Michigan medical marihuana is likely at the bottom of most cannabusiness operators’ concerns at this point. Recreational weed legalization in the Great Lake State has become the primary topic of interest since 2019 when sales began.
However, the Michigan Medical Marihuana Act, Medical Marihuana Facilities Licensing Act, Michigan Regulation and Taxation of Marihuana Act, and Michigan Medical Marijuana Program have made medicinal marijuana more accessible than ever before.
This, of course, means that the medical space is exploding with opportunities for business owners interested in serving anyone who holds a Michigan medical marijuana card.
Keep reading to learn about the opportunities and barriers to entry you’ll face operating in Michigan’s medicinal marijuana sector.
Michigan Medical Marijuana Business Legislation to Know
Michigan voters helped legalize cannabis medicinally quite a while back. However, even with Michigan voters on board with this, operating a cannabusiness serving patients in this state comes with some obstacles.
The four acts you’ll need to understand are the Marihuana Tracking Act, Medical Marihuana Facilities Licensing Act, Michigan Regulation and Taxation of Marihuana Act, and the Michigan Medical Marijuana Act.
Tracks compliance with the laws that authorize commercial traffic in medical cannabis,
Identifies threats to health from batches of cannabis for recreational or medical use,
Demands people engaged in the commercial marijuana trade provide information to enter the system,
Provide powers and duties to the state departments and agencies involved with regulation,
And outline rules for the cannabis space.
Medical Marihuana Facilities Licensing Act (MMFLA) Summarized
The MMFLA was the first legislative package to clarify licensing and regulatory framework for medical cultivators, processors, transporters, safety compliance facilities, and provisioning centers in the state. While it’s somewhat comparable to the state’s recreational marijuana law, the MMFLA focuses on medical marihuana facilities.
The biggest change for medical business operators is that the MMFLA established a cap on the number of producer, processor, and safety compliance facility licenses. As recreational sales happened, the cap was effectively broken for these businesses.
The MMFLA regulates all commercial medical cannabis activity in the state. This includes testing, growing, processing, transporting, and selling cannabis products. The MMFLA outlines the importance of a permit to operate any kind of business related to medical sales. To receive a permit (license), operators must undergo extensive vetting and pass local zoning requirements.
Michigan Regulation and Taxation of Marihuana Act (MRTMA) Summarized
Through the Michigan Regulation and Taxation of Marihuana Act (MRTMA), the electorate passed recreational marihuana use in 2018. Medical and recreational sales are managed by the state under the Department of Licensing and Regulatory Affairs (LARA).
This is where most people start when they think about Michigan marijuana laws. The MRTMA provides an explanation for how cannabis will be taxed, grown, produced, processed, distributed, and sold recreationally in Michigan.
The MRTMA also outlines conduct that’s not allowed. This includes operating vehicles under the influence, sales of product or accessories to those under 21 years of age, public consumption, public cultivation, processing and consumption rules, and possession restrictions.
The MRTMA highlights commercial activity rules, too. Cultivation, processing, testing, and other operations related to the plant must adhere to the demands of this legislation, regardless of whether operating in the medical or adult-use marijuana space.
Michigan Medical Marihuana Act (MMMA) Summarized
The MMMA offers insight into how much medical marijuana a patient or primary caregiver can possess legally. This involves a medical evaluation following debilitating medical conditions associated with a chronic or debilitating disease.
Through the MMMA, patients, caregivers, and medicinal cannabis business operators understand what’s allowed. These regulatory affairs allow certified patients access to safe marijuana in Michigan that can be used to treat a condition, like severe and persistent muscle spasms, inflammatory bowel disease, and other qualifying conditions.
Michigan medical patients some hoops to jump through, but it’s worth it for patients who need a medical marijuana card. The products these patients purchase are for medical use, meaning without access to medical cannabis cards, these medical cannabis products are unavailable to the general public.
Michigan Medical Marijuana Program Summarized
Patients need to be at least 18 years old to qualify for medical cannabis under the Michigan medical marijuana program. Then, if the patient has a primary caregiver, the caregiver must be included in their registry application.
What are the requirements for caregivers in Michigan?
Caregivers need to be at least 21 years old. Their record cannot have any convictions of violent or drug-related felonies.
Primary caregivers also must have a record clean of felonies for the last decade. These individuals are also only allowed up to five qualifying medical marijuana patients in their care.
What conditions qualify?
The Michigan Medical Marijuana Program reserves medical product access for Michigan residency holders who have a medical marijuana card for the following debilitating medical conditions:
Amyotrophic lateral sclerosis (ALS), or Lou Gehrig’s disease
This legislation also reserves medical products for chronic or debilitating conditions, or their treatments, that results in one or more of the following:
Cachexia, or wasting syndrome
Seizures, including those characteristics of epilepsy
Severe and chronic pain
Severe and persistent muscle spasms
How to get a card in Michigan?
Patients must submit an application and physician certification to obtain a Michigan medical marijuana card. Once a physician certification is obtained, patients applying for a medical marijuana card need to obtain a registry identification card.
A personal identification card is easy to get. Patients must do the following to submit an application form:
Apply for Registry Identification Card
Submit an Application Fee of $40
If designating a caregiver, include a copy of the caregiver’s valid state-issued driver’s license or government-issued document.
Offer Proof of Michigan Residency (a valid Michigan driver’s license will work).
Submit a Physician Certification Form
Michigan Medical Marijuana FAQ
How hard is it to get a medical card in Michigan?
These days, it’s incredibly easy to get a medical card. The application can be done online, and a recent report from the MRA claims the state has around 285,000 registered medical marijuana cardholders, which is a massive increase beyond 70 percent since 2012.
Does Michigan have medical Marijuanas?
Yes, medical product is available. With this being the case, the state also allows medicinal marijuana businesses to become licensed and operate, as well.
Medicinal marijuana legality offers an incredible opportunity, especially for business operators. This is particularly the case when considering how the state’s Marijuana Regulatory Agency is investing millions of dollars worth of marijuana tax revenue into medicinal marijuana research for veterans!
What qualifies for medical Marijuanas in Michigan?
The following health concerns qualify patients for medicinal marijuana under state law:
Amyotrophic lateral sclerosis (ALS), or Lou Gehrig’s disease
Cachexia, or wasting syndrome
Seizures, including those characteristics of epilepsy
Severe and chronic pain
Severe and persistent muscle spasms
Can you get a medical card for anxiety in Michigan?
Some doctors might be willing to provide a recommendation for an MMMP card if the person suffers from debilitating anxiety. However, others might not be so quick to help the patient get their MMMP card.
Even though a patient might suffer from anxiety, a doctor or physician will need to analyze to determine if marijuana as medicine can treat it.
A medical card for anxiety is an option on a case-by-case basis. Depending on the doctor or physician the patient speaks with, they might get the recommendation they need.
Marijuana Regulatory Agency (MRA)
What is the MRA?
The Michigan Marijuana Regulatory Agency (MRA) is responsible for regulating the adult-use marijuana establishments and licensees in the state per the Michigan Regulation and Taxation of Marihuana Act (MRTMA) and all related administrative requirements. However, this regulatory agency is not limited to recreational cannabis.
The Marijuana Regulatory Agency in Michigan is also responsible for ensuring that businesses adhere to the state’s Medical Marijuana Program, as well as its Medical Marihuana Act. Hence, if you’re operating a business that serves medicinal marijuana patient needs in this state, you’ll need to know how to interact with this state department.
The New York cannabis industry is in the process of expansion. As cannabis becomes more widely accepted and legalized throughout states, consumers are seeing more variety in products and brands.
While many people believe that marijuana is a dangerous substance that needs to be strictly regulated, statistics show otherwise. With this being the case, entrepreneurs interested in becoming part of the state’s recreational cannabis sector must wait as New York decides how it will legalize recreational marijuana.
Those interested in starting a cannabusiness in New York will need to understand marijuana regulation, as well as the cannabis management authority in place. But most importantly, you’ll need to know what’s involved in obtaining a marijuana business license in New York.
In this article, we’ll break down what you need to know about New York cannabis legalization and how to apply for a cannabis license.
Before we get started, let’s first understand marijuana’s legality in the state and how it’s progressed.
Interested in starting an adult use cannabusiness in New York? Contact us today to learn how we facilitate the application process and support legal operations that hold cannabis licenses.
Why Is Marijuana Illegal in New York?
Marijuana has been banned at the federal level since it was first classified as a schedule one drug under the Marijuana Tax Act.
In 1970, New York State legislators passed the Comprehensive Drug Abuse Prevention and Control Act, which classified marijuana as a controlled substance. The legislation defined possession of a small amount of marijuana as an unclassified misdemeanor, with higher penalties for larger quantities.
Governor Andrew Cuomo signed three marijuana bills into law. The legislation created the Compassionate Care Act, which legalized medical cannabis for patients suffering from serious health conditions.
The bill also set up a licensing program to regulate the production and sale of medical flower in New York State. This resulted in the establishment of five producers, or suppliers, who could grow and distribute medicinal cannabis. These are the companies:
New York Canna
The legislation additionally established the Office of Cannabis Management, which was tasked with overseeing and implementing the regulatory framework for cannabusinesses.
Under Cuomo’s leadership, New York has made significant strides in reforming its marijuana laws to meet the needs of its patients. However, New York remains one of the last states in the country that hasn’t legalized recreational cannabis use for adults age 21 and over – until now, that is!
Medical Cannabis & Recreational Marijuana in New York
New York has allowed licensed businesses to dispense medical herbs since 2016, allowing more than 143,000 patients access to their medicine. While it has been one of the slowest states to legalize both recreational and medical marijuana, New York has some of the most progressive cannabis laws in America. The state is now paving the way for broad access to CBD oil products, edibles, and more.
Gov. Andrew Cuomo recently signed a bill that includes provisions to allow individuals convicted of marijuana possession misdemeanor crimes prior to 2019 (when recreational cannabis becomes fully legal in New York) to file a petition for a criminal record expungement through New York’s off-duty conduct law.
Gov. Cuomo also recently announced that the state plans to issue four additional licenses for businesses that want to dispense medical cannabis, an increase from the five currently operating across New York’s 54 counties and five boroughs.
But what about marijuana regulation? How will this work for the retail dispensaries, on site consumption sites, adult use cultivators, and other registered organizations looking to sell cannabis to New York adults?
New York state’s medical marijuana program has done a lot for patients living in the state. Medical marijuana is essential for some, and with medical cannabis legalization, New York has made tremendous strides to ensure cannabis prohibition had minimal impact on patients.
Unlike adult use retail sale cannabis, selling cannabis for medical purposes is a bit more flexible. It’s also a lot less work than selling cannabis for adult use retail sale, as patients and registered organizations can access any of the five medical marijuana companies in New York state to purchase their medicine.
Medical cannabis license holders are not permitted to operate retail dispensaries alongside cultivation or processing operations; they may only have one site location to sell within the state’s medical marijuana program.
Unlike those with an adult use distributor license, licensed distributors of medical marijuana use the state’s program under the guidance initiated by the Cannabis Control Board.
Medical marijuana products are available in New York. But adult use marijuana is still just on the horizon.
Voters legalized recreational cannabis. However, cannabusinesses must wait for marijuana regulation standards to completely outline how the state will legalize recreational cannabis.
New York’s Governor has months to create the rules and regulations that will govern licensed adult use cannabusinesses in New York. Many areas of focus must be addressed, including:
The state is still working on creating a licensing structure for its retail dispensary license. Until they finalize it, things are still up in the air about how the license types will work and how they’ll be issued.
While many business owners are hoping to open their own cannabusinesses, others may see an opportunity to work for a company that already has a marijuana retail license.
Regardless of whether you’re looking at starting your own cannabusiness or joining someone else’s, there are a lot of key aspects to take into consideration.
Local Laws, Ordinances, and Business License Requirements
New York cannabis businesses must abide by state regulations. However, cannabis operators may also be subject to a few local laws and ordinances that regulate where they can operate as well as the overall nature of their business operations.
Localities can have up to three months to approve a business license application.
Business Insurance Options
Under New York’s adult use cannabis laws, cannabis businesses must keep all of their records and materials for at least five years before they are eligible to dispose of them. But there’s more to it than that.
Businesses must also maintain business liability insurance or surety bonds as well as worker’s compensation insurance. Some cannabusinesses may need additional insurance policies depending on their location, building requirements, and projected revenue.
Business Banking Services
New York still has not approved any banking services for cannabis-related businesses. Even when the state begins licensing adult use marijuana companies, they will likely only be allowed to do business with other licensees through a state agency that will be set up to manage all financial operations of the state’s marijuana program.
The state is also still creating regulations to cover business permits. Business permit requirements are different for every municipality in New York, so cannabis operators must check with local and county offices before applying for a state license.
Adult Use Retail Sales Cannabis License Types
As mentioned above, the state is still deciding on the best way to issue cannabusiness licenses and what those licensing options will look like.
Businesses that sell marijuana recreationally must focus on preparing their applications for a license type called an A-license. These licenses will be issued to retailers who can sell both medical and recreational products.
The state may also issue permits for B-licenses or C-licenses. These license types are designed to govern different kinds of cannabis businesses and the products they sell.
Business License Fees
The state has not released any information about what business license fees will look like under its adult use cannabis laws.
State officials have estimated that the application fee alone could be as much as $25,000 with annual renewal costs of up to $20,000. It’s likely that businesses with multiple license types will face even higher fees.
Business License Security Deposits
Business owners who file for a marijuana business license will likely have to pay security deposits depending on how many separate permits they are applying for and the nature of their operations.
Businesses may also be required to make large capital investments when it comes to certain construction and improvements in order to meet the state’s security requirements.
Business License Transferability
Currently, New York does not have any transferable cannabusiness licenses. It is possible that the state will eventually allow businesses to sell their license or use it as leverage to obtain funding for future projects. However, at this point, there’s no license transferability available.
If a company wants to sell its interest in a cannabusiness, it must dissolve the business and start an entirely new one.
Business License Appeals
The rules for appeal and revocation of cannabbusiness licenses are still unclear at this point in time. Business owners who wish to protest or contest pending license denials can expect a lengthy appeals process that may take as long as nine months to complete.
Office of Cannabis Management (OCM)
The Office of Cannabis Management is tasked with the responsibility of managing all financial and operational aspects of New York State’s adult use cannabis program. This agency will be responsible for tracking every ounce of marijuana produced in the state as well as issuing tax receipts to businesses that pay sales taxes on marijuana products.
Commercial cannabis business owners must register with the OCM before applying for all other marijuana licenses.
The OCM will also be responsible for creating and enforcing cannabis business license requirements.
Business License Seals
New York State is developing a unique seal of approval that every marijuana-related business must use on its product packaging, labels and marketing materials.
The state hopes that the seal will enable state authorities to more easily determine whether or not a business is in compliance with all existing adult use cannabis laws.
Businesses found in violation of these rules may face penalties as severe as license revocation or criminal charges.
Business License Certifications for Employees
All employees working within New York’s adult use cannabis industry may have to obtain valid certification from the Department of Health. These certifications will ensure that all workers have received proper training before handling any marijuana products or serving to customers.
New York is expected to release more information about employee training and certification requirements in the near future.
Business License Reporting Requirements
New businesses working within New York’s adult use cannabis industry will be required to report all sales transactions for tax purposes within seven days of a transaction taking place. They must also track inventory levels, control overages and shortages, and report them to the OCM within seven days of discovery.
Business owners are prohibited from selling their marijuana products if the inventory levels do not match up with actual sales numbers. This is to ensure these products don’t end up on the black market. Thus, the business must make corrections and purchase new product until supply matches demand.
New York state will likely release more information about marijuana tax reporting requirements during future advisory board meetings, so businesses working within the industry should check back often for updates.
Business License Tax Requirements
The state marijuana tax rate in New York will depend on a variety of factors that must be weighed by authorized state authorities prior to implementation.
The basic framework of the adult use cannabis program stipulates taxes totaling 9% of sales and 4% local sales tax, but these rates could be adjusted based on the actual market price of marijuana, the consumer’s ability to pay and other variables.
Concluding on New York’s Cannabis-Related Licenses
New York will be making many changes to its cannabis laws and regulations before they go into effect in the near future. Since this is NY State’s first time implementing a marijuana program for adult use, it’s crucial to stay on top of any regulations the state puts in place.
New York will allow businesses to apply for a license to sell marijuana products in the very near future. The state has been working diligently on creating all of the business licenses and regulations necessary to make this program functional.
Before applying for any cannabis licenses, however, business owners must understand all of the laws and procedures involved with becoming a licensed marijuana-related company. This includes if you need an adult use distributor, adult use processor, limited cultivation, retail dispensary, or microbusiness license.
Adult use cannabis sales are set to blow up as soon as the licenses and regulations are in place. Whether you plan to operate a marijuana dispensary, want a nursery license as an adult use cultivator or processor license, need a distributor license, a delivery license, or some other license, keep in mind that the state will only accept applications after all required paperwork is in place and approved.
Looking for help breaking into New York’s recreational sector? Wondering how you can scale your operation in NY?
Contact us now to speak with one of our experts about how Northstar will help your business scale in New York!
The cannabis industry is growing, and there’s no denying it. The cannabis business is booming as more laws pass and new companies sprout up every day. It looks like the space will only continue to improve, too!
But the cannabis industry comes with its own unique set of challenges that you would never encounter in other industries.
In this article, we cover some of the most common, unique cannabis accounting challenges that make hiring an accountant specializing in cannabis essential.
Unique Cannabis Industry Challenges to Consider
State Law vs. Federal Law
While legal at the state level, the U.S. federal government still prohibits cannabis – and most related operations – from conducting business. This means cannabis businesses that choose to accept credit cards for payments, open bank accounts, get loans, or other financial transactions from the federal government can still be at risk of prosecution by the feds.
In fact, there are cases of banks shutting down cannabis business bank accounts – and dispensaries getting their payment processors shut down without warning – even in states where both medical cannabis and recreational marijuana are allowed.
Because of this issue, many small businesses operating in marijuana either don’t get set up with a traditional merchant account or get one but deposit and withdraw cash to/from each sale using a “cash-only” policy to keep it entirely off the books.
In some cases, other cannacompanies will actually decide not to take all forms of payment because they run the legal risk of confiscation by federal agents.
Cannabis business owners have trouble scaling as they are ultimately forced to operate in cash-only transactions. They also must account for their earnings in a whole different manner than traditional businesses. This results in a need for expert guidance from marijuana accounting professionals.
Furthermore, this means that cannabusiness operators cannot claim their income on tax returns, which can be problematic given the high taxes associated with legal sales of marijuana (even at state levels solely). The money that would be saved through tax returns could be allocated towards scaling, but without this option, cannabis business operators must either find a workaround or take the loss in stride.
Because cannabis is federally illegal, operators can’t claim it as an expense either. This creates another set of problems, especially when cannabis companies want to reinvest their profits. In many cases, they have no legitimate way to write off or reduce the cost of purchasing some equipment that might run into thousands or even millions of dollars.
Opening a Business Banking Account
Opening a business banking account for a cannabis company is another challenge that cannabis businesses interested in scaling face – especially at the federal level.
The Federal Deposit Insurance Corporation (FDIC) recently announced they’d be making an exception for banks that want to provide banking services to cannabis companies. Michigan supports banking for cannabis, too. But it’s not a full-on guarantee like their other guidelines for banks.
The FDIC encourages banks and credit unions to consider “cannabis activity” when deciding whether or not to open an account with a marijuana business – however, this is only advisory, as FDIC guidelines are merely suggestions rather than hard rules.
Regardless of such, advisory firms can point you in the right direction to open an account. And cannabis banking is crucial to scale your operation.
This kind of uncertainty makes it challenging for cannabis entrepreneurs looking to accept tax payments or write-offs from the IRS as legitimate businesses operating within state laws. This difficulty encourages more self-employment taxes for the cannabis industry, along with other complications – which again makes hiring cannabis accounting professionals essential for scaling.
Not All Expenses/Adjustments are Tax-Deductible
Marijuana-related expenses in the United States aren’t always deductible as business expenses. And most marijuana businesses can deduct only cost of goods sold (COGS) – not operating expenses.
This means that ancillary business activities like marketing are off-limits for tax deduction purposes, and they don’t even qualify for an ordinary deduction. Accounting and tax services are complicated for this sector for this reason, among others.
To make matters worse, COGS is generally calculated by subtracting beginning inventory from total inventory at the end of a business’s fiscal year; this could cause some cannabis companies to pay higher taxes than non-cannabis companies (as COGS isn’t always the full accounting value).
Cannabis businesses have limitations regarding how they can lessen their tax obligations, even for ordinary business expenses. This is why it’s essential to work with an expert specializing in tax planning for the marijuana industry.
Our cannabis clients receive fractional financial accounting services, including tax preparation, with specialization in the cannabis space.
Whether handling the cannabis plant or offering ancillary services to the cannabis industry, many cannabis businesses save tax dollars with proper accounting expertise leading the way.
High Margins and Low Favorable Accounting Standards
Because marijuana businesses are federally illegal, cannabis companies’ financial statements may be governed by U.S. Generally Accepted Accounting Principles (GAAP) rather than IFRS (International Financial Reporting Standards).
Compared to IFRS, GAAP standards allow for wider leeway in how costs can be calculated – which could make it more difficult for cannabis companies to have lower tax liabilities or favorable tax deductions.
Federal rules against selling cannabis cause this emerging industry to be characterized by high margins and low favorable accounting standards. This is troublesome for businesses interested in scaling.
Until federal legalization happens and the Controlled Substances Act no longer impacts cannabis tax administration, a cannabis accountant will remain essential to ensure cash management bypasses common accounting issues plaguing the industry. Whether you owe back taxes, need someone to handle your excise taxes, or want someone who understands the tax code in relation to the marijuana industry, these financial services offer a full spectrum of benefits to business operators in this space.
In-House vs. Outsourcing Cannabis Accounting & Bookkeeping Services
Cannabis accounting is a relatively new territory, especially as we’ve seen changes within state laws over time, along with the federal government’s recent announcement regarding banking regulations and their oversight of cannabis businesses.
The market for marijuana accounting is still young, but as more cannabis companies grow and expand (and need to comply with tax laws), the need for marijuana accountants has increased substantially in recent years.
Outsourcing Cannabis Accounting & Bookkeeping: The Right Choice
Cannabis businesses can benefit from hiring in-house cannabis accountants and bookkeepers. However, there are several potential drawbacks to hiring in-house accounting personnel, as well.
Hiring in-house is more costly, which is a step backward as you’re scaling your operation. While you have a professional down the hall, the additional expense of paying for a cannabis accounting professional could take away from your overall profits. And let’s not forget that with a fractional CFO, you’ll use the services as much or little as needed, further decreasing the cost.
Because managing accounting operations in-house requires more administrative and financial personnel, this could potentially limit your business’s ability to expand and hire new employees.
While hiring an in-house expert will cost you more at the outset, it’s important to consider the long-term costs of keeping cannabis accountants on staff. In contrast, a cannabis tax advisor or firm can help your company meet its legal requirements while also allowing you to avoid penalties down the road.
Learn more about the benefits of outsourcing cannabis accounting and tax specialists now.
Cannabis Tax Laws & Audits
One of the biggest challenges that cannabis entrepreneurs face is handling tax payments and writing off business expenses – especially when it comes to filing returns with state governments. These taxes range from corporate income taxes to sales taxes based on gross revenue – which can be tricky given how much money cannabis companies have been bringing in as a result of legalization efforts.
In California, where recreational marijuana was legalized via Proposition 64, there’s a 15% excise tax on all non-medical marijuana sales, and this marijuana sales tax is applied at the point of sale when cannabis products are delivered to a customer.
The state also charges cannabis companies per ounce for cultivation taxes, which must be paid in full before the end of each fiscal quarter (and if you’re late paying it off by even one day, there’s a penalty fee that adds on top of that).
An in-depth audit can reveal problems, and without the right internal controls in place, these problems can compound during an inspection. To keep your business on track to scale, a CPA firm will ensure you’re always audit-ready, ensuring your business continues operating and earning.
Inventory & Manufacturing vs. Retail Storefronts
Although both types of businesses have inventory and manufacturing costs associated with their respective services/products, retail storefronts involve much simpler accounting practices when it comes to selling goods directly to customers.
Since retail storefronts don’t manufacture or produce their own product(s), they aren’t required to track as much inventory. While tracking is still essential, these business operators can calculate the money they’ve received from customers and determine their revenue in conjunction with cannabis tax laws.
In contrast, manufacturing businesses have to account for cannabis stock on hand (which will decrease over time until it’s sold), as well as plant-growing costs associated with growing marijuana plants for sale – which must be accounted for when calculating sales taxes.
Put simply, cannabis businesses engaged in retail storefronts have an easier accounting process than those that manufacture/produce cannabis products. But tracking everything is still crucial for those operating in this space.
We recommend going beyond the minimum in accordance with cannabis compliance. Track everything and have your documentation in order in case of an audit. This is how you will ensure your business can continue scaling without accounting and tax-related troubles on the horizon.
Cannabis Accounting Software
As more states legalize recreational marijuana use and we observe changes made to federal drug policies along the way, cannabis dispensaries have had to ramp up their financial operations and ensure their work is compliant with state regulations. Internal controls, including but not limited to accounting software, are essential.
While the software does not replace a CPA firm, it can work in conjunction with one. For our clients, we usually recommend using spreadsheets to track the business’s financials and a licensed CPA specializing in cannabis operations overseeing them.
At this point, none of the software available is robust enough to fully manage the financials of businesses operating in the cannabis industry. Thus, we cannot recommend software unless it’s required by your state. For example, METRC.
However, having a fractional licensed CPA working on your business and controlling its cash flow is irreplaceable. While software can help with tracking seed-to-sale, business owners need a cannabis accountant to ensure the financial aspects of the business are conducted in a federally legal manner.
Besides the more in-depth knowledge of local laws and advisory services offered, a cannabis accountant or CPA firm offers insight into cost accounting. The software does not handle cost accounting for controlled substances as effectively, nor does it provide consulting services in conjunction with the tax services many cannabis businesses need to scale.
Protecting Finances & Inventory
Any cannabis accountant worth their weight in gold will advise you to protect your finances and inventory. The cannabis industry attracts people interested in taking advantage of the cash these businesses have on hand.
Thus, one of the first steps we recommend taking as a business operator in this industry is to ensure your highly regulated products and cash is protected.
Internal revenue can easily be taken by staff if you don’t have cannabis SOPs in place to safeguard your investment. Compliance demands of regulating authorities also require these controlled substances are locked away from potential thieves.
While those operating in the cannabis space can’t always deduct ordinary business expenses, it’s also challenging to make deductions based on stolen cash and product. With this in mind, many businesses in this industry already understand the need for protection that goes beyond the compliance demands of this budding industry.
Minimally speaking, if you sell cannabis in one form or another, you should have cannabis SOPs in place to ensure you have a log of everyone with access to your product and cash. This way, in case of a problem resulting in an audit, you know who to look at when it comes time to determine the criminal’s name.
Concluding on Marijuana Accounting to Scale
Cannabis is an evolving, premature space. But as it matures, we can expect more businesses to focus on scaling their operations.
The advice in this article will make tax planning and scaling for your business easier. Whether you’re in the beginning stages of your company’s operations or already conducting millions of dollars per year in business, the right cannabis accountant or CPA firm will ensure your business is on track for successful scaling.
Looking for cannabis accountant and CPA services to scale your operation? Contact us now to have our experts join your team!
The CARES Act, an acronym for the Coronavirus Aid, Relief, and Economic Security Act, implemented the Paycheck Protection Program (PPP). But is there an alternative that applies to the cannabis industry?
The Small Business Administration (SBA) funded and administered the PPP. This was meant to offer potentially forgivable loans to businesses impacted by the COVID-19 pandemic. It was created to cover payroll and other costs associated with operations.
Unfortunately, cannabis companies have not been given the same opportunity to obtain PPP loans. Since cannabis cultivation and sales are still illegal federally, these operations cannot get PPP loans. Furthermore, the SBA published a Policy Notice in April of 2018 to outline how prohibition impacts direct and indirect cannabis businesses, thereby banning them from obtaining SBA loans.
In this article, we discuss an effective alternative to the PPP loan for cannabis.
Interested in getting relief during the COVID-19 pandemic for your cannabis business? Contact us today to learn more about what we can do for your operation!
Beware of PPP Loans for Cannabis
PPP loans first became available in early 2020. They were extended by the American Rescue Act and have quickly become one of the most commonly discussed provisions for businesses across the country’s COVID-19 relief packages.
These loans are forgivable for some small businesses and enable them to continue paying employees without issue. However, even though many cannabusinesses would qualify for these loans, plant-touching cannabis businesses should avoid PPP loans. While some might encourage these operations to apply, the federal government’s classification of cannabis is problematic for this type of loan.
Since the SBA has its own application process, we need to look at that to determine whether or not cannabis applicants can successfully get a PPP loan. During the application, the SBA requires affirmation that they are not violating federal law under penalty of perjury. Due to the state-legal cannabis businesses’ unavoidable violation of federal law, it’s impossible to truthfully affirm that the operation does not violate federal law.
Cannabis businesses have always had trouble interacting with the government, so it should come as no surprise that applying for relief funds can be challenging. However, the Employee Retention Credit and State Small Business Credit Initiative allow struggling cannabusinesses to receive assistance from government agencies.
The ERC: An Alternative to the PPP for Cannabis
The Employee Retention Credit (ERC) is a provision of the CARES Act. Though the ERC has not been given the same attention as PPP because companies cannot get both the ERC and PPP funds simultaneously, it’s still an option. Many businesses could not qualify for the PPP or obtained PPP funds and had to return them to the government not long after.
Now, the ERC offers a fully refundable payroll tax credit that employers can use. However, it doesn’t come without the following limitations:
Half (50%) of qualified wages and health plan expenses had to have been paid to the company’s employees in a calendar quarter.
This credit only applies to qualified expenses paid between March 12, 2020, and January 1, 2021.
The highest amount of qualified wages that can be taken into account for the ERC with respect to each employee for all calendar quarters throughout 2020 is $10,000. The maximum credit for an eligible employer for qualified wages paid to each employee $5,000 (half of $10,000).
For your business to qualify for the ERC, it must experience some suspended operations due to the restrictions the government has imposed or a significant decline in gross receipts. Thus should be either a partial or complete suspension of operations.
A decline in gross receipts can be considered “significant” if the employer’s gross receipts for a given quarter at some point in 2020 drop below 50% of their gross receipts for the same calendar quarter in 2019.
Companies qualifying for the ERC need to determine how many average monthly full-time employees (FTEs) worked for them in 2019. If your company employed beyond 100 average monthly FTEs, it’s only allowed to claim the credit on wages and health plan expenses paid for your employees that weren’t working over the course of the eligible months. However, if your company had 100 or fewer employees, then you’re allowed to claim the credit for all employees, regardless of whether they were working or not.
To claim the ERC, you’ll do so on IRS form 941, “Employer’s Quarterly Payroll Tax Return.” If your company is eligible, you can reduce its federal employment tax deposits by the permissible ERC amount. However, if your ERC is in excess of the remaining federal employment tax deposits for that quarter, your company can file Form 7200 to claim an advance refund.
IRC Sec. 280E: Does this affect cannabis business eligibility for the ERC?
Yes and no.
At this point, IRC Sec. 280 does not allow federal tax deductions and credits from gross income if the taxpayer engages in business relating to the manufacturing, distribution, or sale of controlled substances classified as either Schedule I or Schedule II drugs. This is the result of the 1970 Controlled Substances Act.
Since cannabis is still classified as a Schedule I drug, the sales activity is viewed as trafficking under federal law. With this in mind, IRC Sec. 280E keeps cannabis businesses from benefiting from typical business deductions.
However, equally important to note is that IRC Sec. 280E is an income tax provision of the Internal Revenue Code. The ERC operates as a payroll tax credit. Furthermore, the CARES Act does not explicitly exclude cannabis businesses from claiming the ERC.
While ERC eligibility is questionable and the IRS has not offered guidance just yet, there’s a chance that cannabis businesses that meet all eligibility requirements of the ERC could be eligible.
More About The ERC
At Northstar, we’re helping cannabis businesses save on payroll taxes with the COVID-19 ERC. If your company has been adversely impacted by the pandemic, we’re ready to help you at no upfront cost. Simply put, we only get paid if you do! This includes 3-year FREE ERC audit support!
Here’s a quick summary of the ERC and how it offers relief to cannabis businesses:
ERC Eligibility Explained
Through the COVID-19 Employee Retention Credit, cannabis businesses can get a payroll tax credit to help ease the adverse impact of the coronavirus. The ERC is an option for employers, as well as tax-exempt and some government organizations, as long as they satisfy ANY of the following conditions:
Operations were either fully or partially suspended as a result of the orders from an appropriate governmental authority.
Its gross receipts for a minimum of one calendar quarter were less than 50% in 2020 or less than 20% in 2021 of the gross receipts they had in 2019.
The company qualifies as a recovery start-up business.
ERC Opportunity Explained
The ERC offers up to $33,000 per employee. This is meant to offset employers’ 6.2% FICA liability from March 12, 2020, through June 20, 2021, as well as 1.45% Medical Tax from July 1, 2021, through December 31, 2021. Any remaining credit gets refunded.
Your ERC is calculated quarterly as long as your business satisfies quarterly eligibility requirements. You could also capture retroactively if you didn’t capture in prior periods, as well.
With subsequent ERC changes, the availability expands, and the benefits increase in the 2020 and 2021 tax years.
ERC Process Summarized
To get started, we’ll need to determine if you’re an eligible employer for the ERC for any quarter. This will involve applying each test separately.
We’ll check your company’s employment level in 2019, as well. This will determine your ERC-eligible wages.
From there, we compute your ERC-qualified wages. This involves excluding wages used for PPP forgiveness and other tax credits.
Once we have this information on hand, we can calculate the ERC and work with your payroll provider to determine options to claim benefits. Then, we’ll complete an audit file to substantiate ERC.
Notable ERC Changes for Jan. 1, 2021, to June 30, 2021
The ERC for January 2021 to June 30, 2021, experienced the following changes:
The ERC rate per employee increased by 20%, resulting in its expansion to 70% of qualified wages. In the past, this was 50%. Furthermore, the per-employee wage limit rose from $10,000 annually to $10,000 quarterly for 2021.
Employers are now eligible based on their gross receipts of less than 80%. Previously, it was less than 50% compared to the same quarter in 2019. With this in mind, if your gross receipts drop by beyond 20% in 2021, your business is eligible for the payroll credit.
Right after the calendar quarter, you can choose to use ERC immediately rather than Q1 and Q2 of 2021 compared to the same quarter in 2019 to determine your eligibility.
For companies that didn’t exist in 2019, we’re now allowed to compare 2021 quarterly gross receipts to the same 2020 quarters to determine business eligibility for ERC.
2021 ERC credit is now accessible by public colleges, universities, organizations giving medical or hospital care, and some organizations that Congress has chartered.
The definition of a large employer changes from more than 100 employees to beyond 500 employees in 2021. Thus, companies can use this broader definition of qualified wages if they are within this threshold. As a company, this allows employers to count wages paid to their active (working) employees and those who aren’t currently working.
The Consolidated Appropriations Act (CAA) removed the limit on employees’ qualifying wages. Previously, the limit on qualified wages was the sum the employee would have been given during the 30 days prior to the qualifying period. Now, the ERC will allow companies to pay a bonus to their essential workers.
If the company has less than 500 full-time equivalent employees, they can advance ERC payments during the quarter that the wages were paid to these employees. This also includes seasonal employers, employers who didn’t exist in 2019, and part-time employees.
Save on Payroll Taxes with the COVID-19 ERC
Ready to soar your business to new heights with tax incentives? Contact us today to partner with Northstar’s experienced tax professionals.
The Garden State is offering several financial assistance programs that could cover some of the costs of legal medicinal marijuana in New Jersey.
The state government wants to help patients who can’t afford to pay for their own medical marijuana. This is why it’s proposing a bill that would make it possible for people enrolled in four different financial assistance programs to only have to pay a small copay if they need medical marijuana.
If this legislation passes, health care providers will be required to ask if the patient needs any kind of assistance when filling out paperwork about which medical marijuana products they need.
Interested in expanding your business in New Jersey’s cannabis space? CONTACT US today to learn more about how we can help.
New Jersey Medical Marijuana Financial Assistance Programs
Four different financial assistance programs that help children, seniors, crime victims, and people with disabilities could receive aid with the cost of medical marijuana in New Jersey. This would occur under identical bills that the Senate and Assembly health committees have already approved.
Sen. Joseph Vitale, D-Middlesex, and Assemblyman Herb Conaway, D-Burlington, sponsored these bills in New Jersey. The vote for this medical marijuana cost coverage bill could happen within a week.
These are the New Jersey financial assistance programs that would offer the benefits:
Catastrophic Illness in Children Relief Fund
The Catastrophic Illness in Children Relief Fund is a financial assistance program New Jersey families can use if they have potentially catastrophic medical expenses that result from a child’s condition or illness.
If a family’s related expenses are incurred before the child’s 22nd birthday, to qualify for this program, the costs must:
Exceed 10% of the family’s income that year, plus 15% of any income over $100,000; and
Are not covered by insurance, other State or Federal programs, or other sources such as fundraising.
Any illness can be “catastrophic” when considering uncovered medical expenses and family income over the last 12 months. For the condition or illness to fit the term “catastrophic,” it must be acute or chronic with expenses that aren’t covered by federal, state, insurance programs, or other sources.
Other sources can include – but are not limited to – other State or Federal agency programs, trusts, insurance contracts, proceeds from fundraising, and settlements regarding the child’s medical condition. However, if the child’s source of health coverage pays for ambulatory services from within their provider network, the uncovered out-of-network expenses might not be reimbursable through this program.
“The cost of cannabis can run into the hundreds of dollars per month for individuals,” Conaway explained. “This bill serves those who are financially distressed and … ensures the benefits of medical cannabis are available to all who may need it.”
Through the bill, the Catastrophic Illness in Children Relief Fund will also be allowed to cover the cost of New Jersey medical cannabis for qualified patients. This organization already covers many medical expenses resulting from a child’s illnesses or conditions, and this would enable it to offer assistance to children in need of medical marijuana in New Jersey.
Pharmaceutical Assistance to the Aged and Disabled (PAAD)
The Pharmaceutical Assistance to the Aged and Disabled (PAAD) program is a state-funded program that offers assistance to eligible seniors and disabled persons to afford their prescription drug costs. But at this point, it does not help cover the costs of medical cannabis.
For someone to be eligible for the PAAD program, they must meet these requirements:
You must be a New Jersey resident;
You need to be at least 65 years of age or older or between ages 18 and 64 and getting Social Security Title II Disability benefits; and
Your income for 2021 is less than $28,769 if single or less than $35,270 if you’re married.
Medicare-eligible PAAD beneficiaries also must enroll in a Medicare Part D Prescription Drug Plan. PAAD pays the monthly premium for some standard basic Part D plans (with a monthly premium) at or below the regional benchmark.
For those who are eligible, these Medicare plans cover medically necessary prescription medications under Medicare Part D. But, if a beneficiary enrolls themselves in an enhanced plan at or below the regional benchmark premium amount, PAAD pays the premium if the plan agrees to follow all of the billing requirements.
The federal Medicare Plan and/or PAAD also cover costs above the PAAD co-payment of $5 for every covered generic drug or $7 for all covered brand name drugs. This includes premiums.
However, if the person’s Medicare Part D plan refuses to pay for medication because the drug is not on its list of medicines, PAAD beneficiaries must switch to a drug on their Part D plan’s list. Otherwise, their doctor needs to ask for an exception because of medical necessity directly to their Part D plan.
Medicare Advantage participants need to add a prescription benefit to their coverage. With this in mind, PAAD offers up to the regional benchmark amount to cover the prescription part of the entire premium.
Thus, patients enrolled in PAAD would have to pay a $7 copay for their medical marijuana in New Jersey. The organization already aids seniors and residents with disabilities who cannot afford their prescription drugs. But with medical marijuana ready to utilize as an alternative treatment, many would like it included in the list of medicines supported by this program.
Senior Gold Prescription Discount
The Senior Gold Prescription Discount Program is also a state-funded prescription program. However, it has a different co-payment structure and income eligibility guidelines when compared to the PAAD. And at this point, it cannot cover medical cannabis.
For someone to be eligible for Senior Gold, they must meet these requirements:
You need to be a New Jersey resident;
You must be 65 years old or older, or between the ages of 18 and 64 and getting Social Security Disability benefits;
Your annual income for 2021 is greater than $28,769 and less than $38,769 if you’re single, or greater than $35,270 and less than $45,270 if you’re married.
Furthermore, every Medicare-eligible Senior Gold beneficiary must enroll in a Medicare Part D Prescription Drug Plan. They are then responsible for paying the monthly premium directly to the Medicare Part D plan.
Beneficiaries also are responsible for paying any late enrollment penalty Medicare imposes each month they were eligible to enroll in Medicare Part D but didn’t enroll.
Those who have enrolled in the Senior Gold program only would need to pay a copay of $15 plus 50% of the excess cost of medical marijuana.
However, if a Senior Gold member already spent $2,000 out-of-pocket, or $3,000 if they’re a married couple, the copy is only $15 for medical cannabis if Vitale and Conaway’s bill passes.
“Patients in New Jersey who gain relief from pain or discomfort through the use of medical cannabis cut across a wide swath of our population, and yet the cost of the drug can be exorbitantly expensive for many people who rely on it most,” Vitale explained in a statement.
Victims of Crime Compensation Office (VCCO)
The State VCCO is a program that reimburses victims for crime-related expenses. This includes the cost of medical expenses, mental health counseling, funeral and burial costs, and lost wages or loss of support.
Since the VCCO is a federally financed program, it currently does not offer compensation for medical marijuana-related expenses victims may incur. Thus, the new bill stands to benefit victims, especially those who have experienced some sort of traumatic crime that they are using medical cannabis to treat crime-associated mental illnesses.
Decreasing Out-of-Pocket Expenses with a Medical Marijuana Card
The bill’s mission is to ensure everyone can afford medical marijuana in New Jersey. Since ounces of medical cannabis flower in New Jersey can reach $500 apiece, reimbursement for these expenses is essential for some.
Since the federal government still views medical marijuana as a Schedule I drug lacking medicinal value, federal programs and programs connected to federal funding cannot cover medical cannabis legally. This includes health and medical insurance.
“We’re waiting for insurance coverage for this particular therapeutic but, not having that, we’re moving forward,” Conaway explained. “They are state-run programs with state-run dollars only, so there’s no implication of any federal program or action.”
Medicinal Marijuana Businesses in New Jersey
Medical marijuana businesses in New Jersey stand to gain more customers if this bill passes. The medicinal marijuana patients who would otherwise be unable to afford their medicine will now have the ability to buy what they need.
As the cannabis industry in New Jersey becomes more accessible to those who cannot afford the exorbitant prices, other businesses may also benefit. Particularly, alternative treatment centers fueling the state’s medicinal marijuana program.
Alternative Treatment Centers in New Jersey
Alternative treatment centers in New Jersey allow medical marijuana patients access to medicinal marijuana. All they need is a medical cannabis card, which allows the New Jersey medical marijuana program to thrive.
However, the medical marijuana program in New Jersey isn’t supporting these other programs just yet.
The new bill aims to enable patients, including minor patients and their legal guardians, to get medicinal marijuana, even if they cannot cover the cost of purchasing their medicinal marijuana from alternative treatment centers at a total price.
Quick Tips to Get a Card in New Jersey
To get a card in New Jersey through the cannabis regulatory commission, patient registration is essential. This involves visiting an approved physician – or a licensed physician.
Jersey residents can visit an approved physician to get a card in New Jersey. But they will need medical records showing the qualifying patient needs access to medical marijuana.
While there are some hoops to jump through, it’s possible to get a medical card in New Jersey. However, the cannabis regulatory commission demands qualifying patients – or their primary caregiver or legal guardian – go through the same process to gain access to the medicinal marijuana program.
Depending on the caregiver’s government assistance eligibility, they might be allowed to obtain medical marijuana at a discounted rate, too. However, they must hold a medical card on behalf of the patient.
The New Jersey Cannabis Industry Association has been instrumental in pushing for this legislation, associating themselves with the most vulnerable patients while promoting a viable and sustainable industry that benefits society as a whole.
As we can see from Conaway and Vitale’s stance on the matter, progress is being made in the Garden State. With more movement in the right direction, we’re sure to see positive impacts on the cannabis sector as a whole.
Medical Marijuana Patients in New Jersey
Medical marijuana patients younger than 18 can still get a medical marijuana card. But to get support for medicinal marijuana through one of the new programs, the bills must pass.
The Medical Cannabis Act allowed New Jersey to create its medicinal marijuana program. And while this supports terminally ill patients looking to get a medical marijuana card and visit an alternative treatment center, the New Jersey Medical Marijuana Program is still somewhat limited because of federal prohibition.
Those who have a medical marijuana card in New Jersey can purchase and smoke medicinal marijuana. But despite the Medical Cannabis Act, New Jersey patients can still have trouble accessing the plant through the state’s medicinal marijuana program.
If the patient is too young or disabled, a medical marijuana card can be obtained by up to two caregivers. But each of these caregivers will need to apply for a medical card. However, with recreational cannabis legalization, the plant will become more accessible without a New Jersey MMJ card.
Serving Medical Marijuana Patients in New Jersey
While some might worry about tax dollars going towards alleviating the financial stress that comes with a medical card, cannabis business operators can look at this as an opportunity. With the right marketing, it’s possible to earn supplemental security income from medical cardholders.
New patients will come to the spotlight if this bill passes. And while qualifying conditions in New Jersey limit new patients, more patients will likely get an MMJ card once these programs begin offsetting the cost.
Whether you offer home delivery to each patient or have a dispensary that is interested in supporting every MMJ card patient with excellent customer service, we can expect this bill to support each patient, whether young or a senior citizen, by offering reduced fees for medical use marijuana to those that need it most.
Interested in scaling your cannabis operation in New Jersey? There’s no time like the present!
Contact us now for expert assistance organizing your financials and allow us to help your business reach its full potential!
California cannabis license types are tricky to understand, and California’s Bureau of Cannabis Control is constantly updating them. And let’s not forget about the California Department of Public Health’s Manufactured Cannabis Safety Branch (MCSB) and the California Department of Food & Agriculture.
In California, cannabis businesses need a cannabis license for anything related to the sale or manufacture of marijuana products, whether in-store sales or manufacturing. We’re here to help with Cali cannabis license insight!
Interested in cannabis licensing requirements? We have the answers! CONTACT US today to learn more about how we can ensure your compliance in California.
State Licensing Authorities in California
California cannabis businesses need to be aware of three state licensing authorities. Each has a set of responsibilities that impacts specific aspects of Cali’s commercial cannabis market.
The Bureau of Cannabis Control, California Department of Consumer Affairs, handles cannabis business licenses and regulates businesses. This cannabis control agency oversees distributors, retailers, microbusinesses, and testing laboratories.
The Manufactured Cannabis Safety Brand, California Department of Health licenses and regulates cannabis product manufacturers. If a legal operation is producing products in Cali, this is the authority overseeing its operations.
Then there’s the CalCannabis Cultivation Licensing that’s managed by the California Department of Food & Agriculture. This California regulating force has the task of licensing and regulating cannabis cultivators and operating the Track-and-Trace system. Through these efforts, seed-to-sale tracking is facilitated.
Getting to Know Cali’s Bureau of Cannabis Control
The Bureau of Cannabis Control is a California state regulator responsible for overseeing the licensing and regulation of marijuana. State law grants the Bureau of Cannabis Control broad authority, allowing it to regulate all aspects of commercial marijuana activity in California.
For anyone interested in operating a medical or adult-use cannabis operation in Cali, this bureau is the department that regulates state law. Retailers, distributors, testing laboratories, microbusinesses, and temporary marijuana events must go through the Bureau of Cannabis Control to obtain the right licensing.
The Bureau of Cannabis Control has made tremendous strides for the industry since voters approved Proposition 215, also known as the Compassionate Use Act of 1996. Since then, this department has taken a formerly black and gray market to form a legitimate industry with regulations and compliance leading the way.
This agency is on the lookout for common compliance issues among cannabis businesses. If found, these non-compliant business owners face an assortment of responses from the Bureau of Cannabis Control for various violations, including:
Traceability problems occur when cannabis businesses – particularly, processors or retailers – fail to use or maintain traceability for products.
Security and surveillance laws keep the legal cannabis industry legitimate. These preventative measures ensure people don’t have the opportunity to steal or “misplace” products, which then get sold on the black market.
Sales to Minors
Adult use cannabis regulation is in place. But marijuana product purchases and consumption are limited to those 21 years of age and older in Cali. Sometimes, the BCC will send undercover purchasers into the shops to attempt a purchase. However, there are instances in which an underage user gets arrested and points the finger at a retailer.
Displays and signage must be compliant with the state’s regulations. Cali’s advertising laws must be checked before cannabis businesses begin their marketing efforts.
Getting to Know the Manufactured Cannabis Safety Branch (MCSB)
The California Department of Public Health’s Manufactured Cannabis Safety Branch (MCSB) is one of the three state licensing authorities in Cali. This department has been tasked with licensing and regulating commercial cannabis activity in Cali. It’s also responsible for regulating all commercial cannabis manufacturing in the state.
The MCSB works to protect public health and safety in a few ways. Its main priority is to ensure commercial cannabis manufacturers are operating safely. This involves checking workplace sanitation and making sure these operations are following good manufacturing practices to produce contaminant-free products that meet product guidelines and have proper packaging and labeling.
About the MCSB
So, what does the MCSB do, anyway? Here’s a brief list of what you might notice this regulating force doing:
Licensing from the MCSB
The entire application process for cannabis business licenses goes through this licensing authority. This involves reviewing the qualifications for licensure, following up on application deficiencies, and issuing licenses and payment processing.
Inspection & Compliance
The MCSB assesses compliance, as well. This involves coordination with local jurisdictions, as well as sending notices for corrections of deficiencies. This licensing authority also conducts inspections and investigations for compliance deficiencies.
Application assessment for manufacturing procedures and technical assistance also falls under the MCSB’s duties. This authority reviews remediation plans, reviews and responds to complaints, and handles Track-and-Trace monitoring.
The MCSB is also responsible for regulation research and development, as well as creating and implementing packaging and labeling standards. Policy clarification for licensees is also a task this authority handles.
Outreach & Education
Digital outreach and stakeholder engagement allow the MCSB to support this elevated space directly. It also handles handouts and guidance documents while offering licensee support by email and phone. You might see the MCSB leading presentations, panels, and other events for the cannabis space, as well.
Commercial Cannabis Business License Types
Simply put, anyone who makes or packages a prepared cannabis product is a manufacturer. These products include – but aren’t limited to – topicals, edibles, extracts, vape cartridges, tinctures, and anything else you might find at a dispensary.
Each business manufacturing cannabis products has to hold a state license for every separate premise they plan to conduct their manufacturing operations. Every manufacturer has to disclose all activities that they plan to conduct on their license application.
For online license applications, licensees need to say the license type they require, and this must be based on the activities they plan to conduct on the premises. Cannabis manufacturers are also allowed to package flower and roll and package pre-rolls on their licensed properties.
Type 7 Cannabis Manufacturing License
Type 7 commercial cannabis business licenses are for operations involved in extractions using volatile solvents. This is for manufacturers that use volatile solvents, including but not limited to propane, hexane, or butane. These licensees can also conduct Type 6, P, or N activities.
Type 6 Cannabis Manufacturing License
Type 6 business licenses are for entities involved in extractions using mechanical methods or nonvolatile solvents. Generally speaking, this includes carbon dioxide, water, butter or oil, ethanol, or other mechanical extraction methods. These licensees can conduct Type P or N activities, too.
Type N Cannabis Manufacturing License
Type N manufacturing licenses are for companies that produce cannabis products other than extracts or concentrates that are produced through extraction. This is primarily for those performing infusions, and these licenses are allowed to conduct Type P activities, as well.
Type P Cannabis Manufacturing License
Type P licenses are for manufacturers that only package or repackage cannabis products or label or relabel cannabis product containers or wrappers. These licensees can solely perform Type P activities.
Type S Cannabis Manufacturing License
Type S licenses are reserved for manufacturers that conduct commercial cannabis manufacturing activities at a registered shared-use facility. The shared-use manufacturing facility must be approved for Type S licensees before submitting license applications.
Other Types of Cannabis Business Licenses
Also known as a Type 10 license, Retailer (Storefront) licenses are for brick and mortar dispensaries. However, licenses are quite rare because most local jurisdictions have either prohibited these operations completely or only limit the issuance of these licenses to dispensaries that opened before 2016 under Prop 215. Retailer (Storefront) licensees can also operate a website and can engage in cannabis delivery to consumers.
Also known as Type 9 licenses, Retailer (Non-storefront) licenses are for people who would like to sell cannabis products to consumers solely through an online website or app. However, the licensee must still own a store. This is simply an online-only store that has no physical location for customers to visit. As a Retailer (Non-storefront) license holder, you’ll still need a location for your business to hold its inventory and act as a place for its delivery drivers to congregate.
Also known as a Type 11 license, Distributor licenses are for anyone who would like to transport cannabis products from one licensee to another. For instance, a distributor might transport cannabis products from a cultivator to a testing lab or a testing lab to a dispensary.
Distributors may also participate in the following activities:
1) Arrange for testing of cannabis goods;
2) Conduct quality assurance review;
3) Package, re-package, label, and re-label cannabis for retail; and
4) Offer storage-only services for cannabis accessories, licensees’ branded merchandise or promotional materials, and packaged cannabis goods ready for sale at retail operations.
Distributor (Transport Only)
Also known as a Type 13 license, Distributor (Transport Only) licensees are allowed to transport cannabis goods between licensees and are restricted to the transportation of cannabis goods.
Type 13 licensees may not engage in any of the additional activities Type 11 licensees are allowed to conduct. Furthermore, a Distributor (Transport Only) licensee cannot transport any cannabis goods other than immature cannabis plants and/or seeds to a retailer or a retail portion of licensed microbusinesses.
Type 13 licensees are also allowed to transport cannabis accessories and promotional materials or branded merchandise.
Cultivation licensees are for anyone interesting in growing for the cannabis supply chain. At this point, California has 14 different cannabis licenses, which are categorized by light source and size.
For more information about cultivation licensing, check out the California Department of Food and Agriculture (“CDFA”) CalCannabis homepage. Cultivation licenses encompass Type 1, Type 1A, Type 1B, Type 2, Type 2A, Type 2B, Type 3, Type 3A, Type 3B, Type 4, Type 5, Type 5A, and Type 5B. Type 5, 5A, and 5B licenses are reserved for “large” cultivation operations that use more than 22,000 sq. ft. of total canopy. However, these licenses aren’t issued until after January 1, 2023.
Also known as a Type 12 license, a Microbusiness license lets licensees participate in vertical integration. Each microbusiness licensee has to perform at least three of these six activities:
1) Retailer (Storefront);
2) Retailer (Non-storefront);
4) Distributor (Transport Only);
5) Cultivation operation less than 10,000 sq. ft of canopy; and
6) Level 1 Type 6 Manufacturer.
Also known as a Type 8 license, Testing Laboratory licensees are allowed to test cannabis goods. These testing laboratories need to get and maintain ISO/IEC 17025 accreditation.
Testing laboratory operations may get issued a provisional license that lets them operate as they’re waiting on accreditation, but they still must meet all of the other requirements.
The Event Organizer license is required for anyone interested in organizing cannabis events. A Cannabis Event Organizer Licensee can apply to receive a Temporary Cannabis Event License for a specific event they would like to operate, as well.
A Temporary Cannabis Event License is necessary for anyone looking to hold a temporary cannabis event with authorized onsite sales and consumption of cannabis goods. Still, the location of the event must be indicated on the license. Temporary Cannabis Event Licenses are only issued to Event Organizer licensees.
How to Get Licenses for Cannabis Businesses
Getting a license for a business operating in Cali’s legal cannabis industry isn’t simple. California will not issue cannabis licenses to applicants that don’t have local approval. With this being the case, it’s crucial to find a city or county that approves of commercial cannabis activity within their jurisdiction.
For instance, the city of Los Angeles has already approved the cultivation, manufacturing, and testing of cannabis. This means that California companies that are approved in Los Angeles can apply for a license to perform these activities in the LA area. However, the county of Los Angeles does not allow commercial cannabis activity within its unincorporated areas.
Other California cities have not yet passed any legislation permitting commercial cannabis activity. Thus, it’s crucial to find a place that accepts it. Then, you can apply for a license and approval with your local jurisdiction and the state.
Some local jurisdictions require applicants to get state licensure within some amount of time after getting local approval or licensure. With this in mind, anyone submitting local and state applications should do so simultaneously or within a short period.
On the other hand, if you find a business for sale with an adult-use or medical cannabis license, you can purchase the business. Since a state cannabis license comes with the business, you’ll receive your license without having to go through a regulating authority.
Will I need city or county approval to get a cannabis license?
Think about where you plan to set up shop. Is the location in an incorporated city? Or is it located in an unincorporated area?
If the location is in an unincorporated area, you’ll need county approval. To determine whether your location is in a city or unincorporated area, you can check Google. If it’s an unincorporated area, it will be “Census Designated Place” or “CDP.”
Looking to maintain your compliance as you operate in Cali’s legal cannabis sector? We’re the experts you want on your team!
CONTACT US NOW to learn how we’ll ensure you follow all regulations in place while scaling your business with expert financial management.