads, and you can’t air your ad unless you have reliable demographics that show at least 71.6 percent of your audience will be 21 or older. But there are other rules, too. You can’t advertise free giveaways of any kind, for example, including buy one, get one free.
Article 5: Security Measures. You must have locks, an alarm system, and a video surveillance system. You must restrict access to areas where you hold or store cannabis to employees and other authorized people. If you’re in retail sales, you must provide on-site security during your hours of operation.
Article 6: Track and Trace. You must record all commercial cannabis activity in the state’s online track-and-trace system within 24 hours. If the internet goes down, you must notify the Bureau, keep back-up records until you’re back online, and enter all activity into the system within three calendar days. And every thirty days, you must reconcile your physical inventory with the state’s database.
Article 7: Returns and Destruction. If you reject a shipment of goods, you must record the reason for it in the track-and-trace system. If you return goods, you may return them only for a non-defective version of the same type or one of equal value. If you dispose of them as waste, you must render them unusable, dispose of them in accordance with applicable waste-management laws, and record the activity in the track-and-trace system.
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