California Cannabis: The Marijuana Retailing Rules (Part II)

Get to know the rules so you can set up shop as a cannabis retailer.

marijuana drugs money due diligence pot businessCalifornia’s initial medical cannabis rules pursuant to the Medical Cannabis Regulation and Safety Act (“MCRSA“) also address medical cannabis retailers. The MCRSA defines “dispensary” as “a facility where medical cannabis, medical cannabis products, or devices for the use of medical cannabis or medical cannabis products are offered, either individually or in any combination, for retail sale, including an establishment that delivers, pursuant to express authorization by local ordinance, medical cannabis and medical cannabis products as part of a retail sale.” There are two kinds of dispensary licenses under the MCRSA: Type 10 for a general dispensary and Type 10A, defined as just a “dispensary.”

The MCRSA restricts vertical integration of cannabis licenses by limiting applicants to one or two licenses in certain separate licensing categories (Governor Brown’s Trailer Bill will change this if it passes this summer). A Type 10 licensee can only be a retailer and until January 1, 2026, a Type 10A licensee can be a retailer at no more than three retail locations by holding three separate Type 10 licenses: that of a manufacturer and a cultivator (so long as the Type 10A license has no more than four acres of total canopy size of cultivation throughout the state).

In addition to the mandatory submissions for “owners” and their spouses I discuss here, California cannabis retailers must also submit a list of every individual with a non-controlling interest in the retailer, though nothing indicates non-controlling interest holders will be vetted by the state in the same way as “owners.”

Retail cannabis applicants must also submit the following to the State of California:

  1. A list of funds belonging to the retailer held in savings, checking, or other accounts maintained by a financial institution.
  2. A list of investments made into the retailer entity.
  3. A list of all gifts of any kind given to the retailer for its use in conducting commercial cannabis activity.
  4. Whether an owner or their spouse has a financial interest in any other cannabis license. “Financial interest” means an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other equity interest in a commercial cannabis business.
  5. A list of all convictions (excepting juvenile crimes and traffic infractions under $300 that didn’t involve alcohol, controlled substances, or dangerous drugs) as well as a rehabilitation list for each conviction.
  6. Application for fingerprints through the Department of Justice.
  7. Documentation issued by the local jurisdiction in which the applicant proposes to operate certifying the applicant is complying with all local ordinances and regulations, or will be in compliance with all local ordinances and regulations by the time the Bureau issues a license.
  8. Evidence the proposed dispensary location is at least a 600-foot radius from any school, in a contiguous area, and occupied by one licensee. Retailers cannot sublet any portion of the retail premises.
  9. If the dispensary has 20 or more employees, a copy of its labor peace agreement.
  10. A $5,000 surety bond.
  11. A diagram of the dispensary premises showing “the boundaries of the property and the proposed premises to be licensed, showing all boundaries, dimensions, entrances and exits, interior partitions, walls, rooms, windows, doorways, and common or shared entryways. The diagram must show the areas in which all commercial cannabis activities will take place, including but not limited to, limited-access areas.”
  12. A list of quality assurance, security, and inventory practices.
  13. Proof from the dispensary property owner that you can use the property for dispensing cannabis and a copy of your lease agreement if you have it. Or if you own the property, provide the deed.

Cannabis retailers will be responsible for tracking and tracing all their inventory and for record keeping. Certain records must be kept for at least seven years. The retailer must also follow various security, surveillance, alarm, and premises access requirements. The retailer is abide by various cannabis waste-management destruction and disposal rules. Though California cannabis retailers are prohibited from packaging or labeling cannabis goods, they still must provide “exit packaging” for products, which basically means re-sealable and opaque child resistant packaging. And if a cannabis retailer discovers defective cannabis product, it may return it only in exchange for a non-defective version of the same. In other words, no cash refunds.

From 6 a.m. to 9 p.m., only verified qualified patients or primary caregivers over 18 can shop in a dispensary, but children under 18 can enter a dispensary to purchase medical cannabis goods if they are a medical cannabis patient accompanied by their parent, legal guardian, or primary caregiver. Customers may inspect medical cannabis goods through secured containers, but no sampling is allowed and customers may not purchase more than 8 ounces in a single day, unless their physician’s recommendation authorizes more.

Sponsored

Under the MCRSA, “delivery” means “the commercial transfer of medical cannabis or medical cannabis products from a dispensary, up to an amount determined by the bureau to a primary caregiver or qualified patient . . .  or a testing laboratory.” “Delivery” also includes “the use by a dispensary of any technology platform owned and controlled by the dispensary . . . that enables qualified patients or primary caregivers to arrange for or facilitate the commercial transfer by a licensed dispensary of medical cannabis or medical cannabis products.” If city or county law permits cannabis deliveries, dispensaries must deliver all product themselves; they cannot use a third-party contractor or courier. All deliveries must be in person by a retail employee who’s at least 21 years old and they must go to a physical address in California. No delivery can be made to an address on “publicly owned land or any address on land or in a building leased by a public agency.” Finally, delivery hours are from 6 a.m. to 9 p.m.

These rules are in the midst of a 45-day comment period and are not yet final. So, stay tuned.


Hilary Bricken bio photoHilary Bricken is an attorney at Harris Bricken, PLLC in Seattle, and she chairs the firm’s Canna Law Group. Her practice consists of representing marijuana businesses of all sizes in multiple states on matters relating to licensing, corporate formation and contracts, commercial litigation, and intellectual property. Named one of the 100 most influential people in the cannabis industry in 2014, Hilary is also lead editor of the Canna Law Blog. You can reach her by email at hilary@harrisbricken.com.

Sponsored