 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. Get A Head Start On Part 1 Of San Francisco’s Cannabis Business Permit Application Process5/17/2018
 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 officeofcannabis@sfgov.org. 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.  Today, we have cannabis licensing updates from San Bernardino, Alameda County, Ojai, Redwood City, and the City of Alameda.
Have questions about any of the above cities? Get in touch with one of our experts.  As we mentioned in our tips for submitting a strong cannabis permit application, real estate is a key factor in your application’s success. In fact, without a solid lease or property acquisition on the books, your application is virtually guaranteed to be rejected. So, how can you find a space for your business and make sure you get licensed to open? Our experts weigh in.
Finding Real Estate for Your Cannabis Business Looking for property is a tricky process. It’s a balancing act between timing and finding a needle in haystack. Because cities have different application windows (which are usually short – two to three weeks), it’s imperative that you find real estate for your business before the application window is open. Competition is simply too fierce to wait until the city announces they are ready to start approving business applications. Likewise, should you fail to obtain property for your business, your application will not be approved. On the other hand, as a new business, you want to avoid spending a huge amount of money up front without knowing when a city will or will not open their cannabis permit applications. Here’s what we suggest you do first:
Next steps: Locking in Cannabis real estate Many cities are still drafting their cannabis ordinances – it can take two to ten months for a city to pass an ordinance. While you’re keeping an eye on the city council’s activity, you should budget at least six to eight months of full-time searching to locate your property, according to our experts. There are two types of city ordinances you should be paying attention to. The first is zoning. Many cities have their zoning ordinances related to cannabis already on the books. For those that don’t, these cities will release their ordinances one or two months before the cannabis permits are announced. When they release their ordinances, it’s usually a three step process. There will be a first, second (and sometimes third) reading before passing the final regulation. During the first ordinance is when the city outlines the zones, neighborhoods, rules and restrictions around cannabis leasing and property ownership. This first reading should be the spark for your property search. By the final vote and passing of these ordinances, your property should be locked down. What property is right for your cannabis business? Now that you understand the ideal timing for finding and committing to cannabis real estate, the tricky part is finding a space that meets your needs. Landlords are often wary of dealing with cannabis companies: but, buying a space is a huge risk in the unfortunate event you aren’t approved for a cannabis license. Either way, signing up for property can feel like a gamble. There are ways to reduce your insecurity when seeking commercial cannabis property. First, if you’re working with a landlord, approach your tenant agreement with the same thoroughness that you would a business permit application. Show your business plan, financial projections, and anything else that makes it clear you aren’t a fly-by-night business. Demonstrate your security measures and how you will care for the property. Your landlords want to see that you are a good tenant. Likewise, our experts suggest negotiating for a contingency clause should your cannabis application not get approved by the city. Some landlords will accept a larger up-front deposit with an agreement that if your permit isn’t approved, they keep your cash. This gets you out of paying a long-term lease, but can be costly! And remember: the longer your lease agreement, the easier it will be on your business in the long-run (should you be approved). Prevent the need for looking for real estate in the future by signing as long a lease as possible. If your plan is to purchase property, make sure you read the city ordinances carefully to be sure you can operate your business in the industrial zone. Consider looking for a space where you can use the building for another use other than cannabis. For example, if you use it as a distributor you can distribute other goods or lease it out to companies in a different industry to help with the financial burden. Be prepared for steep competition for available cannabis properties. This part of starting your business is going to be a struggle, but without property, you won’t have a business. Consult our experts for help in getting your cannabis company off the ground – we’re here to help!  This week we have updates from West Hollywood, San Francisco and Redwood City. Don’t forget: Culver City applications are due this week!
Check back in later this week for advice from our experts on finding real estate for your cannabis business, guidance on CBD products and the cannabis excise tax, and the final part of our Los Angeles regulations series. Now, onto the latest news from around the state:
If you would like additional information, San Francisco will be hosting office hours starting May 7. You may walk in or set up an appointment by emailing officeofcannabis@sfgov.org. The hours are Monday – Friday from 1:00pm – 5:00pm.
If you’d like assistance with any of the following licenses or other cities within California, please contact us today. We have processed many business applications successfully, helping clients enter California’s cannabis market.  Just announced: West Hollywood, California is now accepting screening applications for cannabis business licenses through May 31, 2018. West Hollywood has provided a lot of detailed information on how to obtain a license, and here’s what you need to know about the process.
West Hollywood Cannabis Ordinance Back in November of 2017, West Hollywood enacted a Cannabis Ordinance that would allow cannabis businesses to be licensed. According to the West Hollywood Cannabis Business License Screening Application Packet, the following numbers of licenses are to be issued:
West Hollywood Cannabis Application Process West Hollywood will select its applicants based on specific application weighting criteria. By providing the grading criteria up front, the city is challenging applicants to tailor their application to the city’s exact needs. Be sure to take advantage of this knowledge! The first step to getting to the actual application, however, is submitting a screening application (screening applications will be accepted May 2 – May 31). The screening application must include the following:
West Hollywood has also provided a comprehensive application overview as well as an application checklist. If you have additional questions, the city has also provided answers to commonly asked questions. West Hollywood has done a great job providing all the necessary information needed in order to submit a successful screening application. If you would like additional assistance in submitting a successful application, please don’t hesitate to contact California Cannabis CPA.  As we’ve seen over the past few months, California cities and municipalities are offering a limited number of business licenses to new cannabis companies. San Bernardino is offering 17 total licenses; Colfax is has four retail permits up for grabs; San Francisco has a waiting list until 2019; and those are only the most recent announcements. Competition is fierce and barriers to enter California’s cannabis industry are high. That’s not to mention the high application fees you’ll pay for no reason if your license application is rejected. What are some things you can do to make your application stand out? Our experts have worked with dozens of successful cannabis licensees, and they’ve seen what can make or break an applicant. Here are their top tips for submitting a strong cannabis business application in California. Read the instructions. Sounds simple, but every application is different: each municipality has their own twist on what it takes to open a business in their city limits. And, with so many potential businesses vying for a small number of permits, you must follow instructions to the letter. Don’t give the review committee an easy excuse to reject your application just for missing some information or failing to meet one of the requirements! Do your due diligence. Our expert’s number one piece of advice is to go above and beyond when it comes to the details. Essentially, you should be thorough in creating your application that if (when!) it is approved, you can pull the trigger and open within a few weeks. This means calling security companies, interior designers, partners, POS vendors, real estate agents, and anyone else who you will need to vet and sign contracts with to get started. Get financial quotes from each of these vendors, and make sure you’re clear about what your start-up costs are. Keep in mind that all these other businesses are what will make your business successful in the long-term. Don’t panic and start signing up partners you will ultimately struggle to work with. This is not only an important part of your application, but an important part of your inevitable success. Get quotes! Be financially realistic. Once you’ve received quotes from partners and third-party vendors, you’ll have a better picture of what it will take for you to actually open your cannabis business. For some, this can be a wake-up call; maybe you need a little more liquid capital than you originally thought. For others, this just verifies that you’re ready to go. Some cities offer bonus points when CPA attests to your financial viability. Submit your financial documents with a seal of approval from a registered accountant to show the city you mean business (literally). Follow security guidelines. Make yourself a viable contender in the eyes of whatever city you’re applying for by following security guidelines. Hire a professional to get your on-site security set up: panic buttons, motion sensors, door alarms, vaults, etc. Keep in mind that you are dealing with quite literally with cash and drugs: protect your business and prevent theft. The city doesn’t want to have to spend extra resources investigating any incidents at your business, and they want to see that you take safety seriously. Compliance also falls under this area of preparation – and applicants frequently get tripped up on compliance issues. The city wants to see if you are going to run an above ground operation. Are you going to pay your taxes, or are you going to run a black market? Show plans for things like inventory control, inventory audits, and commitment to state policies. It’s not enough to make promises: show an action plan including a full inventory sweep every 14 days, for example. Show where on your floor plan you will position cameras, along with the cost per camera and vetted vendor priced out in your business plan. Have a unique business idea. In short: branding! California Cannabis CPA experts caution against falling into the “dumb hippie bakeshop” stereotype – unless, of course, that’s a carefully thought through user experience you’re going for. Put a little work into describing what the inside of your dispensary will look like, what the user experience will be, and what your logo and signage will be. What makes you look professional? What sets you apart from every other cannabis store? Show your role in the community. As we’ve pointed out in the past, many cannabis business applications have a so-called community section – an opportunity for you to share how you will play a role in supporting the local community. California is well aware that cannabis businesses can expect to rake in the cash: and they want to see how you’re going to add value back to society. Our experts suggest that you select specific causes or community functions with local significance. For example, donating 1-2% of your sales to a local animal shelter is better than saying you’ll send some cash to PETA eventually. Give yourself enough time. Our experts recommend giving yourself a full three to four weeks of dedicated time to craft and submit a solid application. That means spending each day drafting contracts, making calls, interviewing potential employees, locating real estate, creating financial projections, and setting up security measures, among other things the application might ask for. Unfortunately, some cities don’t give you the luxury of time: some applications only give you a two week window. In that case, it helps to consult with an expert to prioritize where you can shine on an application. Has your city announced the opening of their permit application process? Get in touch with California Cannabis CPAs to find out more!  EDITOR'S NOTE: San Bernardino changed it's cannabis application deadline. The new application deadline is June 25, 2018.
There are several important California city due dates approaching! Here’s a quick round-up of the local and city-wide cannabis application deadlines for the month of May. Many of these cities are limiting the number of cannabis licenses available, so competition will be fierce. To give your business the best chance of being approved, work with one of our experts! Later this week, we’ll also be publishing our exclusive tips for submitting the strongest permit application possible. Culver City Cannabis Application Deadline Culver City applications due by 5:00PM on Wednesday, May 9. The city will issue a limited number of permits in each of the following categories.
To read more about Culver City’s application process, check out our comprehensive summary. Moreno Valley Cannabis Application Deadline Moreno Valley applications are due Friday, May 11. Don’t forget to apply through their online portal. Read more about the application process in our summary. San Bernardino Cannabis Application Deadline San Bernardino applications are due Wednesday, May 23. San Bernardino stated that they will be awarding the following licenses, allowing up to 5 in each of the categories until they are taken. Read more about preparing your application in our summary of the city’s requirements.
Colfax Cannabis Application Deadline Colfax applications are due Monday, June 4. Read our recent blog about the details of applying for their four coveted licenses. Need some help getting organizing and submitting your city’s application information? Contact us today to get started. Later this week, we’ll have the final part of our Los Angeles cannabis series (read Part 1 and Part 2) as well as everything you need to know to submit a strong permit application – and increase your chances for being approved at any of these cities.  EDITOR'S NOTE: San Bernardino has changed its cannabis application deadline. The new deadline will be June 25, 2018. Big news: San Bernardino will begin accepting applications for commercial cannabis permits starting April 23, 2018. Here are the full details of the application process to ensure you are fully prepared. Side note: on April 8, the city released specific ordinances regulating smoking in public, personal cultivation and commercial cannabis activity. Find a summary of those ordinances here. San Bernardino Cannabis Application Process On April 23, 2018, San Bernardino will begin accepting license applications for the operation of Commercial Cannabis Businesses (CCB). The city is issuing up to 17 licenses/permits. However, if all 17 licenses are not issued within the first round it is possible the city will open a second round of applications. This is a great opportunity for those who want to get into the cannabis business. Act quickly as the application period will only be open for one month. The deadline for submitting your application is 4:00PM on May 23, 2018. So, where do you start? The city has provided a comprehensive overview of the application procedure guidelines. The actual application can be found here.
The number of each type of commercial cannabis business that shall be permitted to operate in the City shall be established by the Mayor and City Council. At no time shall the total number of permits for all license types exceed one (1) permit per twelve thousand five hundred (12,500) residents of the City as determined by the most recent Population. We will update you as the city responds to our inquiry.
 How will San Bernardino evaluate cannabis license applications? Applications are evaluated and ranked based on the following:
If you complete Phase 2 with a score of at least an 80%, you will move on to Phase 3. There will be a maximum of 34 applicants that move on to Phase 3. If you make it to Phase 3, there will be an extensive interview process. You can find the details of the process on page 4 of this document. San Bernardino will begin accepting applications starting April 23, but they close on May 23. With only one month to complete your full application, contact California Cannabis CPA to ensure you have everything in order to nab a commercial cannabis permit! Moreno Valley NOW ACCEPTING Commercial Cannabis Applications for 5 License Types – DUE MAY 11!4/25/2018
 It’s an exciting time to be a cannabis business in Moreno Valley! Applications are now open for commercial cannabis business permits.
Moreno Valley Cannabis Business License Application Moreno Valley has set up the full application process through a third party vendor named PlanetBids. To begin the application process, click the link and register as a new vendor. Once you’ve registered, Planetbids will send you a registration email within 24 hours. After you receive this email, the Moreno Valley website suggests searching for bid opportunities and look for invitation number 2018-019. The PlanetBids site houses the full application and lists the supplemental details and forms you will need to submit for your cannabis business license. You have until May 11, 2018 at 4:00pm to submit for a commercial cannabis permit. Don’t even try to submit an application outside of the PlanetBids system: the city will not accept it. Luckily, if you run into technical issues there is a PlanetBids hotline that can be reached at (818) 992-1771. Before you apply, Moreno Valley suggests the following:
Remember, a majority of the documents you’ll need to submit (the application, background application, as well as Moreno Valley’s overview on the city’s limitations) are available through PlanetBids. Details on Applying for a Cannabis License in Moreno Valley
Moreno Valley will evaluate and select candidates based on a points system. Things like location, business plan, safety and security plans, air quality plans & community benefits will be considered. You can review the full details of the point-based system on page six of the Moreno Valley cannabis business application guidelines. In addition, applications must achieve a minimum of 70% score within each individual category. In order to be eligible for the next step in the application process, you must score an overall grade of 80%. It is likely that scoring an 80% will grant you an interview and move you to the next step. Note that a fee of $1,556 will be due prior to the interview and you will be notified (via email) of next steps. As Moreno Valley releases additional information about the process and next steps, we will be sure to update you! Act quickly on this one – applications close May 11, 2018. Need help hitting the ground running with your application? Contact California Cannabis CPA today.  Check out this week’s breaking news from Moreno Valley, Gonzales, West Hollywood and Oxnard. Don’t forget: California cannabis tax returns are due in one week!
 Check out these updates from the cities of San Bernardino and Culver City. Plus, news from the California Department of Food and Agriculture (CDFA).
Don’t forget, Cannabis tax returns and payment for January 1, 2018, through March 31, 2018 are due April 30, 2018! Please contact California Cannabis CPA for any assistance with the licensing process.  As spring warms up and nicer weather starts bringing customers out of hibernation, you may be wondering how to increase your sales this season. As a cannabis retailer or manufacturer, one tactic is to offer free cannabis samples to customers to encourage them to try – and buy more of – your product. Is that legal, and what are the tax repercussions of giving away free cannabis? We discuss below.
Can I give away free samples of my cannabis product? First, check to make sure that you can offer free samples legally in your area. You can ask your local officials or ask for guidance guidance from the Bureau of Cannabis Control and the California Department of Public Health. Second, know that these details only apply to licensed manufacturers, not dispensaries. Use Tax and Free Cannabis Samples So, assuming you can legally offer free samples of cannabis, do you have to pay use tax? Remember, use tax is charged on all items that you use or consume and purchased without paying tax. The rate for use tax is the same rate as sales tax. The short answer: yes, you do have to pay use tax when you give away free samples of cannabis. Here’s a more detailed explanation. The use tax comes into play when a product is, literally, “used.” As long as cannabis is part of your inventory being held for sale in the regular course of business, it’s not being used, and therefore you do not pay tax on that supply. When you offer your cannabis product for use – i.e., for a customer to try for free – the use tax will kick in. The tax due on that sample is based on the purchase price by the manufacturer. If you want further details on how this works, read Regulation 1669, Demonstration, Display and Use of Property Held For Resale-General, subdivision (a) as well as Regulation 1670, Gifts, Marketing Aids, Premiums and Prizes. What if I’m offering free samples to employees? Ok, so maybe you’re not so tempted to give away free samples to customers. But what about to your employees? It can be helpful in making a sale to have knowledgeable employees who can personally attest to the quality of your product. So, do you need to pay use tax on cannabis being used for internal promotional purposes? Unfortunately, yes, you still need to pay use tax on free samples given to employees. This still falls under the realm of “use,” as in you are using tangible personal property for any purpose other than demonstration and display. Use tax is measured by the cost of the cannabis product purchase price. Does the use tax rate ever vary? Use tax can vary not by who you are selling cannabis to, or why you are giving it away (e.g. free sample versus normal sale), but by where you sell or give away the cannabis product. The tax rate depends on where the manufacturer gives the sample away. For example, if you give a sample to an employee, the tax applies where the sample was dispensed from (not where the recipient then used the sample). If the sample is given to an employee for personal use, the rate of tax that applies is that of where you made the gift to the employee. Summary and Conclusion While it may be tempting to give away samples of your product for free, note that you will still have to pay use tax on the transition of those samples. The use tax rate that you will pay depends on where the sample was gifted, not where the sample is consumed. Likewise, it doesn’t matter whether you’re offering a sample to an employee or customer; use tax still applies. You may still decide it’s a worthwhile marketing tool to offer a sample, but make sure you are legally allowed to do so before continuing your marketing effort. If you still have questions, check out additional resources in the CDTFA’s Tax Guide for Cannabis Businesses or consult with one of the experts at California Cannabis CPA.  Los Angeles, California recently released a series of additional regulations to reduce any negative impact or confusion regarding the cannabis industry.
Missed part one in our Los Angeles series? We covered the licenses, rules, and regulations. Today we will review the Los Angeles planning ordinances. Cities often regulate where cannabis activity can be conducted, and Los Angeles is no exception. Here’s what you need to know. Cannabis Retailers in LA: Type 10 (Retailer) or Type 9 (Non-Storefront Retailer) Retail cannabis activity can be conducted within ten specific zones located on pages 4-5 at the link. There are also specifics about how close a business can be to other retailers, microbusinesses, schools, alcohol/drug recovery centers, public parks and libraries. In most cases, Type 10 licensees must be at least 700 feet away. There are some exceptions with Type 9 licenses (non-storefront), all of which is listed on page 5 of this document. Cannabis Microbusinesses in LA: Type 12 (Microbusiness) Microbusiness commercial cannabis activity can be conducted within four specific zones. There are also rules about how close your business can be schools, public parks, and treatment facilities so pay special attention to the details on page 6 of this document. Cannabis Indoor Commercial Cannabis Cultivation in LA: Type 1A (Cultivation, Specialty, Indoor), 1C (Cultivation, Specialty Cottage, Small), 2A (Cultivation, Indoor, Small), 3A (Cultivation, Indoor, Medium), 4 (Cultivation, Nursery) and 5 (Cultivation, Indoor, Large) Indoor cultivation is allowed within the 4 zones detailed on page 7 of this document. Note that indoor activity must also be at least 600 feet away from any schools Cannabis Manufacturing in LA
Testing Commercial Cannabis Activity in LA: Type 8 (Testing) Testing is allowed within the seven zones beginning on page 8 of this document. Activity must be conducted at least 600 feet from any school. Cannabis Commercial Distributors in LA: Type 11 (Distributor) Distribution is allowed within the four zones outlined on page 9 of this document. Activity must be conducted at least 600 feet from any school. Details about LA’s Cannabis Zoning Rules How do you define distance as stated in this document? Distance is defined as the horizontal distance measured in a straight line, from the closest exterior wall of the business. Consider the closet point of property from any school, public park, recovery center or day care center. Are there exceptions for grandfathered medical marijuana dispensaries? There are specific provisions given to grandfathered and existing marijuana dispensaries. Read this document starting on page 11 for all you need to know about grandfathered existing marijuana dispensaries. Remember – it’s unlawful to conduct any cannabis activity without being properly licensed! California isn’t messing around. There are a lot of details involved in making sure you obtain a business within the proper zone. Need help clarifying the details? Contact California Cannabis CPAs today. We’ve helped dozens of cannabis businesses obtain licenses within their desired city and zone.  Colfax, California is now accepting cannabis retail applications. Colfax is ready to issue up to four retail cannabis business permits (two medicinal and two adult use). Due to the limited number, it’s important to get started on your application today. Application Checklist Since the city states it “may” issue up to four permits, with no guarantee that it will release the full number, you’ll need to make sure your application is right the first time. To get started, download the full application. Colfax requires two copies of the application be submitted, each one in a three-ring binder. A third copy will be required in PDF format on a flash drive. These details seem trivial, but they are important as you don’t want your application disqualified on arrival. You will also need to supply proof of the following:
Application Process There are four phases to the application process. The details above are part of the first phase. Each of the individual phases will have a separate fee associated with them. If you pass Phase 1, you will be notified if and when you can move to the next phase.
The Evaluation Process Colfax has provided a very specific points system which they will use to grade cannabis retail license candidates. Review these details carefully to make sure your application has the best chance of approval. If you have any questions about the status of your application, the city has provided the following contact information: Wes Heathcock 530-346-2313 Wes.Heathcock@colfax-ca.gov Additional Background As you fill out the application, be prepared to discuss any history of other licenses you have obtained, past felonies, and a description of your desired business location (include any zoning verification letters). In addition, the city will require:
Applications will close on June 4 at 4:00pm. Applications must be submitted to the Planning Department located at 33 South Main Street, Colfax, CA, 95713. Submitting an application for a cannabis business permit is no easy feat. Luckily, if you need some guidance, California Cannabis CPA is here to help. Contact us today!  Another week, another round of California cannabis city updates! This week we have news from three California cities: West Hollywood, San Francisco, and Redding.
If you do not qualify for any of the above statements, you will have to wait until 2019 apply. Even 2018 applications are not open quite yet! San Francisco has provided a preliminary checklist of permit application requirements if you would like to get a head start. Once we hear more, including the number of licenses that will be available, we will be sure to update you.
We will continue to keep you updated on the following cities, as well as any other California cities who update their cannabis laws and ordinances. Have questions about applying for a cannabis license? Give us a shout.  Los Angeles is further clarifying their cannabis rules, regulations, and city ordinances to surrounding this growing industry. In this series, we’ll be tackling Los Angeles revised planning ordinances and licensing. First up: the city’s rules and regulations for cannabis businesses.
Los Angeles Cannabis Application Procedure If you’ve applied for a Los Angeles cannabis license, congratulations in taking the first step towards become a cannabis business owner. If you are still looking to apply, read on! The Department of Cannabis Regulation (DCR) plays a crucial role in cannabis licensing. The DCR provides a master license application form to the public. If you applied, every applicant will be given a time stamp on their application to indicate when it was received. If for some reason the DCR determined your application was incomplete, you will be notified. If you are applying for the first time, your application should include:
Click through for a more detailed list of the application requirements. California Cannabis CPA is also here to help with the details of your application, so please don’t hesitate to get in touch. Specific Requirements There are a few additional requirements you may be required to meet, depending on the type of license you are planning to acquire. Here are a few extra things you should know:
No matter which license you are applying for, you will be subject to a pre-license inspection. This will likely include employees or agents from the following city or county departments stopping by for a friendly visit: DCR, Building and Safety, Police Department, Fire Department and Los Angeles County Department of Public Health. Read additional details of the inspection requirements on page eight at the link. Operational Requirements and Violations As far as regulation penalties, the city divides violations into minor, moderate and serious offenses. Below is a brief overview of the three categories. These represent a high-level overview of the rules, and if you’d like to read the rules in greater depth, we suggest clicking through to review specific operational violations beginning on page ten. Minor Offenses An offense is considered minor if….
Moderate Offenses
Serious Offenses
Record Retention It is your responsibility to maintain the following records for at least seven years. It is considered a serious violation if you do not!
The Los Angeles Rules and Regulations are incredibly extensive and although this list goes into great detail, it does not cover them all. California Cannabis CPA is here to walk you through the extensive steps in order to secure a license. Contact us today to get started.  Newsflash: last week, the California Department of Public Health (CDPH) proposed new emergency regulations that would allow cannabis manufacturers share facilities. These regulations are going to be filed on April 3, 2018, with an ensuing five-day public comment period until April 8, 2018.
These regulations intend to offer ways for small manufacturing businesses to enter the cannabis market at a lower start-up cost. Here’s what you need to know about the proposed regulations. How do I get a Type S License? Here is a quick overview of what you need to apply for your Type S License.
To get a Type S license, an applicant must fall into the Tier I or Tier II fee categories:
Lastly, “cannabis manufacturing” means that a licensee can participate in the following activities:
The application will be available on the CDPH website after the public review period has closed. How do I register a shared-use facility? If you are a cannabis manufacturer with a Type 7, Type 6, or N license, you can register your location for shared-use. As part of the approval process, you must apply for a Type S license. This is similar in structure to a commercial kitchen or coworking space in that it allows companies to share space and equipment. Note that the location where the cannabis shared-use license is held may only be used for cannabis-specific manufacturing activities. To register as a shared-use facility, you must submit the following information:
Why should I be interested in a shared-use facility? The emergency regulations aim to provide equity among cannabis manufacturing companies who have limited access to the cannabis market. Many local regulations and zoning restrictions prevent cannabis manufacturers from operating in accessible neighborhoods. Likewise, the cost of opening and operating a manufacturing plant can disqualify new businesses from getting off the ground due to exorbitant costs. The state intends to ease that burden while providing a new source of revenue for existing operations who wish to share their space. To review the details of the proposed regulations and a fact sheet with instructions for submitting public comment, visit the CDPH website and speak with one of our professionals about the process for sharing your manufacturing operation.  Another week, another round of California cannabis city updates. Don’t forget – there are some important deadlines coming up if you’re opening a cannabis business in Lake Elsinore, Colfax or Moreno Valley.
Don’t forget! In the last few weeks we shared some information about the following cities. But the dates are so important, they are worth mentioning again.
With these important deadlines around the corner, make sure you get your application in order! These licenses are very competitive, so if you need assistance, contact California Cannabis CPA today to get started.  The 2018 tax reform bill passed by Congress brought a lot of new changes to federal taxes for California cannabis businesses. You may have some questions about how to take advantage of these changes, which is why we’re covering all new deductions, liabilities, and tax considerations in ongoing blog updates. Today: should you convert your S-Corp to a C-Corp?
Background: types of business entities As a quick refresher, there are a number of different ways to structure your cannabis business. The way you set-up your new venture has significant tax implications. Here is a quick, high-level overview of some of the most common business structures you might consider forming:
This is a very high level overview of the options available to your business, and if you have specific tax questions for the structure of your cannabis business, we suggest consulting with one of our experts. Let’s move on to the latest tax reforms – and how they impact S-Corps and C-Corps. 2018 Tax Reform Updates Traditionally, small businesses have been encouraged to avoid filing a C-Corporations due to the double taxation issue. S-Corps have always been more appealing business structures for anyone looking for a lower tax rate: typically, individual income tax rates are much lower than business income tax rates. Therefore, especially for small businesses that don’t qualified for the reduced corporate tax rate, setting up a structure where you can claim business income as personal helps owners save money on federal taxes. Congress’s tax reforms in January, 2018 changed that. The tax reforms reduced the corporate tax rate from a maximum of 35% to 20%. Many individual tax rates can reach up to 42%, the tables have turned, and now a 20% tax rate looks more appealing to many business owners who want to avoid paying higher tax rates on their income. Should you convert to a C-Corp? Note that there is some tax relief planned for S-Corps as well. The new tax bill included a temporary provision allowing pass-through entities to deduct up to 20% of their income on their return. This is known as the “qualified business income” deduction (and also applies to partnerships and sole proprietorships). However, this is a temporary provision: and making the switch to the C-Corps would allow your business to access a lower long-term tax rate. Likewise, there are a variety of other deductions that S-Corps and C-Corps businesses can take advantage of. For example, C-Corps can claim the foreign income tax deduction and dividends-received deduction on the repatriation of foreign income where the US Corporation owns 100% of the foreign company. The latest tax reform suggests the current administration and Congress is doing its best to ease regulations on traditional corporations – something your cannabis startup may inevitably benefit from. How do you convert to a C-Corps? It’s relatively straightforward to convert an existing company to a C-Corporation in California. The process starts when you file a set of articles of incorporation with the California Secretary of State. You can read more about the process on the California Franchise Tax Board website. Of course, before making any major business decisions, we recommend consulting with an expert to understand the full implications of your tax liability and business obligations. Filing as a C-Corps may lead to tax benefits, but this business entity comes with lots of other responsibilities.  Newsflash: this month, the California Department of Public Health (CDPH) proposed new emergency regulations that would allow cannabis manufacturers to share facilities. These regulations are going to be filed on April 3, 2018, with an ensuing five-day public comment period until April 8, 2018.
These regulations intend to offer ways for small manufacturing businesses to enter the cannabis market at a lower start-up cost. Here’s what you need to know about the proposed regulations. How do I get a Type S License? Here is a quick overview of what you need to apply for your Type S License.
To get a Type S license, an applicant must fall into the Tier I or Tier II fee categories:
Lastly, “cannabis manufacturing” means that a licensee can participate in the following activities:
The application will be available on the CDPH website after the public review period has closed. How do I register a shared-use facility? If you are a cannabis manufacturer with a Type 7, Type 6, or N license, you can register your location for shared-use. As part of the approval process, you must apply for a Type S license. This is similar in structure to a commercial kitchen or coworking space in that it allows companies to share space and equipment. Note that the location where the cannabis shared-use license is held may only be used for cannabis-specific manufacturing activities. To register as a shared-use facility, you must submit the following information:
Why should I be interested in a shared-use facility? The emergency regulations aim to provide equity among cannabis manufacturing companies who have limited access to the cannabis market. Many local regulations and zoning restrictions prevent cannabis manufacturers from operating in accessible neighborhoods. Likewise, the cost of opening and operating a manufacturing plant can disqualify new businesses from getting off the ground due to exorbitant costs. The state intends to ease that burden while providing a new source of revenue for existing operations who wish to share their space. To review the details of the proposed regulations and a fact sheet with instructions for submitting public comment, visit the CDPH website and speak with one of our professionals about the process for sharing your manufacturing operation.  The deadline to procure a cannabis business license in Lake Elsinore is fast approaching. Applications have been open since March 1, 2018 and will close on April 15, 2018 – so it’s important to begin the process today!
Cultivation and Manufacturing The City of Lake Elsinore will now allow for cultivation, testing and manufacturing in specific light industrial (M-1) and heavy industrial (M-2) zones. However, there are limits to the amount of facilities that may open within each zone. A maximum of ten total cannabis-related facilities will be allowed (five within each zone). Limited retail and distribution uses are only permitted as accessory use to an approved facility permitted for cultivation or manufacturing. The City expressly states that they are open to adding additional businesses in the future, should they see economic benefits. Application Process Not surprisingly, the application process can be a bit extensive. Here is what you need to get started:
The city will look for several things when evaluating your application:
Your location must also be entirely indoors (excluding greenhouses) and all operators must not have any kind of criminal history. Zoning The city has provided a map of the M1 and M2 zones. This map will provide a high-level view of the areas in which the land-use zoning is allowed. If you have questions about the application or the Lake Elsinore permit approval process, you can call the city at this number: 951-674-3124. Since the April 15, 2018 deadline is quickly approaching please contact California Cannabis CPA for immediate assistance in submitting your application. |
