Guide to California's Marijuana Laws

What is Prop 64?

The Adult Use of Marijuana Act (AUMA) became effective on November 9, 2016.  The AUMA legalizes personal consumption, personal cultivation and a commercial cannabis industry.  The following summarizes some of the key provisions in the AUMA.

 

Personal Consumption and Cultivation

  • Legalizes cannabis use for persons over 21 years of age.
  • Allows for persons over 21 to possess, transport, purchase, obtain or give away up to 28.5 grams of non-concentrated or 8 grams of concentrated marijuana.
  • Persons over 21 years of age are allowed to cultivate up to six (6) marijuana plants within a private residence, inclusive of within a greenhouse or other structure on the same parcel of the property that is not visible from a public space.  A residence includes single-family homes, multi-family apartment units and mobile homes.
  • No smoking of marijuana is allowed in public places (except where authorized locally).
  • No smoking of marijuana is allowed where smoking tobacco is prohibited.
  • Local governments may reasonably regulate but not prohibit personal indoor cultivation.
  • Local governments may regulate or prohibit personal outdoor cultivation.

 

Read more here:

Prop 64 Regulations for Adult Use Cannabis Providers

Business & Professions Code, Division 10, Sec. 26000-26211

 

Commercial Cannabis Business Licensing Categories

The AUMA provides for up to 19 different types of state licenses for commercial cannabis.  These business license types largely mirror those provided for in the Medical Cannabis Safety and Regulation Act (MCRSA).  The MCRSA is specific to medical cannabis and will coexist with the AUMA. The MCRSA has 17 license types.

 

**Note that in April 2017 Governor Jerry Brown’s office released a draft trailer bill that attempts to reconcile MCRSA and AUMA. You can read it here***

 

The main categories for licensed activities are as follows:

 

Dispensary/Retailer Licenses – License for retail sale of cannabis and cannabis products.  The dispensary licenses also allows for deliveries.

 

Manufacturing Licenses – There are two types of manufacturing license types.  One for use of volatile solvents, another for non-volatile manufacturing processes.  The state will limit the number of licenses that use volatile solvents because of public safety concerns.

 

Testing License – Laboratories that test cannabis products before they reach the patient or consumer. Required to be a third party, independent from the other operators in the supply chain.

Cultivation Licenses – Commercial cultivation licenses vary depending on size of grow, and the types of light that are used. Note that many local jurisdictions are banning outdoor cultivation because of perceived nuisance by neighbors.

 

Distributor License – Storage and distribution of products from the cultivators and/or manufacturers to dispensaries.

Transporter License – Transporters of cannabis and cannabis products between licensees.

 

Vertical Integration – the MCRSA and AUMA were drafted to support small businesses and operators and prevent monopolies from forming in the industry. For this reason, there are limits on vertical integration. Under the MCRSA, only certain combinations of license types are allowed for licensees.

The AUMA bars cannabis businesses from being located within 600 feet of schools and other areas where children congregate.

Both AUMA and MCRSA provide the opportunity for cities and counties to adopt regulations for the cannabis industry specific to their community.

Below is the complete list of license types for MCRSA and AUMA:

 

The MCRSA cultivation license for medical cannabis established under AB 266 (19300.7)) and SB 643 (19331(g)) are:

(a) Type 1 = Cultivation; Specialty outdoor. Up to 5,000 square ft of canopy, or up to 50 noncontiguous plants

(b) Type 1A = Cultivation; Specialty indoor. Up to 5000 sq ft

(c) Type 1B = Cultivation; Specialty mixed-light. Using exclusively artificial lighting.

(d) Type 2 = Cultivation; Outdoor. Up to 5000 sq ft, using a combination of artificial and natural lighting

(e) Type 2A = Cultivation; Indoor. 5001 -10,000 sq ft.

(f) Type 2B = Cultivation; Mixed-light. 5001 -10,000 sq ft

(g) Type 3 = Cultivation; Outdoor. 10,001 sq ft – 1 Acre

(h) Type 3A = Cultivation; Indoor.. 10,001 – 22,000 sq ft

(i) Type 3B = Cultivation; Mixed-light. 10,001 – 22,000 sq ft

(j) Type 4 = Cultivation; Nursery.

(k) Type 6 = Manufacturer 1 for products not using volatile solvents.

(l) Type 7 = Manufacturer 2 for products using volatile solvents.

(m) Type 8 = Testing

(n) Type 10 = Dispensary; General

(o) Type 10A = Dispensary; No more than three retail sites

(p) Type 11 = Distribution

(q) Type 12 = Transporter

 

MCRSA Just added is a new license when Assembly Bill No. 2516 was passed this year to include a Type 1C, or “specialty cottage”.

 

Read more here:

Medical Cannabis Regulation and Safety Act (2015) (MCRSA)

Business and Professions Code, Division 8, Chapter 3.5 Sec. 19300-19360

 

 

**Note that under MCRSA only certain combinations of licenses may be held.

 

Under Prop 64, the license types are:

(1) Type I = Cultivation; Specialty outdoor; Small – same as MRCSA

(2) Type IA == Cultivation; Specialty indoor; Small – same as MRCSA

(3) Type IB = Cultivation; Specialty mixed-light; Small – same as MRCSA

(4) Type 2 = Cultivation; Outdoor; Small – same as MRCSA

(5) Type 2A = Cultivation; Indoor; Small – same as MRCSA

(6) Type 2B = Cultivation; Mixed-light; Small – same as MRCSA

(7) Type 3 = Cultivation; Outdoor; Medium – same as MRCSA

(8) Type 3A = Cultivation; Indoor; Medium – same as MRCSA

(9) Type 3B = Cultivation; Mixed-light; Medium – same as MRCSA

(10) Type 4 = Cultivation; Nursery – same as MRCSA

(11) Type 5 = Cultivation; Outdoor; Large – not available till 2023

(12) Type 5A =Cultivation; Indoor; Large – not available till 2023

(13) Type 5B = Cultivation; Mixed-light; Large – not available till 2023

(14) Type 6 = Manufacturer 1 – same as MRCSA

(15) Type 7 = Manufacturer 2 – same as MRCSA

(16) Type 8 = Testing – same as MRCSA

(17) Type 10 = Retailer – same as MRCSA

(18) Type 11 = Distribution – mandatory requirement in Prop 64, there is simply no restriction against it being owned by holders of other licenses as there is in the MCRSA. Micro business type licensees can also do their own distribution.

(19) Type 12 =Microbusiness (MCRSA’s type 12 license for transportation, which is not required under Prop 64)

 

What are the requirements in an application for a city or county license?

The exact requirements will vary by jurisdiction. Typically, they fall into the following areas:

Some cities and counties will require more than the below, and some will not require documents to support each of these categories.

  • Type of activity: each cannabis related activity will have its own license under the new state and local compliance regimes. The main areas for licensing will be: cultivation, manufacturing, transportation, and distribution (dispensaries).
    1. Some local jurisdictions are licensing for certain activities but not for others. For example, accepting applications for cultivation but banning applications for dispensaries.
    2. Additionally, regarding cultivation, many jurisdictions have shown a preference for indoor cultivation over outdoor, due to the perceived nuisance of outdoor cultivation. Check with your local jurisdiction to see what activities are currently eligible for licensing applications.

 

(1) Business plan: a business plan that outlines the objectives and operating structure of the company as well as the key management and officers will be required. The plan will also require projected operating costs and revenues, planned relationships with suppliers and/or distributors, and an operational overview of how the business will work and what will be accomplished in the first 12-24 months.

(2) Zoning and Land Use: Is the property far enough from sensitive use areas? Is it in the correct zoning for land use purposes according to the municipal or county code (manufacturing, industrial, commercial vs. residential)?

The state law requires that any marijuana business be at least 600 feet from a school. Some local jurisdictions have also included parks, day care centers, and areas where youth congregate as “sensitive use.” Additionally, some have required 1,000 feet of distance. Also note that federal law has enhanced criminal penalties for marijuana distribution within 1,000 feet of schools.

(3) Security plan: many applications require a detailed security plan that shows alarms, personnel and strategy relating to securing the premises for retail (dispensaries) or cultivation operations.

(4) Insurance: some applications will require that you show proof of insurance for your operation.

(5) Site plans: some applications will require you to hire a civil engineer or architect to draw up site plans for your cultivation operation.

(6) Environmental impact / Waste management: some applications will require a waste management plan and/or statement of water usage and how potential adverse consequences will be avoided.

(7) Live Scan / Criminal History: Some jurisdictions will require a live scan of the applicants and a disclosure of any criminal history. Some have written the laws so that you will only be disqualified if your prior criminal history involves a crime of moral turpitude. Other regulations state that past marijuana crimes will not count against you so long as they were non-violent. However, check with your local jurisdiction.

(8) Tax Returns: some jurisdictions require prior tax returns for the persons involved and the entity, if it has been in operation in the past.

 

 

FURTHER READING:

 

Federal Law – The Controlled Substances Act of 1970

21 U.S. Code § 812 – Schedules of controlled substances

https://www.law.cornell.edu/uscode/text/21/812

 

California Bureau of Medical Cannabis Regulation

 

Chris Conrad’s Guide to Cannabis Yields and Dosages:

http://www.chrisconrad.com/pdf/cannayieldsdosage10.pdf

 

CA Marijuana Laws Pursuant to Prop 64 – final regulations will be released later in 2017.

You can read the draft trailer bill released in April 2017 here

 

Marijuana Taxes

CA Revenue & Tax Code Division 2, Pt. 14.5 § 34010-34021.5

 

Industrial Hemp / CBD

HSC 11018.5 – What is “Industrial Hemp?”
Food & Ag Code 81000-81010 – California State Industrial hemp regulations (effective Jan 1, 2017)