California Marijuana Dispensary Laws: Retail & Licensing

On January 1, 2018, Californians celebrated a whole lot more than just a new year. On that day sales for adult-use recreational marijuana became legal across the entire state, despite what federal law has to say about it. By May of that same year, the California Department of Tax and Fee Administration reported that the state had already raked in an impressive $60.9 million of tax revenue from cannabis sales alone.

The passage of Proposition 64 doesn't mean that using and selling marijuana is a total free-for-all for West Coasters, though – quite far from it, in fact. For business owners looking to break into the potentially lucrative cannabis business, getting informed on a legal level is absolutely critical as the state's ever-evolving laws and regulations can get just a little – to use a word familiar to just about all cannabis connoisseurs – sticky.

In the Golden State, all retailers and budding (no pun intended) retailers must apply annually to sell legal marijuana and marijuana products, whether those goods are intended for medical or recreational use.

A single, separate license is required for each retail location, as long as that location is in operation. During the first year of legal recreational cannabis sales in California in 2018, temporary licenses covering a period of 90 up to 120 days were established as the norm, but this was a stop-gap licensing provision and these temporary licenses were phased out for regular yearly licenses in January of 2019.

California cannabis sales licenses fall into two main categories: Adult Use License or Medical Marijuana License, respectively known as A-licenses and M-licenses. An A-license covers the sale of marijuana and cannabis products for recreational use to persons aged 21 or older who do not have a physician's recommendation. As the M implies, the M-license covers the sale of medical marijuana products to those who do have a physician's recommendation.

Different licenses cater to different types of cannabis retailer formats, as well. California's regulating bodies divide retail cannabis businesses into three basic categories:

• Retailer (Type 10): These businesses sell or deliver cannabis and cannabis products to customers.
• Non-storefront retailer (Type 9): These businesses also sell or deliver cannabis and cannabis products to customers, but they do so from a licensed location that is not open to the public.
• Microbusiness (Type 12): A retailer is a microbusiness if it cultivates, manufactures, distributes or sells – or does at least three of those things – in less than 10,000 square feet of space.

Businesses that plan to distribute marijuana also need a license from the California Department of Public Health's Manufactured Cannabis Safety Branch. The same goes for retail-adjacent operations such as testing labs, cannabis event organizers and temporary cannabis events, all of which require specific licensing.

During the application process, retailers will be asked to confirm that they are in compliance with certain statewide regulations for retail cannabis licensure. These regulations require that: cannabis retail storefronts are located more than 600 feet from schools, day care and youth centers; business owners provide evidence of California Environmental Quality Act compliance or an exception; and that owners possess a valid seller's permit from the California Department of Tax and Fee Administration.

Based on the maximum dollar value of the business' planned retail operation, license applicants must pay the state a 15-percent excise tax fee, pursuant to Section 34011 of California's State Taxation Code. As of 2019, this license fee starts at $4,000 up to $500,000. On the high end of maximum dollar valuations, that excise tax fee jumps to about $72,000. In addition to this sliding-scale fee, the California Bureau of Cannabis Control charges a flat $1,000 application fee.

While having a criminal record does not automatically exclude aspiring business owners from obtaining a retail marijuana license, convictions for violent felonies; serious felonies; felonies involving controlled substances given to minors; drug trafficking felonies; and felonies involving fraud, deceit or embezzlement can prevent licensure. Likewise, prior drug convictions may serve as sole grounds for the denial of a license at the California Bureau of Cannabis Control's discretion.

Of course, retail dispensary licensing in California is not a one-size-fits-all issue – not even close. Because not all counties in the state allow the sale of marijuana, licensing may not even be available in some jurisdictions. Local jurisdictions may also exert their own conditions on the sale of recreational, adult-use marijuana.

Those interested in getting licensed to operate a retail cannabis business should always consult the local county or city business office before getting started. The Los Angeles County Office of Cannabis Management is an excellent resource for case-specific questions.

The California Bureau of Cannabis Control (BCC) is in charge of issuing state licenses to cannabis retailers, distributors and testing labs. But first things first – the person completing the application must be legally considered the business owner, per Section 26001(al) of the California Business and Professions Code, which covers cannabis provisions and definitions. Per this code, an owner is defined as:

• A person with an an ownership interest of at least 20 percent in the person applying for a license or a licensee (securities, liens and encumbrances don't count toward that 20 percent figure, though).
• The chief executive officer of a nonprofit or other entity.
• A member of the board of directors of a nonprofit.
• A person participating in the direction, control or management of the person applying for a license.

To apply for an annual retail cannabis license, the person who meets one or some of those definitions can start the process by visiting the California Bureau of Cannabis Control online.

First, license applicants must register to use the BCC website and log in with a username and password. Once registered and logged in, applicants choose the type of business – retailer or microbusiness, and type of license – A-license or M-license. Applicants must enter business and owner contact and location info for all owners and premises, as well as a valid federal Employer Identification Number, or EIN. Additionally, applicants will answer questions regarding company size.

Before reviewing and signing the application electronically, applicants must upload various digital versions of a long list of supporting items, such as business formation documents; evidence of legal right to occupy the proposed location; financial info; inventory procedures; a labor peace agreement; quality control, security and transportation procedures; premises diagram; and a proof of surety bond.

After the online application is submitted, each business owner receives an email from the BCC guiding them through the process of completing the owner submittal form online or in person at a bureau office, for which owners will need government-issued IDs and a live-scan fingerprint image provided by the Department of Justice. Upon receipt of the application, all of the owner submittals and the required fees, the BCC will approve and issue the respective license. Before receipt, veterans with proof of honorable discharge can request a priority license to speed up the issuance.

Naturally, licensing is just the beginning of canna-business laws in California. Many regulations imposed by the California Department of Public Health's Manufactured Cannabis Safety Branch also apply here.

In terms of products, some of these requirements demand that items sold be free of contaminants and possess uniform THC levels. Edibles are limited to 10 milligrams of THC per serving and 100 milligrams per package, while other adult-use products are limited to 1,000 milligrams per package, or 2,000 milligrams for medicinal products.

The Department of Public Health also maintains a list of prohibited additives, products and product shapes, such as opaque packages for edibles or packaging that resembles traditional food packaging. Labels must identify each product, include THC content, ingredients, a standardized THC logo and warnings. No retail products may be referred to as candy or otherwise blatantly appeal to children.

Read More: California Marijuana Dispensary Laws: Medical Retail, Licensing & Regulations

Once in business, the state requires that all California cannabis retailers report consumer purchase data via the CCTT-Metrc program, or Marijuana Enforcement Tracking Reporting Compliance system. Other required security measures include ID badges for all employees, security personnel on site, 24-hour video surveillance of all point-of-sale areas, and areas containing cannabis products, alarm systems, commercial-grade locks, limited-access areas and secure storage of all marijuana products.

As of 2019, the law doesn't allow for 24-hour marijuana emporiums – marijuana sales in California must occur between the hours of 6 a.m. and 10 p.m., giving early birds and night owls alike plenty of time to legally peruse.

Not all of California's retail cannabis laws apply strictly to commercial sellers of marijuana; consumers are naturally under the jurisdiction of these laws, too. Adults aged 21 and over in the Golden State may purchase up to 1 ounce of cannabis per day or up to 8 grams of cannabis concentrates as found in edible products. To purchase marijuana at a recreational dispensary, consumers will need to present a valid United States-issued photo identification, such as a driver's license or passport.

Once at the checkout counter, customers should expect to pay the 15 percent statewide tax on all recreational and medical cannabis products, in addition to local taxes and fees. These fees vary per jurisdiction – Oakland, for instance, charges an additional local tax of 10 percent on recreational marijuana and 5 percent for medical products.

Because marijuana remains illegal under federal law, in direct contrast to California's own law, it is possible that purchasers of marijuana could be charged with a crime, even if the product is purchased from a legal, licensed dispensary. But as PolitiFact California's Chris Nichols writes, "The likelihood of that happening, however, is very, very small, according to the marijuana policy experts we spoke with. The assumption is federal authorities would focus on large suppliers, not individual consumers who make small purchases."

As of 2019, the legal norm per statewide California law is that marijuana consumers cannot legally smoke, eat or vape cannabis products in public places, no matter where or how the products were purchased. However, Proposition 64 does allow local governments to permit cannabis consumption in public, so this may vary per location jurisdiction. As different localities exercise their right to regulate public consumption, the norm of regulating marijuana usage on private property may indeed shift.

As of 2019, cities from Palm Springs to Sacramento and in-between are considering following the lead of trendsetters like San Francisco and Oakland to offer permits for publicly consuming marijuana at licensed locations like cafes and lounges.