Failed tests

If your cannabis and/or cannabis products fail to pass the required testing and cannot be remedied, then, according to State Regulations, the entire batch must be destroyed. This obviously has an impact on your bottom line: cutting losses means implementing industry best practices. We recommend you continually engage the services of testing laboratories at fundamentally significant steps in the cultivation and manufacturing process. This could potentially save your cannabis and cannabis products from failing tests and destruction.

Compliance Assistance

If you are a commercial cannabis operator and need assistance and/or guidance with compliance, contact a team member today. Part of every operator’s responsibility is to meet state regulations and incorporate best industry practices into your operations.

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California’s permanent cannabis regulations were reportedly finalized on Monday, December 3, although operators may not be privy to the new regulations until January 2019. State officials have decided not to make the rules public until the Office of Administrative Law (OAL) has finished conducting its review.

The news is frustrating, but it also makes it hard to prepare your business for the potential impact of the permanent cannabis regulations. Here’s what we know about the most recent draft of California’s permanent marijuana business regulations – and how you can prepare for 2019.

What are California’s permanent cannabis business regulations?

The permanent business regulations related to the cannabis industry are joint effort of California’s Bureau of Cannabis Control, Department of Food and Agriculture, and Department of Public Health. The regulations cover a variety of issues related to cannabis, including delivery, packaging, and events.

Experts who have studied the proposed regulations warn that these rules will hurt current operators. Here are a few of the key changes that may affect your business.

End to Contract Manufacturing
All licensed companies could be barred from doing business with a commercial cannabis company lacking a license.

Contract manufacturing, commonly known as white labeling or co-packaging, is a way for licensed manufacturers to produce and package products for those businesses that are still unlicensed. We see this partnership commonly with celebrity-endorsed brands or an established cannabis company that has a production facility located in a municipality which does not allow for commercial cannabis. This is simply the best way to do business for many operators who are hamstrung by the varied cannabis allowances from county to county. If this rule ends up as part of the final regulations, it could put many contract manufacturers out of business.

New Delivery Regulations
The proposed rules reduce the amount of cannabis product a single delivery vehicle can transport from $10,000 to $5,000.

The economics of this rule change could have big implications for licensed cannabis operators. Currently, the $10,000 limit allows for drivers to leave for their delivery window with one order for $100 and $9,900 in additional product to fulfill orders as they come in. However, the rule change forces drivers to leave with at least $2,000 in product designated for orders already placed. This leaves just $3,000 available for fulfilling orders while on the go.

Obviously, this severely restricts the sales opportunities for delivery operators and damages the customer experience. Slower service is bad for business, and the higher overhead of making more trips to and from the delivery hub could put some companies in the red.

New Disclosures for Business Owners
If you have a cannabis business license or own a financial stake in a cannabis venture in California, you will be reclassified as a “salesperson” or “consultant” under the proposed California cannabis business regulations. Why is this important?

The key to this rule is the part where any employee who has a say in what the business should sell, manufacture, or cultivate will be considered an owner. More individuals will therefore have to file state disclosure paperwork. Logistically, this becomes a bureaucratic nightmare. What’s even more concerning is this provision could amount to a ban on silent partners, with big implications for those ventures still seeking funding.

How to Prepare for California’s New Regulations

Until January, we won’t know which of these proposed regulatory changes made it into the permanent bill. However, it’s prudent to start preparing your business now. Talk to your silent investors to make sure they’re aware of the changes in disclosures. If you need to find a new investor for your cannabis business, it’s better to start now.

If you run a delivery service, take a look at your operating budget to see if you have space to hire extra vehicles and drivers. You can also prepare your customers by asking for minimum orders or changing up the checkout process in incremental changes. Minimize the disruption to the user experience by making small adjustments to your delivery service ahead of time.

Finally, if you’re working with a contract manufacturer, protect your business by seeking a plan B partner. Lock up relationships with other licensed operators now, as competition is only going to get steep.

For more on the proposed regulations, get in touch with our experts today. ​

At the polls earlier this month, voters across the US weighed in on a number of measures related to cannabis. For California voters, midterm results were overwhelmingly in favor of the new adult-use cannabis industry, a good sign for anyone hoping to grow their business venture.

There were about 50 tax measures across the California’s ballots, the majority of which were approved by voters. While more taxes may not necessarily seem like a positive thing to budding entrepreneurs, this is a sign that local governments intend to welcome the cannabis industry and help it grow. It’s to their benefit for businesses to do well, as a local municipality can benefit from the resulting tax revenue.

As we go into 2019, here are the new cannabis taxes that companies in California need to pay to stay compliant with state and local laws.

San Francisco: Proposition D

In San Francisco, voters approved Proposition D, the Marijuana Business Tax Increase. This measure will impose taxes on cannabis ventures that do business in the city, regardless of whether or not their physical site is located there. The tax rates are:

• Cannabis retailers: 2.5% of gross receipts up to $1 million and 5% of gross receipts over $1 million.
• Cannabis non-retail businesses: 1% of gross tax receipts up to $1 million, and 1.5% of gross tax receipts over $1 million.

These taxes go into effect in January, 2021 and do not apply to the first $500,000 of recreational cannabis gross receipts. Medical cannabis retail sales are also exempt from this tax. Revenue from this particular tax is expected to reach $5 - $12 million, money which will go into the city’s general use fund.

Emeryville: Measure S

Emeryville, California voters passed Measure S, a Marijuana Business Tax similar to the one in San Francisco. The business tax measure levies a cannabis business tax of up to 6% of gross receipts. The goal is to generate $2 million in revenue for unrestricted governmental use. This is quite a big leap for Emeryville, as previously cannabis companies paid 0.10% of annual gross receipts, or $25, whichever was greater. The ballot measure does not say when this increased tax rate will go into effect.

Oakland: Measure V

Oakland, California went in a bit of a different direction when it came to voting on cannabis taxes this November. Voters decided to lower their existing cannabis business tax – though the municipality previously had one of the highest tax rates in the state. Recreational cannabis was taxed at 10%, while medical cannabis companies had a 5% tax rate. Small operators were having a hard time competing in the market with cities nearby charging lower taxes.

Measure V was approved by voters to give the Oakland City Council the authority to lower cannabis tax rates through a forthcoming ordinance. The measure also allows cannabis companies to deduct the cost of raw materials from their gross receipts. On the federal level the 280E regulation prevents cannabis companies from doing this on their tax returns.

Lastly, this ballot measure allows local cannabis businesses to pay their taxes on a quarterly basis, instead of one annual payment at the beginning of the year. From a tax perspective, Oakland is looking more attractive than ever to entrepreneurs looking to enter the cannabis industry.

Lake County: Measure K

Lake County’s Measure K Marijuana Business Tax was approved by a majority vote this November. This measure goes into effect January 1, 2021 and changes the following taxes:

• Cultivators/nurseries: taxed at $1 per square foot (previously $1-$3 depending on the method of cultivation).
• Other cannabis businesses: taxed between 2.5% and 4% of their gross receipts

Read the full text of the measure to determine where you call in the two tax brackets.

Mountain View: Measure Q

Mountain View’s Measure Q applies to the maximum of four cannabis businesses allowed to operate in Mountain View, per their permitting regulations. This approved ballot measure imposes up to 9% tax on gross receipts of cannabis businesses. The money will go into a fund for “general city purposes,” estimated to grow to $1 million in annual revenue.

Lompoc: Measure D

2018 Lompoc, California voters approved Measure D2018 with the following tax rates to cannabis companies:

• $0.06 per $1 of non-medical retail sales proceeds;
• $0.01 per $1 of cultivation proceeds;
• $15,000 for net income less than $2 million of manufacturing/distribution proceeds;
• $30,000 for net income $2 million or more of manufacturing/distribution proceeds;
• a total aggregate tax of $0.06 per $1.00 of micro-business proceeds; and
• no tax on testing.

Riverbank: Measure B

Last but not least, Riverbank voters approved Measure B. This is an interesting step for a municipality that does not currently permit cannabis businesses to operate within their jurisdiction. But, by passing this ballot measure, voters have indicated they are open to allowing adult-use cannabis businesses to operate in the future. Measure B permits Riverbank’s City Council to issue a tax of up to 10% of gross receipts on cannabis businesses operating in the future. Built into the tax are incentives which give the city a cut of any illegal cannabis business earnings. Despite this relatively high tax rate, keep an eye on Riverbank in the future for indications that they may be open to permitting recreational cannabis businesses to operate.

If you have any questions about these tax related measures, get in touch with our experts.

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Updated December 6, 2018

Last September 30, 2018, Governor Jerry Brown signed and approved Senate Bill 1409 which permits the cultivation of industrial hemp by California growers. Prior to its approval, only growers that qualified in the Pilot Program, and the Agricultural Act of 2014, could cultivate Industrial Hemp.
 
With SB 1409, starting January 1, 2019, individuals interested to grow industrial hemp are able to do so under the following conditions:

1. Apply and Register with their County Agricultural Commissioner and pay registration and renewal fees, as specified by the County.
2. Grow Cultivars from the approved cultivar list, which has been certified by specific organizations, or produced by clonal propagation.
   • Member organization of the Association of Official Seed Certifying Agencies
   • Canadian Seed Growers Association
   • Individual Cultivars that have been certified by the Organization of Economic Cooperation and Development
   • CA Varieties that have been certified by a seed-certifying agency
3. Will require sampling and laboratory test reports issued by Department of Food and Agriculture approved laboratory, using Department approved method of testing.
4. Provide GPS Coordinates of planned cultivation site to County Agricultural Commissioner.

 
Research and development will be permitted in developing a new cultivar that must be certified by a seed certifying agency. The Department will require research and developers to outline and implement security and anti-diversion measures to prevent the unlawful use of industrial hemp or seed cultivars, as well as procedures for maintenance of records documenting the development of new seed cultivars.
 
Industrial hemp is used to produce more than 25,000 products. This means that it could be an alternative resource for products we use on a daily basis—that has a smaller impact on the environment.
 
If you want to know more about industrial hemp, its uses, and how to become a grower in California, contact a team member today!

Original Post:

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.

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:

• Cultivation tax
• Excise tax
• Sales and Use tax

Depending on what type of business you have, there are different tax deadlines that need to be met for each type. Being well informed and staying on top of being compliant is half the battle when it comes to getting the most deductions for your cannabis business.

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:

• Commercial General Liability Insurance: this type of insurance protects against various claims such as bodily injury, property damage, personal injury, slander, libel and even copyright infringement.
• Worker’s Compensation: protects employees, since every employee has the right to have compensation for short and long term injuries and disabilities incurred on the job.
• Crop Insurance: at the moment, crops for indoor cultivation facilities is the only type of crop that can be insured. It provides some security in the event that a crop is defective and must be destroyed.
• Vehicle Insurance: In the event that an accident occurs while on the job, this type of insurance covers physical damages and injuries.
• Property Insurance: it covers any damages and/or repairs to the physical place of business.
• Cargo Coverage: this protects items being transported by the business for business purposes.
• Equipment Insurance: provides protection for equipment damage, theft and vandalism.
• Equipment Breakdown Insurance: this type of insurance covers the cost to repair or replace damaged equipment, the costs for time and labor to repair or replace damaged equipment, as well as the costs to replace damaged cannabis stock, materials or perishable items.

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
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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!

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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:

• Up to 3 Testing Permits
• 2 Permits for Cultivation
• 2 Permits for Manufacturing
• 2 Permits for Distribution
• 1 Permit for Retail

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 has highlighted specific application procedures and compiled a list of important Commercial Cannabis FAQs.
• You will need to complete a Background Application and sign this waiver to submit with your application.  Each owner and employee must complete one.
• You must obtain a Zoning Verification Letter by filling out this Zoning Application. This letter must come from the Economic and Community Development Department.  Keep your proof of receipt as you will need to submit it with the 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:

• Zoning Verification Letter (here is the zoning application) and proof of payment for Zoning Verification.  As noted above, this must come from the Economic and Community Development Department. To get started, provide the address of the proposed location to Union City’s Planning Manager.

 

• Carmela Campbell – 510.675.5316 or carmelac@unioncity.org

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.

• Background applications and proof of payment for each owner/employee
• Security Plans
• Business Plans
• Business Proof of Status (anything that shows incorporation, partnership agreements, etc)
• Site Plans, Floor Plans, Development Plans and Air Quality Plans
• Vicinity Map
• Location Information that includes photos of the location site and buildings
• Labor and Employment Plans
• Enhanced Product Safety Plan
• Environmental Benefits Plan
• Local Enterprise Information
• Qualifications of Principals

You will also have to submit personal information for each principal which will include:

• 2 high quality photos of each principal
• Social security cards and ID Cards of each principal
• Proof of Address

Important Document Details

As you upload these documents, it’s important to note a few details.  

• If you are uploading a document that has multiple pages, all pages must still be within one upload/PDF file

• Minimum 11-point font for every document
• File upload limit of 100MB
• Label each document with the last name of the primary contact and then the business name.  For example, if the primary contact is Gary Jones and the business is Cannabis 123 – label the document “Jones – Cannabis 123”

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:

• $272 - Zoning Verification Letter
• $300 per person – Background Check
• If you proceed in the process, you will go through 3 different phases:
  • Phase 1 - $3,979
  • Phase 2 - $1,581
  • Phase 3 - $1,568 (in this phase you will also pay a LiveScan application fee of $174 per person)
  • Phase 4 - $2,030

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.

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:

• Verification of the program qualification without premises verification (e.g., a candidate may be approved without a site evaluation);
• Priority processing (more on that in a minute);
• Business, licensing, and compliance assistance (TBD by the city);
• Training via an incubator (TBD by the city);
• Fee waiver (TBD by the city);
• Access to an industry investment fund (if established in the future)

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.

• Tier 1:  the candidate is considered “low income” with earnings of less than $41,230 annually, as well as EITHER (a) a cannabis conviction prior to November 8, 2016 (the date when Prop 64 was enacted) that now would be prosecuted as a misdemeanor or citation OR (b) 5 years cumulative residency in a qualifying zip code.  
  • Qualifying zip codes include:  90057, 90037, 90062, 90003, 90061, 90059, 90061, 90001, 90011, 90008, 90016, 90013, 90059, 90002, 90014, 90021, 90044, 90043, 90037, 90058, 90008, 90027, 90033.

 

• Tier 2: the candidate is considered “low income” with five years cumulative residency in a qualifying zip code OR has ten years cumulative residency in a qualifying zip code.  

 

• Tier 3: the candidate is a landlord entering into a Social Equity Agreement with the city to provide capital and/or leased space, as well as business, licensing and compliance assistance to Tier 1 and Tier 2 applicants. The landlord agrees to provide access to real estate property for Tier 1 applicants rent-free and with prorated utilities for a minimum of two years, provided that the property meet certain requirements.

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:

• Part 1: Los Angeles Rules and Regulations for Cannabis Businesses
• Part 2: Los Angeles Zoning for Cannabis Businesses
• Part 3: Los Angeles Requirements for Cannabis Licenses

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If you have specific questions related to your business, please get in touch with our experts today.

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This week’s California cannabis updates come to you from Long Beach, Antioch, and the counties of Contra Costa and El Dorado.

• Long Beach passed an Adult-Use Business Ordinance last week at their city council meeting. First, Mayor Robert Garcia must sign the ordinance into law. The ordinance will take effect 31 days after the law has been signed. The city will begin accepting applications after this.
  • The city still has to issue a few more pieces of information, but we are eager to start helping you get those Long Beach applications in. Expect a full article about cannabis and the city of Long Beach ASAP!
• Antioch has always been conservative about their marijuana licensing. However, recently the city began solidifying business zones for potential commercial cannabis activity.  In late June, a second reading was held and an ordinance was adopted approving the new cannabis zoning regulations.
  • This indicates Antioch is one step closer to allowing cannabis business in their city. No announcements yet on when applications will open or what permit types will be available, but we will be sure to keep you updated.

• Contra Costa County: two cities, El Cerrito and Richmond, currently lie within the county’s borders and are pro-cannabis. In late June, the board of supervisors held a meeting and passed a commercial cannabis activity ordinance. The ordinance allows for:
  • Up to 2 non-volatile manufacturing permits
  • Up to 4 storefront retailer permits
  • Up to 10 cultivation permits
  • Distribution and Testing

A hearing was also held on July 10 to further clarify cannabis taxes.  It is suggested the proposed cannabis taxes go on the November ballot. We will keep you updated as Contra Costa County moves forward with the cannabis application process.

• El Dorado County currently has a ban on commercial cannabis licenses, but things may be starting to change. El Dorado County recently held a meeting suggesting cannabis taxes and activities be on the November ballot. This will likely include a general cannabis tax, cannabis cultivation, retail, dispensary, and distribution. As of this moment, no further decisions are likely to be made prior to November. Check this space for future updates!

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:

• Dispensaries
• Cultivation
• Manufacturing (Non-Volatile)
• Testing Facilities
• Transportation
• Distribution Facilities

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:

• Cannabis Related Businesses and Activities Permit Application
• Cannabis Related Businesses and Activities – Indemnification, Acknowledgement re: Public Records & Copyright Materials Release
• Cannabis Related Businesses and Activities – An Application Submittal Checklist
  • This 11-page document will walk you through EVERYTHING you need in order to submit an application. It’s a great way to stay organized and outlines additional details, like the security plan you will need for your facility.
• Cannabis Related Business and Activities – Supplemental Info & Initial fee calculation worksheet
  • This worksheet will specifically walk you through the fees you owe the city for the initial application. Basically, anyone with a 20% or more stake in the cannabis company will have to pay, get a background check and fingerprinted. See below for an example of the calculation.

 

• Application and subsequent materials must be submitted in a 3-ring binder. They must also be:
  • Single-sided
  • 5x11 sized pages
  • Do not use spiral or comb bindings, but staples will be accepted
  • Building plans are an exception and are allowed to be on larger sized paper up to 30 x 42. They may also be folded, collated, unstapled and secured together with rubber bands.
  • Make sure you include an electronic copy, preferably PDF, on a CD or thumb drive.

The initial filing fee covers the costs of all background checks and fingerprinting. The city will not issue refunds.

• Once an application is submitted & the Cannabis Related Business/Activity Application Fee is paid, applicants need to make an appointment for LiveScan fingerprinting. You can do this by contacting the Police Department at (760) 323 – 8166.  If you intend to have a 20% or more financial interest in the cannabis business, you must get finger-printed.
• Once fingerprinting is complete and the city has verified your prints, you will be notified via email if you are allowed to move forward in the process. The next step will be a background check.
• Once the background check is completed, the application will be reviewed.

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.
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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.

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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?
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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:

• CDPH will use your A license application as the primary application and aggregate the total gross revenue of your A & M license to determine your license fee.
• If you have paid two application fees, the balance of the funds will be applied to your license fee. These fees, as mentioned above, are due upon approval of your application by the Department and determined by the aggregate total gross revenue of your two license applications.
• The label, “FOR MEDICINAL USE ONLY” is still required on products with more than 1,000 milligrams of THC. These products can only be sold in the medicinal market and must be labeled by the manufacturer.
  • Other products – those that can be sold in either the M or A market – will be labeled with this phrase by retailers at the time of sale to a medicinal consumer.

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.

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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!

• San Rafael has recently announced the opening of their pilot medical cannabis licensing program. The following 4 types of licenses will be available:
  • 4 licenses for cannabis testing labs (State License Type 8)
  • 8 licenses for medical-infused product manufacturing (State License Type N)
  • 4 licenses for medical non-storefront delivery (State License Type 9)
  • 2 licenses for medical distribution (State License Type 11)

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.

1. Receive a San Rafael city-approved cannabis operator license
2. Lease or purchase property that conforms with local and state zoning regulations
3. Be approved for a state-level cannabis license

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.

• Pasadena voters decided on local cannabis measures on June 5, all of which passed. Measure CC was passed with 66% approval and will lift the city’s current ban on cannabis dispensaries. Measure DD was passed with 75% approval and will tax marijuana businesses at a 6% rate for retail businesses and a 4% rate for all other businesses. The following licenses will be approved:
  • 6 Retail Stores
  • Retail stores may deliver
  • 4 Indoor Cultivation
  • 4 Testing Labs

As additional dates and information continue to roll out about these licenses, California Cannabis will update you through our newsletter and blog posts.

• South Lake Tahoe is moving in a positive direction toward boosting the cannabis industry. They will approve licenses for the following business types:
  • 2 retail cannabis operations
  • 2 indoor cultivation sites that are less than 5,000 square feet
  • 2 micro-businesses, which can operate three cannabis related activities — like manufacturing, retail and cultivation — under one permit.​

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.

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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.

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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.

• The city of Jurupa Valley is proposing an initiative that would allow (but regulate) medicinal and adult-use cannabis. The city is considering allowing retail, delivery, cultivation, microbusinesses, manufacturing, distribution, testing and nurseries within their borders. We will continue to keep you updated as we get more news!
• The city of San Rafael has completed a final adoption of an ordinance that amends current code. This amendment will allow for issue of a cannabis distribution license.
• The city of Goleta is considering moving forward with a cannabis business license ordinance. But first, they are holding a roundtable this week and would like your input!
  • The roundtable is being held Wednesday, June 6, 2018 at 1:00 p.m. in City Council Chambers. A consulting group is leading the charge and will ask for feedback on local’s concerns regarding any operations, the cannabis application process, enforcement of the current laws and future potential regulations.  
  • Questions can be directed towards the city manager (Carmen Nichols) at cnichols@cityofgoleta.org or 805-961-7522.​

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:

• San Bernardino
• Sacramento
• City of Adelanto
• Palm Springs
• Port Hueneme
• City of Desert Hot Springs
• Cathedral City
• Willits
• Point Arena

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.

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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.
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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?
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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!
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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!

• Ojai recently had a second reading and adopted an ordinance that would allow for testing labs.  The city has yet to release further details. In the past, Ojai has accepted applications for dispensaries and delivery services.
• San Luis Obispo’s city council adopted an ordinance that amended regulations for commercial cannabis business and cultivation. The ordinance goes into effect on June 14.  
  • NOTE: voters need to approve the cannabis revenue measure first before permits are issued. This ordinance would allow medicinal and adult-use cannabis delivery, retail, cultivation (indoor), distribution, non-volatile manufacturing, nursery, microbusiness and testing.
  • It may be a bit of time before we see these permits issued, as the city council wants to put this on the ballot in November. Let’s see if voters approve this new tax that will create additional revenue for the city.

• Fillmore presented an ordinance that would allow indoor and mixed-light commercial medical cultivation. This would be a big step for Fillmore, though they would still prohibit outdoor cultivation and other commercial cannabis activities.

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:

• Sacramento
• Cathedral City
• Port Hueneme
• Desert Hot Springs
• City of Adelanto
• Palm Springs
• Willits
• Point Arena

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.



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