Recently, California joined the growing list of states that have passed some level of pro-hemp legislation in the past few years. Bill SB 1409 was passed to open the doors to growing the state’s industrial hemp industry. Here’s what you need to know about the legislation – as well as three things to do now to start making money on hemp.
What is the Hemp Bill SB 1409?
California’s Hemp Bill, SB 1409, was signed into law by Governor Brown to go into effect on January 1, 2019. This bill adds an industrial hemp pilot program to the state’s legal cannabis industry. As it stands right now, the cultivation of hemp is regulated because of its classification as a “fiber or oilseed crop” under the California Uniform Controlled Substances Act that can only be grown by approved hemp seed cultivators. The list of approved cultivators hasn’t been added to since January 1, 2013. Every year, growers of industrial hemp register with a county agricultural commissioner and pay a renewal fee.
SB 1409 opens the possibility of becoming an industrial hemp seed cultivator to others who haven’t been certified before January 1, 2013. Industrial hemp is no longer going to be considered a fiber or oilseed crop. This doesn’t necessarily mean CBD food products can be sold; in fact, a recent release from the California Department of Public Health banned the sale of CBD food products. We’re still waiting to see how hemp will be regulated as we approach 2019.
Interestingly, SB 1409 also authorizes the California Department of Food and Agriculture to begin an “agricultural or academic research” pilot program for industrial hemp. Colorado and Oregon have carried out similar programs to help inform and structure their regulatory systems. Hemp remains illegal at the federal level, yet more than 30 states have passed some kind of pro-hemp legislation to date.
How to Make Money on Hemp
Obviously, there are still a lot of unknowns when it comes to California’s future regulation of industrial hemp. In addition, seed cultivator applicants won’t be permitted to submit a license request until January 2019. However, here are three things you can do now to get a first slice of California’s legal industrial hemp industry.
Find your niche.
Hemp has a wide range of uses: over 25,000 known uses, to be exact. It can be used in building materials, fabric and textiles, ink, skin lotion, and shoes, and the seeds are a great source of nutrition. If you want to make money off hemp products, the first course of action is to zero in on how you want to use hemp. Hemp-based consumer products, food/nutrition products, and pharmaceuticals are the most common industries, and probably the most accessible for new entrepreneurs. Hemp seeds are very nutritious: they contain a big dose of omega-3 fatty acids and are a better source of good protein than chia seeds or flax seeds. Hemp seeds are also known to contain a good portion of vitamin E and minerals like potassium, magnesium, calcium, iron, and zinc.
Keep in mind that with food product, pharmaceuticals, or beauty products, you may have to comply with FDA or FTC regulations in addition to California state compliance laws. Do your consumer research now to see whether your hemp fortune lies in nutrition or nail polish.
Start creating distribution channels.
Just because you can’t start growing hemp in 2018 doesn’t mean you can’t start creating your own distribution channels. Start to recruit customers for your niche product by building a brand presence online. Pick a topic, make a website, and start promoting or endorsing hemp products that already (legally) exist on the market. Becoming an expert in all things hemp will serve you well both on the customer and supplier side. Customers want someone they can trust to help them navigate the new hemp market. Hemp farmers want help recruiting customers to their product. It’s a win win for you and your suppliers.
Look for land.
If you do intend to become an independent hemp farmer, you will need a lot of space. Though hemp is relatively easy to grow, it’s not easy to be profitable without planting at least 50 acres. Now is the time to start your search for the space you need in January; competition for land will only get tougher as the January 1 deadline approaches.
For more tips on getting started in the cannabis (and soon to be hemp) industry, get in touch with one of our experts.
The City of Commerce just released its Commercial Cannabis Permit Application and held its Prospective Operator Workshop. If you weren’t able to attend, here is a City of Commerce Guide to Cannabis Licensing.
The first thing you need to consider, if you haven’t already, is what kind of commercial cannabis business license you will apply for. Below is a list of the licenses the City will be issuing:
- Non-Storefront Retail Delivery
Deadlines and Fees
Once you’ve decided on what type of commercial cannabis business license to apply for, the other important things to remember are the deadlines and fees.
Applications can only be submitted in-person and by appointment. You can request an application submission appointment by emailing firstname.lastname@example.org. The window for application submission is from October 15-26, with the last day for application submission appointment requests on October 22.
There is a non-refundable fee of $13,025.00 application fee. If you are considering applying for a microbusiness license, the City is requiring that applicants pay an application fee for each type of activity.
According to state regulations, microbusiness can have up to four (4) specified license types and a minimum of three (3). That being the case, you will have to pay at least $39,075.00 for a microbusiness license with three (3) licensed activities.
Other fees that will need to be paid to the City that are refundable are:
Payments will be received in the form of Cashier’s Checks or Money Orders, or business checks that must be made out to the City of Commerce.
General Owner Information
Any type of license application will require owner information such as name, contact details, SSN or EIN, percentage of ownership, and other general information that should be gathered together for easy reference. There is also a brief questionnaire section that must be filled out regarding convictions, prior cannabis license revocations, etc.
You will also be required to initial statements declaring the nature of your cannabis business operations.
Qualifications and Experience
The application includes a portion where the company’s members, who have had experience in the industry, and any other relevant qualifications must be listed. It is important to showcase the strengths of each team member who will provide a sound, professional, and compliant contribution to the success of the cannabis business’ operations.
This section presents itself as a checklist of requirements you will need to put together and submit as part of the application.
The Known Premises portion refers to property that is readily available and accessible. It requires highly technical documentation that should be done by professionals, such as an architect and a certified civil engineer.
Unknown Premises refers to a proposed property that has yet to be acquired, either through a lease or purchase. Since the location is not yet finalized, this section requires information about how you will go about securing it including, finances, feasibility, and your commitment to the City.
This entire section focuses on the facility’s operating procedures that cover the following:
- Non-Laboratory Quality Control
- Point-of-Sale and Track and Trace
- Cultivation Methods
Be sure to address each requirement listed on the application for each type of license type you are applying for. Failure to do so could disqualify your application.
Every business needs a business plan- and commercial cannabis businesses are no different. Part of the City’s application requires that a business plan specifically address the day-to-day operations, compliance with local and state laws, a schedule that includes a narrative of the timeline for all proposed construction, a budget, proof of capitalization, and a pro forma for at least three (3) years of operation.
Proposed Community Benefits Program Plan
Every locality wants to know that your cannabis business will help improve the surrounding neighborhood and community. In this application, the City may require your company to engage in designated programs, provide funding to specific initiatives beyond the designated City amount, staffing plan, labor peace agreement, and maybe even take part in a Mixed-Use Development Bonus that will incubate a local small business, co-locate with another small, local business, or propose other mixed-use developments.
Disclosure of Financial Interests
You will need to disclose and provide all the information associated with groups or individuals with a financial interest in the company. These groups or individuals could be:
- Financial institutions whose interest constitutes a loan
- Those whose interest is through a diversified mutual fund, blind trust, or similar interest
- Those whose interest is through a lien, security interest or property encumbrance
- Those whose share of the company stock is less than 5%
Labor Peace Agreement
If your company will have more than 20 employees, you will need to enter into a labor peace agreement with the United Food and Commercial Workers Union (UCFW). This is done to ensure that all employees receive livable wages and helps to improve the quality of their lives.
You will need to get a Seller’s Permit from the California Department of Tax and Fee Administration. This can be done online or in-person at any of their field offices. Registering in-person at a field office provides for same day permit issuance.
Limited Waiver of Sovereign Immunity
You will have to waive any sovereign immunity defense you or your company may have in the event that a federally recognized tribe asserts their immunity over the company and its operations.
Development Agreement Proposal
You will need to review and sign the provided Development Agreement Proposal by the City. If you feel that you disagree and/or would like to change anything, you may redline the proposal by striking through or underlining sensitive language. You will also need to prepare a narrative identifying at least five (5) topics from the agreement proposal that you propose distinguishes your application from the rest.
You may provide additional relevant information about your or your team’s involvement in the City- either as a tenant, business owner, or resident. You may include the length of time, and the total estimated contribution to the City via taxes and fees.
Provide a signed Cannabis FAQ Fact Sheet Acknowledgement Form with the application. Failure to do so could disqualify your application.
There is an Environmental Data Form and Noticing Form that must be submitted in the event that there is a need for an Environmental Impact Report.
Background Check Authorization
Don’t forget to include your Background LiveScan Authorization when submitting your application. Each owner will need to provide a signed and completed form.
Last but not the least, don’t forget to sign and date the actual application form. Getting all these documents together will be tedious and the smaller details may be overlooked. The best way to ensure that everything is done properly and efficiently could be by engaging a team of professionals to help you through this process.
If you want to get some more information about the licensing process and how a professional consultant can help you get your license, contact a team member today!
One of the elements of a good business plan is performing market research to determine your target customers. Pricing, marketing, and product selection all depend on who your key consumer groups are – and what they’re interested in purchasing in the adult-use legal cannabis market.
In some ways, consumer data is extremely limited due to the government’s classification of cannabis as a Schedule I drug. Government research that is typical of other industries is simply not performed on the cannabis market. As a result, most data we have about cannabis consumers is limited to gender, residence, and spending amounts. This can be useful in valuing your cannabis business for investors, but is less helpful for cannabis marketers hoping to build a customer persona.
While the demographics vary among cities and districts, some early trends have emerged that can help inform your cannabis business offering. Here’s what you need to know about the key cannabis consumer groups in 2018.
Who is the typical cannabis customer?
In a survey conducted by the Cannabis Consumers Coalition, the majority of respondents were between ages 21 - 35, which is not necessarily surprising. Interestingly, the second biggest group of cannabis consumers was 45 years or older, meaning cannabis consumers are likely to be professional adults. In fact, the study discovered that more than 58% of cannabis consumers are between the ages of 21 and 55. The perception that cannabis consumers are college age, unmotivated stoners is likely misguided. Cannabis customers are more likely to be working professionals, parents, and with some level of disposable income.
Aligned with the shift in age toward older cannabis consumers, the average household income of a cannabis customer has also risen. The Cannabis Consumers Coalition research indicates that cannabis consumption transcends economic class, with customers at all income levels partaking in cannabis consumption on some level. Inform your product pricing with the following data from their survey: the majority of cannabis customers have combined household incomes of $26,000 - $55,000.
What do we know about the gender of cannabis consumers? While movies like Dazed and Confused have widely popularized the impression that most cannabis consumers are male, this survey suggests the gender gap is much more narrow. Companies like Whoopi & Maya have popularized cannabis as an alternative therapy for women. Women hold nearly 30% of executive leadership positions in the cannabis industry – a significantly higher percentage than the nationwide average. When designing your marketing material, take into consideration that women make the majority of household purchasing decisions, and in the cannabis market, they will be a powerful consumer group.
Medical v. Adult-Use Cannabis Users
Though recreational cannabis is only legal in about half of the states, it’s an important trend to track for new cannabis entrepreneurs interested in entering the market. This statistic can help you understand the deeper motivation behind your customer: are they making a purchase because it’s a medical necessity, or for recreation? How frequently can you expect someone to make a repeat purchase? Diving into your customer behavior has implications for inventory management, loyalty programs, and pricing.
Data from the National Institute of Health reveals that the majority of customers partake in cannabis use for recreational reasons. Their national sample showed that among those consumers who lived in states with medical cannabis legislation, 17% used cannabis for medical reasons and 83% used it recreationally. However, those who do use cannabis medically do so with more frequency and regularity than those customers who purchase cannabis for recreational use. A good business practice would be to take medical consumers’ needs into your marketing plan, even if your primary target customer is a recreational user.
California’s Key Cannabis Consumer Groups
California has the potential to become the world’s largest cannabis market, making it a good bellwether for understanding developing consumer trends. Early studies by market research firm BDS Analytics indicates there are three key consumer groups across the state. Primary consumers in California are 39 years old and have used cannabis or cannabinoids in the past six months. A secondary group deemed “acceptors” by the study are 49 years old, and while they haven’t recently used cannabis, they would do so in the future. California’s “rejecter” group is an average of 56-years-old and are not likely to consider cannabis use.
It’s worthwhile to note that while rejecters and acceptors aren’t recent users of cannabis, that doesn’t correlate with disapproval of legal adult-use cannabis. The study showed that tolerance and acceptance of cannabis is becoming more common, and in fact, Californians are becoming more interested in the potential health benefits of cannabis use. This further reinforces the case for continuing to include medical-use customers as part of your business plan and marketing strategy.
For more insight into how to build your cannabis company, get in touch with one of the experts at GreenGrowth CPAs.
As a cannabis operator, you may have already heard about 280e and have tried to figure out how to get the most deductions for your business. Though many states are close to fully legalizing cannabis, federal regulations like the 280e prevent current legal cannabis businesses from taking full advantage of small business tax deductions. The 280e is a section of the United States Tax Code enacted during the Reagan era that prohibits businesses that deal with Schedule I and II controlled substances from taking tax deductions and credits. At the time that it was enacted, Congress decided to include an exception that allows for the deductions of the cost of goods sold (COGS), even if they are federally illegal substances. it means your cannabis business can still claim deductions.
Although it is tricky to work around the restrictions of 280e, there are some straightforward tips to help you get the most deductions for your cannabis business.
Understand the concept of “Cost of Goods Sold.”
The Cost of Goods Sold is the direct costs associated with producing the goods you sell. Since your cannabis business is not treated like other legal businesses, the COGS for other types of businesses that include marketing and advertising cannot be included in the cost of goods sold for cannabis and cannabis products. You may not deduct anything related to marketing and advertising, like your dispensary display equipment, marketing material, ads, and signage. What can you deduct? Only parts related to production, such as the salary of employees who actually harvest and cure cannabis, materials that go into cultivating and manufacturing the cannabis, etc..
Create comprehensive and descriptive job descriptions for your employees
By having comprehensive and detailed job descriptions for each of your employees, it’s easier to determine whether or not an employee’s wages can be claimed as a deduction. Some employees’ roles that don’t involve any handling of the cannabis to create a finished product will not be deductible. On the other hand, having an in-depth look at each role could help your accountant claim some deductions for employees’ salaries you initially thought couldn’t be claimed.
Keep detailed records of your cannabis business and facility.
The exact square footage of your facility and knowing how each square foot is used could help you claim more deductions. Some facilities, specifically dispensaries, have a harder time claiming deductions for their business because most of the business is used to sell finished products. This shouldn’t stop you from providing facility information to your accountant. A good cannabis accounting firm can help you justify how you use the space appropriately for a COGS deduction. You may have a small back room where you receive, repackage, store, or handle cannabis and cannabis products prior to dispensing them. If that is the case, your accountant may be able to show that you can claim a deduction for the specific room.
Save all your receipts and give them all to your accountant.
Many accountants appreciate clients who take the time to put everything together to make filing taxes easier. In the case of cannabis businesses, your accountant should leave no stone unturned. Provide your accountant with every receipt for every expense. There may be expenses that your business can claim that you may have thought couldn’t be claimed before.
Familiarize yourself with the taxes associated to your industry. Know when and what to file
In the cannabis industry, there are three types of cannabis taxes:
If you need some assistance in understanding cannabis taxes, filing taxes or maintaining accurate records for tax filing, talk to a team member today. Get the most deductions is possible with the help of an accountant or an accounting firm that works closely with the cannabis industry. The sooner your cannabis business becomes compliant, the sooner it can make a profit.
Every cannabis business operator in California is required by state laws to have insurance. There are quite a few insurance agencies and brokers that offer cannabis business-specific insurance packages. As recently as this June, California began offering property insurance for cannabis businesses. In a cash-rich industry that deals with a very valuable product, you may want to look into insurance to make sure your business is protected. Regardless, it’s up to you to make sure your insurance is meeting the state, local, and federal requirements and standards. Here’s a quick guide to your state, local, and federal insurance responsibilities as a cannabis operator in California.
California Cannabis Insurance Requirements
California requires cannabis businesses to have a minimum commercial general liability insurance policy of $2 million, with insurance of up to $1 million for each loss, when submitting a cannabis license application. The state also requires a $5,000 surety bond that should be addressed to the state of California.
Anyone who does not meet the insurance requirement will likely have their business application rejected. Likewise, if your cannabis business insurance lapses, you must take the proper steps to alert the state by notifying the Bureau of Cannabis Control in writing within 10 days.
Types of Insurance for Cannabis Companies
What other insurance do you need in California? Especially as it pertains to your cannabis licensing application, you will want to have a policy for worker’s compensation insurance for your employees. The state also requires all small businesses to have disability insurance. Our experts also suggest looking into these other types of cannabis business insurance:
To help you understand which, if any, of these additional insurance types would be most helpful for your cannabis venture, we have a guide on everything you need to know about California cannabis insurance. Check it out and get in touch with our experts if you have any questions.
Federal Insurance for Adult-Use Cannabis Businesses
Because cannabis is still considered a Schedule I drug by the DEA, there is no official requirement from the federal government requiring a cannabis business to have insurance. However, there may be other small business insurance requirements your cannabis venture needs to meet to be compliant. Health insurance is required at the federal level – one option for businesses with one to 50 employees is the Small Business Health Options Program (SHOP) program. Generally speaking, the federal government defers insurance requirements to be decided at the state level. As a rule of thumb – with the exception of ACA regulations, make sure you’re meeting California’s insurance requirements, and you should be compliant under US federal law.
It’s also worthwhile to note that when it comes to deducting insurance from your tax return, the regulations are a little complicated due to the 280e regulation. It really depends on your specific role in the cannabis industry – commercial general liability insurance may be deductible as a COGs for some businesses, but not for others. It’s important to check with a tax expert to make sure you’re making the right choice for your insurance deduction.
If you have more questions about cannabis insurance, please get in touch with GreenGrowth CPAs today!
The north side of California seems to be on a roll when it comes to accepting adult-use cannabis, and we proudly welcome Union City back on our list of cities now accepting commercial cannabis applications.
Union City officially re-opened their cannabis application window on Friday, August 16, so you can officially apply NOW. Union City is awarding the follow cannabis permits:
Union City is giving preference to businesses who are vertically integrated, aka any location that will have two or more uses. In addition, they are also accepting applications from applicants who submitted prior but were not awarded a permit. The city will close their application window on December 7, 2018. Today, we will discuss the application process for Union City and what you need to do to ensure you have the best chance of being awarded a cannabis permit.
There are a few documents that Union City has prepared to provide you with the most up to date information about the cannabis application process. It is suggested you read these before filling in your application.
Union City Cannabis Application Submission
All applications must be submitted online via this website. One of the perks of an online application is the ability to complete just a small portion, save it and then complete the rest at a later date. You will also be required to submit about 23 different attachments in a PDF format. These will include:
Once the Planning Manager states that the location is in the appropriate district, you can submit the zoning application to the office at 34009 Alvarado Niles Road in Union City. Once submitted, and your fee is paid, you should be expected to receive your final Zoning Verification Letter within 10 days. This letter is required to be submitted online with your application. You can find a zoning map here. Cultivation, distribution, manufacturing, testing and medicinal retail uses are able to locate within the ML (light industrial) or MS (special industrial) districts.
Keep in mind a cannabis business must be 100 feet from any youth businesses. Union City may provide some exceptions based on your business plan, so if you’d like to be within 100 feet of a youth business you must explain the reasoning clearly within the application.
You will also have to submit personal information for each principal which will include:
Important Document Details
As you upload these documents, it’s important to note a few details.
Union City Cannabis Application Fees
Each city has different protocols for application fees. Union City prefers Cashier’s Checks or Credit Cards. They will not accept cash or personal checks. Please note there is a 2.25% fee applied to credit card payments over $2,500. The application fees are:
Applicants are also encouraged to attend a city cannabis meeting on Wednesday, September 19 at 1:30pm in City Council Chambers. This will be the only and primary opportunity to discuss any application or cannabis related questions with the city staff.
If you have further questions about obtaining a cannabis permit in Union City, GreenGrowth CPAs is happy to help you walk through the process to ensure your best chances of opening a successful cannabis business.
As we covered in previous posts, finding properly-zoned real estate is one of the most important - and difficult - parts of starting a cannabis business in California. The real estate market in California is competitive already, and so-called “green zone” regulations severely restrict where cannabis businesses are allowed to operate.
Nevertheless, it’s imperative that you find real estate for your business before the city or county application window opens. Competition is simply too fierce to wait until the city announces they are ready to start approving business applications. Plan ahead to find cannabis-ready property with this quick guide on California’s cannabis zoning laws.
California’s Cannabis Zoning Laws
California state regulation SB94 allows the 482 cities and 58 counties in California to regulate land use and zoning in relation to cannabis within their jurisdictions. What this means is that cannabis zoning laws not only vary by location, but also by the type of business activity. For example, cannabis dispensaries will abide by different cannabis zoning laws than cultivators or manufacturers. Note that cities or counties with no legal cannabis activity will not provide zoning information related to cannabis businesses.
As far as growing cannabis, it can be tricky to discern regulations by city and state. Research shows that a slight majority of cities have banned outdoor cannabis gardens, while others have specific home-grow permits that may relate to smaller cannabis businesses as well.
To find a specific zoning law in your area, the Orange County Register has compiled a database of cannabis zoning laws by city and county (last updated June, 2018).
Common Cannabis Zoning Laws
Each city and county customizes their cannabis zoning laws. However, there are a few commonalities that our experts tend to see in many zoning policies. If you’re seeking property, here are some things to keep in mind:
Green zone regulations may not be announced if a city hasn’t opened their cannabis business applications yet. Regardless, it’s important to stay informed about the city’s ordinances and available commercial property. When the applications do open, be prepared by contacting California Cannabis CPAs and asking how we can help.
Recently, our experts led a webinar outlining everything you need to know to get your Los Angeles cannabis business license. If you missed it, you can listen to the full webinar on-demand. We covered many topics, including Los Angeles’ cannabis social equity program.
Los Angeles’ cannabis social equity program is a part of the city’s commercial cannabis licensing system. The goal is to give a boost to past victims of cannabis criminalization by offering assistance and benefits to any communities that were unfairly punished by the drug war. Read on for more information on how this program works and how your cannabis business might be able to participate in the program.
What is Los Angeles’ Cannabis Social Equity Program?
LA’s social equity program has the stated goal of promoting “equitable ownership and employment opportunities in the cannabis industry in order to decrease disparities in life outcomes for marginalized communities and to address the disproportionate impacts of the war on drugs in those communities.”
The program intends to offer assistance in the form of funding, physical space, and a separate licensing timeline to any commercial cannabis licensees who meet the program criteria. Some of the program benefits as of July 2018 include:
As you can tell from some of the notes next to the listed benefits, the city is still developing the specific benefits of the cannabis social equity program.
Who qualifies for Los Angeles’ Cannabis Social Equity Program?
There are three tiers qualifications under which a prospective cannabis business owner might qualify for the social equity program.
Please note that to be eligible for the benefits of the social equity program, you must own at least one third (and for Tier 1, 51%) of the business applying for the license.
Even if you do not fall under one of the three tiers, you can qualify for the social equity program. To do so, you can either pay a fee to the city fund or agreeing to provide a small portion of your physical space to help the beneficiaries of the program.
How can I apply for Los Angeles’ Cannabis Social Equity Program?
If you recall from our webinar, Los Angeles is issuing cannabis business licenses in three phases. Phase 2 of the cannabis licensing program started on August 1 and will remain open for 30 days. During this phase, applicants must qualify under the social equity program.
You can currently apply for a Phase 2 license on the Los Angeles City cannabis page. Read this primer for instructions on how to log in to your account and submit an application. Our experts are standing by to help out if you have any questions.
For more information on getting your cannabis business license in Los Angeles, check out our webinar or read our three-part guide on cannabis in Los Angeles:
If you have specific questions related to your business, please get in touch with our experts today.
As the saying goes, there are two things certain in life: death and taxes. An addendum to this saying might be that taxes never seem to decrease over our lifetime. However, these three California cities have chosen to reduce cannabis taxes in their jurisdiction. Let’s take a look at these three cities and the rates at which they’ve reduced taxes.
Berkeley recently hired HdL Companies to audit and review current taxes for cannabis regulations. These services have resulted in a reduction of cannabis taxes within Berkeley. Medicinal sales tax was 5% and is now 2.5%. In addition, adult-use cannabis sales tax was 10% and is now 5%.
Salinas is the largest municipality of Monterey County, California. This city just reduced cannabis nursery tax rates from $15/square foot of canopy space to $2/square foot. If you’re taking the first steps toward starting a cannabis company, this might be a great jurisdiction for you to consider.
Grover Beach is a city located in San Luis Obispo County, California. The city recently reduced several taxes related to cannabis, including the cultivation tax from $25 per square foot to $5 per square foot. Manufacturing and distribution taxes have been reduced from 5% of gross receipts to 3%. All taxes for adult-use and medical cannabis remain the same.
Although Coalinga has not officially reduced any of its taxes, the city is looking into the idea of reducing cultivation taxes. The current cultivation tax costs all cannabis businesses at $25.00 per square foot for the first 3,000 square feet. It drops to $10 per square foot after that. We will see what Coalinga decides to do in terms of reducing cultivation taxes.
These three cities have reduced cannabis taxes, and depending on the long-term economic growth benefits, it’s likely that other districts could follow suit. We will keep you updated as we see additional cities make changes to their cannabis taxes.
Interested in opening a cannabis business of your own within one of these California cities? Contact California Cannabis CPAs today.
On June 27, 2017, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) passed and provided a framework for cannabis activity and sales within California. In June of 2018, cannabis licensing authorities enacted emergency regulations ensuring a set of rules were in place for the continuance of MAUCRSA.
Now, California’s cannabis licensing authorities are proposing permanent rules to take the place of the emergency regulations. California’s three state cannabis licensing authorities will further define these rules. They are:
The emergency regulations that went into effect June 6, 2018 will stay in place for 180 days. During this 6-month time period, the three cannabis licensing authorities will adopt non-emergency regulations.
The respective authorities also want to hear from the people about your thoughts, concerns and suggestions. Each of the three agencies will hold multiple public hearings in order to do so.
California Cannabis Public Hearings
Each of the three cannabis licensing authorities will hold public hearings so the people of California comment and share their input on the future laws. These can be submitted by attending the public hearings and sharing your comments orally, or submitting them to in writing. Instructions for how to submit comments in writing are listed below.
California Department of Public Health Hearing Dates
The CDPH is holding the following hearing dates:
If you would like to see on how to submit a public comment in writing please click here.
Bureau of Cannabis Control Hearing Dates
The Bureau of Cannabis Control provides information about legal, safe and responsible cannabis use. Of course, you can find information – including fact sheets, FAQs, and more – on their website. Their hearing dates are scheduled as follows:
If you would like to know how to submit a public comment in writing please click here.
California Department of Food and Agriculture Hearing Dates
The CDFA protects California’s food supply with regulatory oversight over management, innovation and science, with a commitment to environmental stewardship. Their public hearings are scheduled for:
If you would like to know how to submit a public comment in writing please click here.
The cannabis licensing authorities are hoping to respond to and review each comment. They have all stated they will respond to relevant comments in a timely fashion. They only way a public comment will not be accepted is by phone.
Attending one of the hearings or submitting written comments is a great way to get your voice heard! California is one of the most progressive states when it comes to marijuana legislation, and is paving the way for future cannabis laws throughout the country. California will likely set precedent and this is your chance to be a part of it. If you have any interest in opening a cannabis business now or in the near future, become involved at the local level where possible or attend one of the above hearings. Your voice makes a difference!
If you have questions about specifics regarding any of the above authorities, or would like further clarification on how to obtain a cannabis license in California, contact California Cannabis CPA today.
Breaking California Cannabis News: Updates from Long Beach, Antioch, and Contra Costa and El Dorado Counties!
This week’s California cannabis updates come to you from Long Beach, Antioch, and the counties of Contra Costa and El Dorado.
Have a question about licensing in one of the cities we discussed today? Contact Green Growth CPAs.
The world of commercial cannabis applications is ever changing. Each California city takes it upon themselves to decide why, when and what form of commercial cannabis business they will allow into their jurisdiction. Some cities have hard application deadlines, while others see it as an opportunity to bring in additional revenue and accept applications on an ongoing basis. Palm Springs is one of these cities.
Palm Springs is a California city with a mere 50,000 people but covers almost 100 square miles, making it the 10th largest California city by land area. Palm Springs adopted ordinances in late 2017 that allowed for commercial cannabis activities, and now they are accepting applications with no end date in site.
Palm Springs Cannabis Licenses
Palm Springs is accepting applications for the following cannabis business activities:
The city approves of both medicinal & adult-use cannabis.
Submit a Palm Springs Cannabis Application
Palm Springs does a nice job of organizing the application process and detailing the steps in one complete PDF document. You can find that document here.
Within the PDF document, you will find each of the following documents that are required for submitting an application. Everything must be completed in order for your application to be fully evaluated. This includes:
The initial filing fee covers the costs of all background checks and fingerprinting. The city will not issue refunds.
Palm Springs is not specific about how many licenses they will issue within each category, but as Green Growth CPA is alerted of further details we will be sure to update this article.
Palm Springs isn’t the only California city accepting commercial cannabis applications on an ongoing basis. We will be continuing a series of articles that detail cities with open application deadlines, so stay tuned.
Can we help you get started on your application? Give us a shout and ask how we can help.
Just this month, California Department of Public Health (CDPH) approved the re-adoption of emergency regulations for cannabis manufacturers for an additional 180 days. What does this mean, and how does it impact your cannabis business?
What are California’s cannabis emergency regulations?
Just a quick refresher: the emergency regulations cover the policy known as MAUCRSA, the Medicinal and Adult-Use Cannabis Regulation and Safety Act. These regulations outline California’s standards and licensing requirements for commercial cannabis manufacturers. They were originally passed in December 2017, and as is the standard for “emergency regulations,” valid for a period of 180 days. They were renewed for another 180 days just recently – with a few key changes.
What are the changes to California’s re-adopted emergency regulations?
The biggest change is the removal of restrictions created by the adult use (“A”) and medicinal (“M”) license designations. Originally, MAUCRSA regulations required cannabis plants be designated for either the A or M market at the cultivation stage. Plan material and cannabis products resulting from cultivation had to maintain that A or M designation while moving through the supply chain – complicating logistics and operations for cannabis businesses across the market.
In the newly re-adopted cannabis emergency regulations, the CDPH is attempting to resolve some of the A and M confusion. They have removed restrictions of A and M license designations, meaning businesses can complete one license application for use in both the adult-use and medicinal markets. Starting June 6, 2018, cannabis and cannabis products will only be labeled as adult-use or medicinal at the time of retail sale (with one exception for higher-THC products that are only allowed in the medicinal market).
To review the re-adopted emergency regulations in detail, click this link.
What does that mean for cannabis cultivators?
There are a couple scenarios where you might have questions, especially if you’re still waiting to hear about your cannabis cultivation license. If you submitted two applications, one for an A license and one for an M license, here are a few points of clarification:
If you have any specific questions about the MAUCRSA emergency regulations or any of these changes, please get in touch with the experts at California Cannabis CPA.
Post-Election Cannabis Updates from Pasadena, Licenses in San Rafael, South Lake Tahoe, and Deadlines in San Bernardino!
This week: cannabis licensing updates from the California cities of San Rafael, South Lake Tahoe and Pasadena. In addition, San Bernardino’s application deadline is quickly approaching!
The process will be merit-based and all applications will be reviewed by city staff. In addition, if you are a new business you must meet the following requirements.
San Rafael has released a separate page making it easy to verify correct zones and permit fees. Have additional questions about San Rafael? Send us a message and we will happily provide further details.
Further details are expected soon and California Cannabis CPA will be sure to keep you updated as application details are announced.
Don’t forget: applications for San Bernardino close in two weeks! Applications must be submitted by June 25 to be considered for cultivation, manufacturing, retail, microbusiness and distribution opportunities.
Looking to submit an application for one of these cities, or perhaps a specific license type? We have a database of cities that have open and quickly approaching application deadlines. Contact us today.
In case you missed it, Tuesday was primary day across California, where the first-round bid for governor became one of the most watched races in the country. As a refresher: under California law, the top two primary finishers go on to the general election, regardless of party. In a field of 27 candidates, Gavin Newsom (D) and John Cox (R) took the top two spots according to the New York Times. They will go on to the general election in November.
Where do these two candidates stand on cannabis? Based on what they’ve said publicly, we have some indication on what kind of cannabis policies Newsom and Cox might enact if elected governor of California. Please note that we are not here to debate politics or endorse either candidate, and are simply reporting their stances on cannabis – a small part of each candidate’s platform and beliefs. Here’s where each candidate stands on the growing California cannabis industry.
Gavin Newsom, Democrat
Newsom is the current Lieutenant Governor of California and previously served as the mayor of San Francisco for two terms. He’s been one of the leading politicians to advocate for the legalization of cannabis In 2014, Newsom was the only statewide politician to endorse California Proposition 47, a bill that decriminalized drug crimes from felonies to misdemeanors. Then, he became the face of the pro-cannabis Blue Ribbon Commission on Marijuana Policy. This report’s recommendations led to Proposition 64 and the full legalization of cannabis in 2018.
Where does he stand on improving the regulatory and operating environment for cannabis businesses? Newsom is on the record for wanting to tackle the cannabis black market and trying to move businesses into “the sunshine of a regulated environment.” Based on his track record and response to Sean Spicer and the administration, one could reasonably expect he would continue to evolve California’s cannabis regulations in a way that makes it possible for businesses to operate legally, responsibly, and securely.
John Cox, Republican
Cox has a business background, and previously ran for the United States Senate in Illinois. His net worth is in the billions due to his past work as a lawyer, specifically in tax and corporate law and in estate planning. He also worked as the chief financial officer of the snack foods company Jay Foods.
As a self-purported “Reagan Republican,” Cox has said he is against cannabis legalization for adult use. In a California gubernatorial debate on May 8, he seemed to suggest that cannabis consumers should be treated in hospitals for substance abuse. In an interview with the San Diego Union-Tribune, he clarified, “I’m suggesting that people who are addicted to substances, substance abuse, should get treated, they should not be incarcerated.” Cox went on to add that cannabis users may be at risk for later using harder drugs, and should be put into a treatment facility. He supports medical cannabis.
Cox has been endorsed by Donald Trump, suggesting that if elected, he might follow the administration’s stance on cannabis.
In summary: it seems that each candidate presents two very different paths forward for the California cannabis industry. Questions about statewide cannabis regulations? Our experts can help with all your business or tax concerns. Please don’t hesitate to get in touch.
This month has been a big month for lowering the risk of operating a cannabis business in California. First, the state moved toward creating a banking system for cannabis companies. Now, the California Insurance Commissioner has approved a program to allow dispensaries, storage facilities, processors, distributors, and other cannabis businesses to procure property and liability coverage.
The program, Cannabis Business Owners Policy (CannaBOP), will make it easier for insurers to enter the market and fill coverage gaps for cannabis businesses. Developed by the American Association of Insurance Services (AAIS), CannaBOP was approved quickly and is ready to offer a package policy that includes both liability and property coverage. The program is supported by rules and loss costs (as with any insurance policy package) and was developed through analysis of market exposures and rating guidelines specific to the cannabis industry.
This announcement has been building since January, 2018 when cannabis became legal state-wide. A cannabis surety bond program was launched in February, and coverage for commercial landlords renting to cannabis companies was announced in May. Before this month’s announcement, cannabis companies were limited for choice: nearly all insurers willing to offer coverage were small carries that were not regulated by the state and often hesitant to provide coverage to a perceived high-risk industry.
Should you get cannabis property insurance? The answer depends on your unique cannabis business. CannaBOP is designed for smaller cannabis operations and for start-ups that need coverage but haven’t been able to find it – until now. For cultivators working with pesticides and quality control issues, this type of insurance is a great way to protect your business from product liability lawsuits.
Keep in mind, however, that CannaBOP relates specifically to property and liability insurance – and it does not include workers comp coverage or auto insurance. For that coverage, you might look to those smaller, non-regulated insurance companies who have been providing interim property coverage until this announcement.
If you have additional questions about insurance or protecting your cannabis business, please reach out to our team! We’d be happy to help.
Cannabis Updates from Jurupa Valley, San Rafael, and Goleta. PLUS: Cultivation Application Deadlines!
This week, we have updates from the cities of Jurupa Valley, San Rafael and Goleta. Also, we share a few cities that are accepting applications on an ongoing basis for cannabis cultivation licenses.
In addition, these cities are accepting cannabis cultivation applications on an ongoing basis. While some cities may decide to have hard application deadlines, these cities keep their acceptance windows open ended (for now) for cultivation licenses:
California Cannabis CPA has helped many cannabis businesses with the initial research that goes into finding the right city for your business. Need some assistance with a particular license? Ask how we can help.
One of the most difficult parts of operating a cannabis business in California is managing your cash flow. Luckily, this week, the state Senate is taking a step forward to ease that burden. SB930 creates a state charter for banks to serve cannabis businesses. This allows licensed and approved cannabis manufacturers, cultivators, and retailers to write checks to pay fees, taxes, and vendors, ultimately making it easier to do business.
California SB930 proposes putting the Department of Business Oversight in charge of banks and credit unions specifically established to process deposits, withdrawals, and transactions by the state’s budding cannabis industry. If approved, SB930 will allow cannabis companies to use this system of state-licensed banks to pay rent, vendor invoices, and also buy state and local bonds. It also means that the estimated $600 million in cannabis taxes the state intends to collect this year can be paid securely through banks, rather than in cash and in person.
This is great news for cannabis entrepreneurs, as it lowers risk in your accounting procedures and can increase security at your premises. Less cash on-site is a big win for anyone looking to operate safely while keeping security budgets low. A bank dedicated to cannabis businesses will also have implications for what you look for in a real estate property and how you pitch to investors.
The bill has to clear California’s State House of Representatives before going to the governor’s office, but this is overall very good news for the cannabis industry. If you have questions about this bill, or about accounting in general, please get in touch with our experts.
The CDTFA released an update recently relating to the cannabis excise tax on CBD products. For a quick refresher on the cannabis excise tax, take a look at our guide for cannabis retailers. As you prepare your cannabis taxes, here’s what you need to know about the excise tax on cannabidiol products.
Cannabis and CBD Products: Definitions
Per direction from the CDTFA, "Cannabis" refers to all parts of the Cannabis sativa L. plant, excluding industrial hemp. Likewise, "Cannabis products" refers to cannabis and cannabis plant material that has been processed and transformed into defined as cannabis that has undergone a process that transforms it into a concentrate, edible, topical, or other things that contain cannabis.
Does Cannabidiol count as cannabis products?
Cannabidiol comes from both the hemp and marijuana varieties of cannabis. In this case, the CDTFA is focused on the marijuana variety: hemp varieties only have small amounts of THC and have been legal in the US for a while. Therefore. CBD products made from industrial hemp are not subject to the cannabis excise tax. Check with the California Department of Food and Agriculture (CDFA) for specific regulations related to the industrial hemp industry.
CBD and Excise Tax Regulations
Cannabidiol (CBD) products containing "cannabis" are subject to the cannabis excise tax. CBD products that do not contain cannabis are not subject to the cannabis excise tax, even if the CBD product contains trace amounts of Tetrahydrocannabinol (THC).
Questions about the excise tax? Get in touch with our experts today!
We hope you had a nice long weekend. This week, we have cannabis updates from the cities of Ojai, San Luis Obispo and Fillmore. Plus: a few cities are accepting cannabis manufacturing applications on an ongoing basis. Not every city has a hard application deadline!
While most of our newsletters focus on upcoming and open cannabis application windows, it’s also important to note that some cities accept applications on an ongoing basis. For example, the following cities accept manufacturing licenses on an ongoing basis:
Looking for some additional guidance on the licensing process? California Cannabis CPA is here to help make sense of it all. Contact us today with your questions and we can get you started.
Catch Part 1 and Part 2 of our Los Angeles series before reading the third and final article below.
In November 2016, the people of California voted to approve Proposition 64 for the Adult Use of Marijuana (AUMA). This forever changed the landscape of cannabis in California and opened up a slew of opportunities for cannabis businesses. Los Angeles has been home to the legal medical marijuana market for years. However, it had difficulty monitoring illegal use of medical marijuana. Therefore, the city is taking further actions to ensure their ordinances are crystal clear.
A Social Equity program was also created to promote equitable ownership and employment opportunities in the Cannabis industry. Los Angeles has full intentions to issue licenses in the most transparent manner possible.
Los Angeles Required Cannabis Licenses
A license is needed for the following commercial cannabis activities. A license will be issued as one of two categories – A (Adult) or M (Medical). This information is sited directly from the Los Angeles ordinances, so if you’d like to read it in its entirety, you can do so here.
It’s important to note than an applicant may only hold up to 3 Type 10 or Type 9 licenses.
An applicant is not limited in the number of license applications. However, each cultivated area may only be licensed 1.5 acres per applicant.
Los Angeles Cannabis Application Procedure
If you would like to apply for a license is Los Angeles, you need to fill out and file this application for Commercial Cannabis online. Various fees will be required. Candidates will be ineligible if they fall into any of the following categories:
Once you submit a complete application, The Department of Cannabis Regulation (DCR) will require a pre-licensing inspection. The details are outlined in our Rules and Regulations blog (link to our own blog once ready). EMMDs (existing medical marijuana dispensary) are exempt from this inspection. A pre-licensing inspection must be passed before any temporary approvals or licenses may be issued.
The Department of Cannabis Regulation (DCR) will mail applicants notice within 10 days of a complete application. They will also inform and mail the owner of the property and any occupants within 500 feet of the business premise. The applicant is also required to hold a hearing, informing the public of the new cannabis business that may be opening within their neighborhood.
Issuance of Los Angeles Cannabis Licenses
The Appeals Process
If you would like to appeal the DCR’s decision or denial of your license, you must do so 15 days from the mailing date of the DCR’s decision. If not filed within 15 days, the appeal is automatically rejected. Click through for more information on page 14 of this document.
Likewise, if you do successfully submit your appeal, the appellate body shall issue its decision within 30 days of the closure of the hearing on the appeal. Unfortunately, if the appellate body does not come to a decision within this time frame it is considered a denial.
Other Must-Know Info for Getting a Los Angeles Cannabis License
Your license is non-transferrable. The only exception to this is if you submit your case (and there’s been an organizational or ownership. Although this is a detailed post, the city of Los Angeles issued a highly comprehensive document that goes into further detail, so we recommend taking a look if you’d like further detail about any of the above topics.
Still looking for some guidance on the licensing process? Let California Cannabis CPA make sense of it all. Contact us today with your questions and we can get you started.
Starting a cannabis company can be a tough sell when trying to raise capital from traditional funding sources. The newness of California’s industry combined with the unknown of funding a new (drug!) business leads to a level of risk unappealing to many investors. In a previous post, we’ve covered different ways you can find an injection of cash for your business. And this week, our experts have a new way to make your business more attractive: real estate.
Use Real Estate as an Investment Opportunity
There are two instances where purchasing real estate can be leveraged as an investment opportunity.
The first, most simple way? Use your real estate as a business in and of itself. Purchase a property in a green zone-compliant area that you can use to operate your business. Then, approach investors with the chance to become part owners in the building, rather than your business.
The second way is to offer a similar investment opportunity on different locations owned by your business. If you plan to open multiple locations but need to raise the capital to purchase the locations, have an investor take ownership in individual properties.
Both examples are a win-win for investors and entrepreneurs. For investors who may be wary of the risk associated with the cannabis industry, real estate is a much safer investment option. For cannabis entrepreneurs, you maintain full ownership of your business. Making an investor a part owner in your real estate rather than your business lets you make decisions as you want and grow your company with more autonomy.
Leasing vs Buying: Green-Zone Property
Does this mean you should make an effort to buy a property rather than leasing it? There are pros and cons to both options. We’ve outlined some of the biggest points to finding real estate previously on the blog. Should you have more specific questions, we’re here to help.
This is a very specific instance where our experts have found ways to make your company successful. Get more advice on how to build your business and join California’s billion-dollar cannabis industry when you consult our experts.
San Francisco recently announced that it will soon be accepting cannabis business permit applications – however, they have not yet announced when the application date will officially open. The city has provided some preliminary application information to get you started, and we recommend you suggest preparing your application now. If you’re not sure where to start, follow this article by reading our guide to the first three steps you should take to start your cannabis business.
San Francisco Cannabis Licensing: Part 1
San Francisco will soon be releasing part 1 of their cannabis business permit application process. On May 7, the City opened office hours to allow for walk-ins and appointments should you have questions. You may schedule a meeting by emailing email@example.com. The office hours are Monday through Friday, 1pm to 5pm, in room 018 located in San Francisco’s City Hall.
Who can apply for a San Francisco cannabis permit?
During Part 1 of the Cannabis Business Application process, San Francisco has very strict criteria. You may only apply to this round of applications for a cannabis business permit if:
This list was taken directly from San Francisco’s website from their list of accepted criteria.
What is San Francisco’s equity program?
San Francisco recognizes that the nationwide and state drug policy has traditionally negatively impacted certain communities, causing additional inequality and a heightened level of hardship. Therefore, San Francisco has proposed an equity program that will allow certain neighborhoods, citizens and communities to have access to a cannabis business permit first.
Normally, applicants would have to pay a permit fee. However, San Francisco is waiving the $5,000 fee for equity applicants. There are also programs that allow for discounted rent and assistance in running a cannabis business.
How to Apply for a San Francisco Cannabis Permit
While San Francisco has not issued an application start date quite yet, the city has written a list of the items required so you can get a head start. The city will require items such as background checks for all owners and proof of a secured location zoned for your business.
The city will issue the following permits:
It is not yet clear how many of each permit San Francisco will issue. Once the application is available, the Cannabis Office will email the verified applicants with further instructions.
When the application is released, prepare to submit a few additional things:
If you have additional questions related to enforcement or the equity program, visit room 362 at City Hall between 9am to 1pm, or call (415) 554-4420.
San Francisco’s application process is sure to be competitive. If you’d like to get a head start today, contact California Cannabis CPA to ask how we can help.
This week we have updates from San Luis Obispo, Jurupa Valley and a reminder to submit those applications for West Hollywood!
Looking for some guidance on the cities listed or others within California? We have a track record of providing research and cannabis application guidance to our clients quickly and accurately. Contact us today to ask how we can help.
The most common question our experts get isn’t always tax related. In fact, it’s a bit more complicated. Everyone wants to know: “what do I need to do to start a cannabis company?”
What seems like a straightforward question usually has a much more complicated response. In this post, we’ll cover the three high-level steps you need to take to get started in California’s $3.7 billion cannabis industry. Our experts have helped dozens of companies launch in cities across California, and without these three factors, getting a license is difficult, if not virtually impossible. Here’s what you need to start a California cannabis company.
Step 1A: Find Real Estate
As we outlined in a previous post, finding properly zoned real estate is the biggest and most important element of starting your business. If you don’t have a lease or purchased property, your cannabis license application will not be approved.
Finding real estate is made especially difficult by a city’s zoning restrictions. Often, a city will release their zoning ordinance just before announcing the opening of cannabis business applications. Commercial real estate is limited to green zone properties; and these properties are fiercely competitive among potential licensees. Our experts frequently see only ten properties available in compliant zones. Narrow those ten properties down to landlords willing to host cannabis businesses, and you’re looking at two or three spaces available to every prospective cannabis business in the city.
Secondly, a landlord willing to lease to a cannabis business is likely going to charge a premium (because they can). Budget ahead of time for a largely inflated lease price, and keep in mind that some landlords will ask for a large deposit to account for the chance that your cannabis license application might not be approved.
Step 1B: Select your Jurisdiction
We’re calling these step 1A and step 1B because these two items are really concurrent processes. Selecting a jurisdiction has as much to do with the available real estate in a district or city as other factors: tax rates, the cost of doing business, and application fees.
To reiterate: without real estate, you will not be able to operate as a cannabis business. However, there are other planning aspects that should play a role in getting your business off the ground. Select your jurisdiction carefully! Not every city allows for every type of cannabis business. Read the regulations (and check out blog for updates as new cities come online) to see how many cannabis licenses will be available and what the selection criteria will be. Check tax rates, crime statistics, and other city-wide regulations to see how easy your life will be once you get approved.
Pro-tip: try to narrow it down to 2-3 jurisdictions before looking for real estate. This will make your life easier!
Step 3: Complete and Submit the Cannabis Business Application
This step sounds pretty straightforward, but our experts say submitting a strong cannabis business application is a full-time task. Give yourself three to four weeks of effort to put together the best application possible. To help you, we’ve compiled our best tips from helping dozens of businesses through the process. Read our advice on how to submit a strong cannabis permit application in California before you get started.
Remember: cities update their ordinances roughly once a year. As this is the first year that cities are releasing cannabis regulations, 2018 can be considered something of a test run. If you have feedback for your respective city, be sure to submit a public comment. When these ordinances and regulations are revisited next year, these comments will be taken into account.
Questions? Get in touch with our experts to learn more about starting a cannabis business in California.