Frequently Asked Questions

Frequently Asked Questions – Cannabis

Status Firearm Ownership California?

Status Firearm Ownership California?

See Cannabis Firearm Ownership

 

Prop. 215 – Statute

Prop. 215 – Statute

Prop. 215 – Statute states

The people of the State of California hereby find and declare that the purposes of the Compassionate Use Act of 1996 are as follows:

(A)  To ensure that seriously ill Californians have the right to obtain and use marijuana for medical purposes where that medical use is deemed appropriate and has been recommended by a physician who has determined that the person’s health would benefit from the use of marijuana in the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief.

(B)  To ensure that patients and their primary caregivers who obtain and use marijuana for medical purposes upon the recommendation of a physician are not subject to criminal prosecution or sanction.

(C)  To encourage the federal and state governments to implement a plan to provide for the safe and affordable distribution of marijuana to all patients in medical need of marijuana.

(2)  Nothing in this section shall be construed to supersede legislation prohibiting persons from engaging in conduct that endangers others, nor to condone the diversion of marijuana for nonmedical purposes

Prop. 215 - Statute

Blog

What is People vs Kelly

What is People vs Kelly

What is People vs Kelly –  Proposition 215 wrote the right to access medical cannabis into the law in California? California Proposition 215, also known as the Medical Use of Marijuana Initiative or the Compassionate Use Act, was on the November 5, 1996, general election ballot in California as an initiated state statute, where it was approved.

The passage of Proposition 215 is considered a significant victory for medical marijuana. It exempts patients and defined caregivers who possess or cultivate marijuana for medical treatment recommended by a physician from criminal laws which otherwise prohibit possession or cultivation of marijuana. Because of Proposition 215, California is one of the fourteen states that allow marijuana for medical uses.

In 2008, twelve years after Proposition 215 passed, the medical marijuana group “Americans for Safe Access” estimated that California had more than 200,000 doctor-qualified medical cannabis users.

In May 2009, the U.S. Supreme Court declined to hear an appeal of a California state appellate ruling from 2008 that upheld Proposition 215 and concluded that California can decide whether to eliminate its own criminal penalties for medical marijuana regardless of federal law. The appellate ruling came about because of a lawsuit against Proposition 215 filed by San Diego and San Bernardino counties. These counties objected to Proposition 215 on the grounds that it requires them, in their view, to condone drug use that is illegal under federal law. They also challenged a law that requires counties to issue identification cards to medical marijuana patients so these patients can identify themselves to law enforcement officials as legally entitled to possess small amounts of marijuana.

There has been substantial litigation of the issue, and finally, People vs Kelly [47 Cal.4th 1008 (2010), [103 Cal. Rptr. 3d 733, 222 P.3d 186] was decided on January 21, 2010, by the California Supreme Court. The decision invalidated a law passed in 2003 by the California State Legislature on the grounds that the law imposed stricter standards on medical marijuana than is allowed under Proposition 215. Under the ruling, the state government is no longer allowed to impose any legal limits on the amount of marijuana that medical marijuana users can grow or possess.

The 2003 law limited medical marijuana users to 8 ounces of dried marijuana and six mature or 12 immature marijuana plants.

The basis for the court’s ruling in People v. Kelly is that the 2003 legislation amounted to an amendment to Proposition 215 and that the California Constitution prohibits legislative tampering with ballot initiatives approved by voters. The defendant in the case was Patrick Kevin Kelly, a user of medical marijuana.

Resource Blog

Who perform compliance audit cannabis business?

Compliance audit cannabis business

Compliance audit cannabis business

Compliance audit cannabis business
Certified Public Accountant

Simple answer – three letters – CPA or Certified Public Accountant.

We happen to read through the website for a vendor that had produced a very high-quality piece of compliance software for the cannabis industry. They had written about internal use for the software, and having “Third Party Auditors” perform “audits”, and right where they got into big trouble.

“Third Party Auditors” was defined as the performance of an “audit” that is a task that could be performed by an attorney, a consultant or a generic “accountant”.

Compliance Audit Cannabis Business

Specifically, their website stated:

“You focus on developing and enhancing your audit practice, which means empowering your auditors with a tool that makes them both efficient and proficient. You could create your own compliance checklists, even build your own audit software, but it’s expensive and time-consuming. There’s little reason to do that when you can use Brand X to conduct your audits, produce your reports, and still maintain control of your client engagements for a small fraction of the expense and time.”

We encourage clients to supplement regular self-audits with third party audits to get an independent view from an experienced consultant. This best practice is built into our software. When a client wants to engage a TPA for an audit, they make a one-step, in-app request to one of our registered auditors.”

The language which has been used to describe who is performing what task clearly in violation of the California Accountancy Act. The performance of independent audits of financial statements, elements of financial statements, reports on internal accounting controls and other types of regulatory compliance reviews is reserved exclusively for Certified Public Accountants [“CPA’s][1]. The practice of public accountancy which is the exclusive purview of CPA’s is contained in Section 5051 or the California Accountancy Act [“CAA”] which states

California Accountancy Act Section 5051.

“Except as provided in Sections 5052 and 5053, a person shall be deemed to be engaged in the practice of public accountancy within the meaning and intent of this chapter if he or she does any of the following:

(a) Holds himself or herself out to the public in any manner as one skilled in the knowledge, science, and practice of accounting, and as qualified and ready to render professional service therein as a public accountant for compensation.

(b) Maintains an office for the transaction of business as a public accountant.

(c) Offers to prospective clients to perform for compensation, or who does perform on behalf of clients for compensation, professional services that involve or require an audit, examination, verification, investigation, certification, presentation, or review of financial transactions and accounting records.

(d) Prepares or certifies for clients reports on audits or examinations of books or records of account, balance sheets, and other financial, accounting and related schedules, exhibits, statements, or reports that are to be used for publication, for the purpose of obtaining credit, for filing with a court of law or with any governmental agency, or for any other purpose.

(e) In general, or as an incident to that work, renders professional services to clients for compensation in any or all matters relating to accounting procedure and to the recording, presentation, or certification of financial information or data.

(f) Keeps books, makes trial balances, or prepares statements, makes audits, or prepares reports, all as a part of bookkeeping operations for clients.

(g) Prepares or signs, as the tax preparer, tax returns for clients.

(h) Prepares personal financial or investment plans or provides to client’s products or services of others in implementation of personal financial or investment plans.

(i) Provides management consulting services to clients.”

As a clear consequence of that definition, attorneys, Enrolled Agents, “consultants” and “generic accountants” are expressly prohibited from performing the tasks which are specifically for reserved for CPA’s.

There are no restrictions on a non-CPA using the software to verify, document and confirm that a business is following the guidelines mandated by the agencies in California that regulate the cannabis industry[2] and oversee tax compliance[3].  There is another level of complexity that should be highlighted, and that is the requirement under the CAA, as well as AICPA Professional Standards which requires that a CPA meet applicable Professional Standards with respect to independence[4].

Compliance audit cannabis business

[1] Section 5033.  of the California Accountancy Act defines -“Certified public accountant” means any person who has received from the board a certificate of a certified public accountant and who holds a valid permit to practice under the provisions of this chapter.

[2] The agencies which regulate the cannabis industry in California are – [ Bureau of Cannabis Control [“BCC”], Dept. of Public Health – Manufactured Cannabis Safety Board [“CDPH”], Dept. of Agriculture – CalCannabis Cultivation Unit [“CDFA”].

[3] The agencies which oversee the application of tax statutes are the US Department of the Treasury – Internal Revenue Service [“IRS”], the California Franchise Tax Board [“FTB”], the California Dept. of Tax and Fee Administration [“CDTFA”] and the US Dept. of the Treasury – Financial Crimes Enforcement Network [“FinCEN”] for Title 31 violations.

[4] See 16 CRR §65. Independence. A licensee shall be independent in the performance of services in accordance with professional standards. A detailed analysis of the definition of independence and the accompanying restrictions on services that a CPA may provide to an “attest client is clearly beyond the scope of this letter.

While well-written compliance software is a good start, it is not a substitute for the skilled judgment of a CPA. You can read more of our thoughts on that topic at Software Never Substitute for CPA Judgment.

Compliance audit cannabis business

Cannabis Licensing

 

 

Must IRS Accept US Currency – Cash?

Must IRS Accept US Currency – Cash?

Must IRS Accept US Currency – Cash?

The very simple answer is YES the IRS must accept US currency in payment of tax obligations.

The United States Code provides that

Must IRS Accept US Currency - Cash?
Internal Revenue Service

“United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.” 31 U.S.C. § 5103. Thus, it seems clear that the IRS is required to accept U.S. coins and currency for the payment of taxes. The Department of Treasury’s website also includes a frequently asked question regarding the requirement of accepting cash as legal tender for a debt. The response clarifies that a private party (i.e., a non-government entity) is not required to accept cash payments.

See https://www.ustreas.govJeducationJfag/currency/legal-tender.shtml. While the U.S. government is required to accept cash in payment of taxes or other debts. there is no statute or regulation requiring the United States to accept cash payments at each and every location that accepts payments. The Service has approximately 400 Taxpayer Assistance Centers (TACs). Taxpayers are able to make payments at each of the TACs.

As a security measure, the Service has implemented specific procedures to be followed when a taxpayer makes cash payment at one of the TACs. This procedure intentionally involves more than one employee.

First, a taxpayer desiring to make a cash payment must provide exact change.

Second, this taxpayer must be provided a receipt for the payment. The taxpayer is given Part 2 of Form 809 as a receipt for the cash payment See IRM 21.3.4.7.2.1. The employee who is authorized to receive the payment and to issue the Form S09 receipt is not authorized to make any adjustments to the taxpayer’s account on IDRS. See IRM 21.3.4.7.2(4).

This limitation precludes an employee from accepting a cash payment, adjusting the taxpayer’s account to reflect the payment, and then converting the cash payment to the employee’s personal use. The mandatory separation of duties protects the employee, taxpayers and the IRS.

In those locations where there are a very limited number of employees, is not feasible to accept cash payments. Minimal staffing at a location generally necessitates having employees with more than limited authorities. Having an employee with limited IDRS access in a TAC of this size severely restricts the services that can be provided to other taxpayers at that location. Therefore, it seems reasonable that the Service accept cash payments only at the TACs with greater staffing.

The IRM incorporates this reasoning and authorizes the Director, Field Assistance or the Area Director to grant a deviation from accepting cash payments to TACs with fewer than three employees.

The exception provided for cash payments at small TACs is reasonable, but care needs to be taken to ensure that the exception does not become the rule. That is, the Service cannot eliminate its obligation to accept cash for the payment of taxes by staffing the TACs so that no centers have sufficient personnel to accept cash payments.

 



Must IRS Accept US Currency – Cash?

How do I pay my taxes?

CPA Engagement Letter Content – Read Carefully?

CPA Engagement Letter Content – Read Carefully

CPA Engagement Letter Content – Read Carefully as part of our efforts to expose this community to some information that you may never have

CPA Engagement Letter Content - Read Carefully
Let’s start a conversation and be proactive.

thought of, or cared about, but you REALLY need to understand, I thought it would be helpful to start a discussion about what is in [or should be in] the Engagement Letter you get from your attorney or CPA. I respect the attorney’s territory and hope our of our legal colleagues will chime in. I will begin by noting that our Engagement Letter is monster. It has cost us > $125K to produce and update and is derived from four principal sources:

  • Engagement Letters share with colleagues at Big 4 FIrms
  • AICPA Tax Section Engagement Letters and Checklists
  • CNA and Travelers Professional Liability Counsel For CPA Firms
  • Our own thoughts as reviewed by counsel.

There is a base Engagement Letter with General Terms and Conditions and five specific riders for types of services we provide.

In the interest of brevity, we are providing a link to a Dropbox Showcase which will permit you to view all of the documents in PDF format, but you will not be able to share the links or download the documents. We trust you understand that we are sharing materials that have cost us a tremendous amount of money to produce. We are doing so, not with the intention of selling anything [thought we would certainly welcome the chance to working with anyone. We have also included a number of other documents that are relevant to the commercial cannabis industry in California just to provide some insight with respect to how we assist our clients in conducting business.

CPA Engagement Letter Content – Read Carefully

You can find the above-referenced documents here.

Just to provide a couple of “teasers” to pique your interest, this is the Cannabis Industry Rider which we append to our Engagement Letter for Cannabis Industry clients.

This is the Cannabis Industry Rider – Incorporated Business Engagement Letter.

Due to the nature of the industry in which you are involved and the fact that the business activity violates certain Federal laws, it is important that you provide us with the following representations in a written document at the conclusion of our engagement and prior to our filing of the tax returns:

All information provided for the preparation of the client’s tax returns, either verbal or written, is true and correct to the best of the client’s knowledge and belief. All items pertaining to gross income are reported without offset or reduction. No items of expense or liability are overstated.

If any of this information is later found to be in error, the client will

(1) notify our firm immediately and

(2) assume full responsibility for any discrepancies.

In the event that our firm is unable to provide tax returns due to delays arising from the untimely response or lack of documentation, the client will hold the firm harmless for any penalties that may incur.

The client acknowledges that a tax provision, known as “Internal Revenue Code Section 280E,” is applicable and that it may potentially limit claimed deductions for business expenses incurred. The client acknowledges that advice has been rendered by our firm regarding the non-deductibility of certain expenses reported on the tax returns and the subsequent tax consequences of these

The client represents that they are not affiliated with any law enforcement agencies. The client further represents that none of the interactions with our firm have been for the purposes of gathering evidence for any court, criminal or civil. If the client is found to be so associated with law enforcement, the client hereby acknowledges that all of the actions taken constitute “entrapment.”

The client asserts that no requests have been made for illegal services or requests to “launder money” or to misrepresent facts to any person, including outside financial institutions. Further, the Client will indemnify, save and hold harmless, our firm and its members and employees from any loss, cost or expense or liability arising out of, or on account of any and all court proceedings, criminal or civil, on actions taken involving the Client

Finally, this is the indemnification language contained in our Engagement Letter…and admittedly is very aggressive in protecting us.

CPA Engagement Letter Content – Read Carefully

Indemnification

To the extent permitted by law, the Client agrees that aBIZinaBOX/JSZCPA, and its employees shall not be liable to the Client for any actions, losses, damages, claims, liabilities, costs or expenses in any way arising out of or relating to this engagement for an aggregate amount in excess of the fees paid by them to aBIZinaBOX for the services performed pursuant to this engagement. Further, in no event will aBIZinaBOX or its employees, agents, or representatives be liable for consequential, special, indirect, incidental, punitive, or exemplary loss damage, or expense (including, without limitation, lost profits and opportunity costs).

To the extent permitted by law, the Client shall indemnify and hold harmless aBIZinaBOX and its employees from and against any and all actions, losses, damages, claims, liabilities, costs and expenses (including, without limitation, reasonable legal fees and expenses) brought against, paid, or incurred by any of them at any time, in any way arising out of or relating to aBIZinaBOX services provided in connection with this engagement, except to the extent finally judicially determined to have resulted from intentional misconduct by aBIZinaBOX.
**> **
> The Limitation on Liability and Indemnification provisions of this engagement letter shall apply regardless of the form of action, loss, damage, claim, liability, cost or expense, whether in contract, statute, tort (including, without limitation, negligence), or otherwise. These provisions, as well as the other agreements and undertakings of the Client, shall survive the completion or termination of this engagement.

There are some that will assert that we are going too far in seeking to protect ourselves…and that’s too bad. It what we do for ourselves, and seek to do for our clients every day. If there is sufficient interest, we are willing to go through our entire twenty-page Engagement Letter and explain what does what to whom. Our view is that the best kind of clients we would ever wish to have, particularly in a tough highly regulated industry like the cannabis industry is clients that are aware and informed about the issues.

As we stated before, we would much rather contribute high-quality content to a forum that gets up on a soapbox and tries to sell something.

CPA Engagement Letter Content – Read Carefully

How does the DEA’s DCD operate

How does the DEA’s DCD operate

The reality of the situation is that assuming that the long-term scenario is that cannabis is going to come off of Schedule I and that there will ultimately be inter-state transactions involving cannabis that even if the individual states were to maintain vast different laws governing cannabis within their borders, the issuance of licenses is going to have to come from a single source. Two examples of this would be the IRS’s issuance of Taxpayer Identification Numbers which are centrally issued but used by the entire United States or a more specialized issuer such as the current Drug Enforcement Administration [“DEA”]. The DEA’s functions in addition to the commonly perceived law enforcement role include the functionality of its predecessor which was referred to as the Bureau of Narcotics and Dangerous Drugs “BNDD”. The functionality of the BNDD currently resides within the DEA’s Diversion Control Division [“DCD”].
The DCD coordinates the gathering of documents an matching of state licenses for practitioners [including MD, DO, DDS, DMD, DVM, DPM], mid-level practitioners [including NP, PA, OD, etc], pharmacists and all allied business entities as a single “choke point”. DCD is the sole logical issuer of choice to take over Cannabis licensing and it is responsible for every single other controlled substance in the United States.
Obviously, either DEA is going to have to remove cannabis from Schedule I or Congress is going to have to take the step before that kind of a change takes place. There is no practical state level option to accomplish the same task. The choice of DCD would also address the single issuer concerns with private blockchain.

Application for Registration Under Controlled Substances Act of 1970
(New Applicants Only)

ON-LINE REGISTRATION CONSISTS OF SIX (6) SECTIONS. Please have the following information available before you begin the application:

Section 1. Personal/Business Information

If you are applying for an Individual Registration (Practitioner, MLP, Researcher) you are required to provide your Full Name, Address, Social Security Number, and Phone Number. If you are applying for a Business Registration, you are required to provide the Name of the Business, Address, Tax ID, and Phone Number.

Section 2. Activity

Business Activity and Drug Schedule information. In addition – Certain registrants for forms 225 and 510 will need to provide specific drug codes and/or chemical codes related to their operations.

Section 3. State License(s)

It is mandatory to provide State medical and/or controlled substance licenses/registrations. Failure to provide VALID and ACTIVE state licenses will be cause to declare the application as defective and it will be withdrawn WITHOUT refund.

Section 4. Background Information

Information pertaining to controlled substances in the applicant’s background.

Section 5. Payment

Payment, via this on-line application, must be made with a Visa or MasterCard, American Express, or Discover. Application fees are not refundable.

Section 6. Confirmation

Applicants will confirm the entered information, make corrections if needed, and electronically submit the application and a submission confirmation will be presented. Applicants will be able to print copies for their records.

WARNING: 21 USC 843(d), states that any person who knowingly or intentionally furnishes false or fraudulent information in the application is subject to a term of imprisonment of not more than 4 years, and a fine under Title 18 of not more than $250,000, or both.

Select Your Business Category

Form 224

Practitioner (MD, DO, DDS, DMD, DVM, DPM)

Mid Level Practitioner (NP, PA, OD, etc.)

Pharmacy

Hospital/Clinic

Teaching Institution

Form 225

Manufacturer

Importer

Exporter

Distributor

Rev. Distributor

Researcher

Canine Handler

Analytical Lab

Form 510

Chemical Manufacturer

Chemical Importer

Chemical Exporter

Chemical Distributor

Form 363

Narcotic Treatment Clinics

What authority medical sales tax exemption?

Medical Sales Tax Exemption

The medical sales tax exemption –  November 8, 2016, the passage of Proposition 64 (The Control, Regulate and Tax Adult Use of Marijuana Act) exempts certain sales of medical marijuana from sales and use tax.

Sales of medical cannabis to those who have a medical marijuana identification card (MMIC) issued on a county-by-county basis by the California Department of Public Health (CDPH) and a valid government-issued identification card are now exempt from sales and use tax. Consumers can obtain the CDPH-issued cards at their county health department, at a cost that varies by county. A paper recommendation from a physician is not sufficient to qualify for this sales tax exemption.

This county-issued MMIC will have the State of California seal and indicate whether the cardholder is a “patient” or “caregiver.” The card will also contain the patient’s or primary caregiver’s photo, a nine-digit ID number, a CDPH website to verify the ID number, an expiration date, and the county that issued the card, as shown below. Cards are valid for the duration of the physician recommendation or up to one year, at which time the card must be renewed. Retailers should retain the purchaser’s nine-digit ID number and expiration date, along with the related sales invoice or other records of sale, to support the exempt sale.

Medical Sales Tax Exemption 
Medical Sales Tax Exemption

Exempted products include medical cannabis, medical cannabis concentrate, edible medical cannabis products, and topical cannabis. These terms are defined in Business and Professions Code section 19300.5.

Retailers should not collect sales tax reimbursement on qualifying exempt sales of medical marijuana. They should claim a deduction on their sales and use tax returns for their qualifying exempt medical marijuana sales. Retailers may verify the validity of a nine-digit ID number on the CDPH website

Sales of recreational marijuana will not start until January 1, 2018. Such sales will be subject to sales tax and an excise tax. A cultivator tax will also apply to marijuana beginning on that date.

Medical Cards 

What is the procedure for cash payments to CDTFA

Procedure For CDTFA Cash Payments

The California Department of Tax and Fee Administration (CDTFA) has updated its procedure for CDTFA cash payments. The procedure requires that all cash payments be made by appointment

Procedure For CDTFA Cash Payments Exceeding $20K
California Dept. of Tax and Fee Administration

only at designated offices. You must call your local office for an appointment to make your payment at least 3 business days in advance. You will be given the date, time and location to transact your payment. If you do not have an appointment, your payment will not be accepted.

If you will be making a payment for an amount greater than $20,000, you must follow the additional instructions provided below.

Payments of Over $20,000

In addition to scheduling an appointment with the CDTFA to make your payment, you must do all of the following:

1. The payment must be placed in a clear, tamper-resistant, bank-deposit-type payment bag that is not larger than 9” x 12”. Do not overstuff the bag. Use more than one bag if your payment does not fit in one. Please contact your local office if you have any questions or need to see a sample bag. Bags may be purchased at office supply stores or online.

2. Complete CDTFA-705, Currency Deposit, and include a copy inside of the payment bag. If your payment requires multiple bags, a payment voucher must be included in each bag.

3. Cash should be sorted by denomination and all bills should face the same direction. Any mutilated, contaminated, worn, or counterfeit currency will not be accepted. The currency counter will be unable to read these notes. You will be contacted for bills that cannot be counted and they will be returned. Bills that are found to be counterfeit will not be returned.

4. Each payment bag must include the account name and account number on the outside of the deposit bag.

If making payment to multiple accounts, a separate bag must be used for each account. When making a payment in person, cash must be enclosed in a sealed bag before entering our lobby.

When you present a cash deposit bag to transact at a CDTFA office, you will receive a conditional receipt which states the amount you listed on the deposit voucher. The payment will be counted at a later time for verification.

You will be contacted if a discrepancy is found during the verification process. Your account will only be credited for the amount that has been verified and accepted by the CDTFA. See CDTFA Notice 245-CPI

California Taxes

What are infor req details – Owner Submission?

Owner Submission Requirements – Owner vs. Financial Interest

The following is a summary of the Owner Submission Requirements – Owner vs. Financial Interests for the Bureau of Cannabis Control license

Owner Submission Requirements - Owner vs. Financial Interest
Owner Submission Requirements – Owner vs. Financial Interest

applications. Where an individual is deemed to be an “Owner”, the requirements are highlighted in pinkish color. Those with a Financial Interest in orange.

“The instructions which accompany the Owner’s Submission state:

  • An owner is defined as a person with an aggregate ownership interest in the commercial cannabis business of 20 percent or more unless the interest is solely a security, lien or encumbrance. 
  • A person with an aggregate ownership interest of 20 percent or more of the person applying for a license or a licensee, unless the interest is solely a security, lien or encumbrance. 
  • The chief executive officer of a nonprofit or other entity (i.e. corporation).
  •  A member of the board of directors of a nonprofit. 
  •  An individual who will be participating in the direction, control, or management of the person applying for a license. 
  •  An owner who is an individual participating in the direction, control, or management of the commercial cannabis business included any of the following: 
  •  A partner of a commercial cannabis business that is organized as a partnership. 
  • A member of a limited liability company of a commercial cannabis business that is organized as a limited liability company. 
  • An officer or director of a commercial cannabis business that is organized as a corporation.”
The Emergency Regulations at   Sec. 5003 and 5004 provide
§ 5003. Designation of Owner (a)- All applicants for a commercial cannabis license shall have at a minimum one individual who meets the definition of “owner” under Business and Professions Code section 26001(al) and who will submit the information required of owners under section 5002
 (b) “Owner” means any of the following:
(1) A person with an aggregate ownership interest of 20 percent or more of the person applying for a license or a licensee, unless the interest is solely a security, lien, or encumbrance.
(2) The chief executive officer of a nonprofit or other entity.
(3) A member of the board of directors of a nonprofit.
(4) An individual who will be participating in the direction, control, or management of the person applying for a license. An owner who is an individual participating in the direction, control, or management of the commercial cannabis business includes any of the following:
(A) A general partner of a commercial cannabis business that is organized as a partnership.
 
(B) A non-member manager or managing member of a limited liability company of a commercial cannabis business that is organized as a limited liability company.
 
(C) An officer or director of a commercial cannabis business that is organized as a corporation.
Authority: Section 26013, Business and Professions Code. Reference: Sections 26001, 26012 and 26013, Business and Professions Code.
The information required of an “Owner” includes
 
(A) The full name of the owner. 
 
(B) The owner’s title within the applicant entity. 
 
(C) The owner’s date of birth and place of birth. 
 
(D) The owner’s social security number or individual taxpayer identification number.
 
(E) The owner’s mailing address. 
 
(F) The owner’s telephone number. This may include a number of the owner’s home, business, or mobile telephone. 
 
(G) The owner’s email address. 
 
(H) The owner’s current employer. 
 
(I) The percentage of the ownership interest held in the applicant entity by the owner. 
 
(J) Whether the owner has an ownership or a financial interest as defined in sections 5003 and 5004, respectively, of this division in any other commercial cannabis business licensed under the Act.
 
(K) A copy of the owner’s government-issued identification. Acceptable forms o£identification are a document issued by a federal, state, county, or municipal government that includes the name, date of birth, physical description, and a picture of the person, such as a driver license. 
 
(L) A detailed description of the owner’s convictions. A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of polo contender. Convictions dismissed under Penal Code section 1203.4 or equivalent non-California law must be disclosed. Convictions dismissed under Health and Safety Code section 11361.8 or equivalent non-California law must be disclosed. Juvenile adjudications and traffic infractions under $300 that did not involve alcohol, dangerous drugs, or controlled substances do not need to be included. For each conviction, the owner sha11 provide the following: 
 
(i) The date of conviction. 
 
(ii) Dates of incarceration, if applicable. 
 
(iii) Dates of probation, if applicable. 
 
(iv) Dates. of parole, if applicable. 
 
(v) A detailed description of the offense for which the owner was convicted. 
 
(vi) A statement of rehabilitation for each conviction. The statement of rehabilitation is to be written by the owner and may contain evidence that the owner would like the Bureau to consider that demonstrates the owner’s fitness for licensure. Supporting evidence may be attached to the statement of rehabilitation and may include, but is not limited to, a certificate of rehabilitation under Penal Code section 4852.01, and dated letters of reference from employers, instructors, or professional counselors that contain valid contact information for the individual providing the reference. 
 
(M) If applicable;a detailed description of any suspension of a commercial cannabis license, revocation of a commercial cannabis license, ar sanctions for unlicensed commercial cannabis activity by a licensing authority or local agency against the applicant or a business entity in which the applicant was an owner or officer within the three years immediately preceding the date of the application. 
 
(N) Attestation to the following statement: Under penalty of perjury, I hereby declare that the information contained within and submitted with the application is complete, true, and accurate. I understand that a misrepresentation of fact is cause for rejection of this application, denial of the license, or revocation of a license issued.
 

§ 5004. Financial Interest in a Commercial Cannabis Business

(a) A financial interest means an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other equity interest in a commercial cannabis business except as provided in subsection (c).
(b) The license application shall include the name, birthdate, and government-issued identification type and number for all individuals who have a financial interest in a commercial cannabis business but are not owners as defined in Business and Professions Code section 26001(1).
These individuals shall not be required to submit the information required of owners under section 5002(c)(20).
(c) Notwithstanding subsection (b), the following persons are not required to be listed on an application for licensure under section 5002(c)(19):
(1) A bank or financial institution whose interest constitutes a loan;
(2) Persons whose only financial interest in the commercial cannabis business is through an interest in a diversified mutual fund, blind trust, or similar instrument;
{3) Persons whose only financial interest is a security interest; lien; or encumbrance on property that will be used by the commercial cannabis business; and
(4) Persons who hold shares of stock that is less than 5 percent of the total shares in a publicly traded company.
Authority: Section 26013, Business and Professions Code. Reference: Sections 26012 and 26051.5, Business and Professions Code.

When can a legal cannabis user in CA own firearms?

Firearms-Cannabis-Never in California

The CA-9’s current ruling is Firearms-Cannabis-Never-California. The holding in Wilson v. Lynch,  [No. 14-15700 D.C. No. 2:11-CV-01679-GMN-PAL] states:

Firearms-Cannabis-Never-California
Firearms-Cannabis-Never-California

The panel affirmed the district court’s dismissal of a complaint challenging the federal statutes, regulations, and guidance that prevented plaintiff from buying a gun because she possesses a Nevada medical marijuana registry card.

The panel preliminarily held that plaintiff lacked standing to challenge 18 U.S.C. § 922(g)(3), which criminalizes possession or receipt of a firearm by an unlawful drug user or a person addicted to a controlled substance.

The panel held that plaintiff’s Second Amendment claims did not fall within the direct scope of United States v. Dugan, 657 F.3d 998 (9th Cir. 2011), which held that the Second Amendment does not protect the rights of unlawful drug users to bear arms.

Taking plaintiff’s allegations in her first amended complaint as true – that she chose not to use medical marijuana – the panel concluded that plaintiff was not actually an unlawful drug user.

The panel held that 18 U.S.C. § 922(d)(3), 27 C.F.R. § 478.11, and the Open Letter issued by the Bureau of Alcohol, Tobacco, Firearms, and Explosives to federal firearms licensees, which prevented plaintiff from purchasing a firearm, directly burdened plaintiff’s core Second Amendment right to possess a firearm.

Applying intermediate scrutiny, the panel nevertheless held that the fit

Firearms-Cannabis-Never-California
Firearms-Cannabis-Never-California

between the challenged provisions and the Government’s substantial interest in violence prevention was reasonable, and therefore the district court did not err in dismissing the Second Amendment claim.

The panel rejected plaintiff’s claims that the challenged laws and Open Letter violated the First Amendment.

The panel held that any burden the Government’s anti-marijuana and anti-gun-violence efforts placed on plaintiff’s expressive conduct was incidental.

The panel held that the challenged laws and Open Letter neither violated plaintiff’s procedural due process rights protected by the Due Process Clause of the Fifth Amendment nor violated the Equal Protection Clause as incorporated into the Fifth Amendment.

Plaintiff did not have a constitutionally protected liberty interest in simultaneously  WILSON V. LYNCH holding

Firearms-Cannabis-Never-California
Firearms-Cannabis-Never-California

a registry card and purchasing a firearm, nor was she a part of a suspect or quasi-suspect class.

Finally, rejecting the claim brought under the Administrative Procedure Act, the panel agreed with the district court that the Open Letter was a textbook interpretative rule and that it was exempt from the Act’s notice-and-comment procedures.

Hence, the answer, for the time being, is clear. If you are on a cannabis registry in California, not only is it illegal to own a firearm, but the authorities will come knocking to CONFISCATE BY FORCE the firearms that you currently possess. [See this article]

The Honolulu HI Police Chief has stated “Your medical marijuana use disqualifies you from ownership of firearms and ammunition,” and you  “have 30 days upon receipt of this letter to voluntarily surrender your firearms.”

Compliance

How is withholding calc Bonus Sup. Pay?

Bonus, Commission, Supplemental Payments – Withholding

Bonus & Commission payments are considered by the IRS as “supplemental wages”.  Meaning they are supplements to an employees regular wages.  The IRS says this about supplemental wages,

“They include, but are not limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan.

How Taxes are Calculated – Bonuses or  Supplemental Wages

How they are taxed largely depends on how they are paid; if you pay a bonus on a single check along with an employee’s other regular wages then you can allow the standard payroll tax tables which are driven by an employees W4 election to dictate the withholding.  However, if you separate the supplemental wage payment out from the employee’s regular wages then the IRS says to withhold Federal income taxes at a rate of 25%.  Therefore, if you pay someone a $5,000 bonus you would withhold $1250.00 for Federal income tax alone.  In addition, you would still be required to withhold State/local income taxes (Colorado at 4.63%), Social Security at 6.2% and Medicare at 1.45% (for YTD wages below $118K annually).

Why is this? At this point, we can only theorize as I’ve never seen anything from the IRS detailing the rationale for this rate.  My assumption has always been that the tax rule is designed to ensure sufficient withholding is taken out of supplemental payments so that employees don’t have a tax surprise on their hands the following April.  The impact for many employees of this supplemental tax rate can be an over funding of their personal income taxes which leads to a tax refund personally.  For an employer, there is zero impact from an expense standpoint.  An employer should NOT deviate from the IRS tax guidance on supplemental wages and should choose one of the two common options for taxing.

Net Bonus Amounts

When an employer wishes to give an employee after-tax net bonus things get complicated.  Since the IRS supplemental tax rate is 25% and can lead to an employee’s earning being over-withheld for the year; we advise employers to shy away from Net bonuses and instead settle on a gross amount for the bonus.  If you wish to give an employee a $1,000 net bonus, using the supplemental rate you would need to pay a gross bonus of $1594.39 (25% fed, 4.63% state, 6.2% social security, 1.45% Medicare).  That’s 37.28% you as an employer would be covering in addition to the net bonus payment and not including another 7.65% or more in employer taxes.  Frustrating? Yes, in particular, if you know your employee is in a relatively low or middle-class personal tax bracket and may have various dependents and other tax breaks personally.  But remember you do not want to give your employees personal tax advice.  At some point you the employer must settle on a gross amount for the bonus and determine if the payment should be combined with the employee’s salary/hourly wages or tax using the flat rate percentages.  Either way, the employee is being rewarded with a bonus make sure you discuss with them the gross amount as that is their true reward not the net result after taxes.

Supplemental Wages Combined with Regular Wages

If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period.

Supplemental Wages Identified Separately from Regular Wages

If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee’s regular wages

1. If you withheld income tax from an employee’s regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages

a. Withhold a flat 25% (no other percentage allowed).

b. If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Subtract the tax withheld from the regular wages. Withhold the remaining tax from the supplemental wages. If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax.

2. If you did not withhold income tax from the employee’s regular wages in the current or immediately preceding calendar year, use method 1-b. This would occur, for example, when the value of the employee’s withholding allowances claimed on Form W-4 is more than the wages.

Regardless of the method you use to withhold income tax on supplemental wages, they are subject to social security, Medicare, and FUTA taxes.”

Tax Compliance

IRS

What is Cost Goods Sold [“COGS”], how is it calculated?

Cannabis Cost Goods Sold Calculations

Cannabis Cost Goods Sold Calculations is not a deduction but actually, an adjustment is taken into account in arriving at gross income. Regulation §1.61-3(a) provides, “gross income” means “…the total sales, less the cost of goods sold.” Although IRC §280E disallows any deduction for a marijuana seller’s ordinary and necessary business expenses, the legislative history fails to include the cost of goods sold in this rule. The literature suggests that Constitutional concerns of the Sixteenth Amendment, which taxes ‘incomes’, are the reason for this exclusion.

In the Senate hearings prior to passing IRC §280E, discussion suggested including the cost of goods sold in the ‘disallowed’ expenses for drug traffickers. However, the feeling that this could create a constitutional issue leading to court challenges (and delays) prevailed, and cost of goods sold remained an available adjustment to drug traffickers.

Although the Service has not issued regulations related to IRC §280E, the Service allows the adjustment for Cost of Goods Sold (COGS) on the tax returns of businesses engaged in drug trafficking. On November 24, 2010, U.S. Representatives Fortney Pete Stark, Barney Frank, Jared Polis, Linda Sanchez, Raul Grijalva, and Sam Farr wrote to the office of the Chief Counsel of the IRS, asking the service to create guidance for regulations related to deductions for state-licensed marijuana businesses.

The Chief Counsel’s Office replied to the Congressman on December 16, 2010, stating that the IRS is unable to issue regulations for IRC §280E since neither the Controlled Substances Act nor IRC §280E makes the exception for medical marijuana. Further, the Chief Counsel places blame on Congress to change either IRC §280E or the Controlled Substances Act.

Cost Method for Cost of Goods Sold

A business must use an inventory method of accounting whenever “the production, purchase or sale of goods is an income-producing factor. Under an inventory method, costs related to producing, acquiring, storing, and handling goods are not currently deductible. These costs must be included in the costs of inventory and deducted when inventory is sold. In the typical business, tax professionals look to minimize current income by taking deductions during the current period. IRC §263A does not magically transform otherwise disallowed costs under IRC §280E into allowed capitalized costs, although the tax professional should look to maximize the number of deductions which can be justifiably capitalized. Much billable work exists for tax and accounting professionals who possess the skills to wade through client inventory records and classify expenses to maximize the cost of goods sold deduction and support the conclusions at an examination.

Generally, the current year inventory costs are added to the beginning of the year inventory amount and reduced by the costs of inventory on hand at the end of the year to calculate costs of goods sold for the year.

Section 471 and methods required by Section 263A provide that marketing, advertising and selling expenses are “not required” to be treated as inventory costs. Under Reg. §1.471–11, 6(a), taxpayers must include as inventoriable costs all direct (e.g., the cost of inventory and delivery, and the cost of materials and labor for manufactured inventory) and indirect production costs (e.g., rent and utilities related to inventory).

Accounting

 

How Do IRC Sec. 263A UNICAP Rules Apply To CA Cannabis?

IRC Sec. 263A UNICAP Rules Apply To CA Cannabis

IRC Sec. 263A UNICAP Rules Apply To CA Cannabis. The rules require more indirect costs to be allocated to inventory than the full absorption rules under IRC §471. The UNICAP rules require a producer of inventory to include in the cost of its inventory the direct costs of such property and such property’s proper share of those indirect costs, part or all of which is allocable to such property.  Under UNICAP, direct costs include direct material costs and direct labor costs. UNICAP is required for most manufacturers and resellers with the exception of businesses with less than $10 million in gross receipts on a three-year rolling average basis.

Most cannabis businesses that do not produce products will not be required to comply with UNICAP. A reseller which is not subject to the UNICAP rules is usually required to include only direct costs in the cost of its inventory.28 A marijuana business would be well advised to comply with the UNICAP rules, whether or not it is required to do so. First, this would allow it to maximize the costs allocated to cost of goods sold. Potentially, it could minimize the number of disallowed business expenses.

Nothing in the code or regulations states taxpayers cannot voluntarily follow the UNICAP rules. For growers of marijuana, not all expenses will be allowed as the cost of goods sold, but many wills. Examples include rent, electricity, water, nutrients, security, insurance, scales, grinders, packaging materials, delivery vans, labor, excise taxes, accounting software, and traceability software.

Generally speaking, a state-licensed marijuana retailer is ‘trafficking’ in the sale of marijuana in violation of the federal CSA and will NOT be allowed a deduction for ordinary and necessary business expenses. The solely written guidance from the IRS comes in the form of a Chief Counsel’s Advice (CCA).  This CCA addresses two questions:

  • First, how is a cost of goods sold determined for a taxpayer subject to IRC §280E? Taxpayers should calculate Cost of goods sold “using the applicable inventory-costing regulations under §471 as they existed when §280E was enacted.30 Therefore, Reg. §1.471-3(b) for resellers, and Regs. §1.471-3(c) and 1.471-11 for producers are applicable for computing COGS.

 

  • Second, may the IRS require the taxpayer to use an inventory method for the controlled substance? “Yes, unless the taxpayer is properly using a non-inventory method to account for the…controlled substance pursuant to the Code, Regulations, or other published guidance.” It is interesting to note that the author is aware of no other circumstances where an interpretation of a law is restricted to other laws in effect at that time of passage.

What is the History of the CHAMPS litigation on IRC Sec. 280E ?

CHAMPS Litigation on IRC Sec. 280E (The ‘Two Business” rule)

The CHAMPS Litigation on IRC Sec. 280E use of IRC 263A alone to increase Cost Of Goods Sold may still leave the legal marijuana business with a punitive effective tax rate after application or IRC §280E. Absent any regulations to guide the practitioner, we look to relevant U.S. Tax Court cases for guidance. It is well established that a taxpayer can have more than one trade or business36. In Californians Helping to Alleviate Med. Problems, Inc. v. Commissioner (CHAMPS)37. the Tax Court expanded IRC §280E to permit the deduction of ordinary and necessary expenses to the extent two businesses are conducted at the same business location.

Some states, including California, operate using a caregiver model. It is important to understand the differences in this business model. Some dispensaries in this model offer palliative care,

CHAMPS litigation IRC Sec. 280E
CHAMPS litigation IRC Sec. 280E

which is specialized medical care for people with serious illnesses. It focuses on providing patients with relief from the systems and stress of a serious illness. The goal is improving the quality of life for both the patient and the family. CHAMPS was in the business of providing counseling and other caregiving services to its members, who were individuals with debilitating diseases.

Under the California Compassionate Use Act of 1996, the taxpayer provided marijuana to members who requested it. The business charged its members a membership fee that generally reimbursed the business for its costs of the caregiving services and its costs of the medical marijuana. This left the business substantially in compliance with California law, since in the caregiver model the caregiver is reimbursed for costs, but should not generate a profit on an ongoing basis. At audit, the Service disallowed the expenses as non-deductible under IRC §280E because they were incurred in connection with the trafficking of a controlled substance under the federal CSA.

47% of the of the CHAMPS members suffered from AIDS, while the remainder suffered from cancer, multiple sclerosis or other terminal or chronic diseases. The primary purpose the entity was to provide caregiving services to its members. The secondary purpose was to provide members with medical marijuana pursuant to the provisions of California law and instruction in the use of the marijuana to benefit their health. The most important aspect of this case is that the palliative care services provided by CHAMPS were extensive. Support group sessions were held for members including those with AIDS, addiction, and emotional development problems.

Low-income members were provided with hearty daily lunches and hygiene supplies were also available. Counseling benefits related to life-coping issues were available. In short, CHAMPS was a palliative care entity that happened to dispense marijuana, rather than simply a marijuana dispenser.

On its tax return, CHAMPS did not make any allocation subject to IRC §280E. All ordinary and necessary business expenses were deducted. At trial, CHAMPS argued they had two businesses: a primary trade or business of palliative care (caregiving) and a secondary trade or business as a marijuana dispenser. CHAMPS argued and the Court agreed, that the deductions for the non-trafficking business should not be subject to IRC §280E. The Service accepts the characterization that two or more undertakings are separate activities unless the characterization is ‘artificial or unreasonable”. Section 280E and its legislative history express a congressional intent to disallow deductions attributable to a trade or business of trafficking in controlled substances. They do not express intent to deny the deduction of all of a taxpayer’s business expenses simply because the taxpayer was involved in trafficking in a controlled substance.

We hold that section 280E does not preclude petitioner from deducting expenses attributable to a trade or business other than that of illegal trafficking in controlled substances simply because petitioner also is involved in the trafficking in a controlled substance. It is important to note that CHAMPS had contemporaneously created records which clearly showed the costs spent on each activity, including detailed time records of employees’ time spent in each of the two businesses.

Absent §280E regulations pertaining to two distinct businesses operating from the same location, we look to the guidance under IRC §183 and the supporting regulations. Reg. §1.183–1(d)(1) provides that “(t)the taxpayer’s characterization will not be accepted, however, when it appears that his characterization is artificial and cannot be reasonably supported by the facts and circumstances of the case.”

Most significant facts and circumstances in making this determination are:

  •  The degree of the organizational and economic interrelationship of various undertakings.
  • The business purpose which is (or might be) served by carrying on the various undertakings separately or together in a trade or business or in an investment setting.
  •  The similarity of various undertakings.

The Tax Court later expanded facts and circumstances test in Rupp v. Commissioner, which provides nine factors for use in determining whether the two undertakings share a close relationship to one another:

  • Whether the undertakings are conducted at the same place;
  • Whether the undertakings were part of a taxpayer’s efforts to find sources of revenue from his or her land;
  • Whether the undertakings were formed as separate activities;
  • Whether one undertaking benefited from the other;
  • Whether the taxpayer used one undertaking to advertise the other;
  • The degree to which the undertakings shared management;
  • The degree to which one caretaker oversaw the assets of both undertakings;
  • Whether the taxpayers used the same accountant for the undertakings
  • The degree to which the undertakings shared books and records.

The Tax Court subsequently applied the nine factors of Rupp in Olive v. Commissioner 139 T.C.No 2..  While not cannabis industry-friendly, Olive helped further frame the outer limitations of the ‘two business rule’. Olive operated “The Vapor Room”, purportedly a medical marijuana dispensary and a caregiving activity. The Court found that the taxpayer was not operating two businesses and was therefore not entitled to a portion of its IRC 61 ordinary and necessary business expenses.

Some of Olive’s patrons suffered from AIDS, HIV, cancer and other terminal diseases. Taxpayer felt CHAMP applied here. The court applied the nine factors from Rupp and found that the taxpayer operated only one business. Contrary to CHAMPS, where the Court found two businesses existed, in Olive the Court determined that there was one activity, trafficking in a controlled substance.

280E

What procedure to validate Google Cloud or Microsoft Ptrs?

Google Cloud – Microsoft Partner Validation

There is nothing that pisses me off than a professional that doesn’t adhere to Professional Standards or State licensing requirements…EXCEPT for purportedly legitimate partner programs that don’t require validation of status such as Google Cloud – Microsoft Partner. Xero’s Accounting Partner Program is particular lax about

Google Cloud - Microsoft Partner
Google Cloud Partner

validation. A week from today, we are going to publish the results of what we find…and we are going to start with Xero’s Ambassadors.

Let’s try a very simple illustration of what the results of a validation check should be able to provide you with.

A Microsoft Partner can be validated VERY quickly with the following:

  • They should be a member of the Microsoft Partner Network and have an MPN or Microsoft Partner Number. aBIZinaBOX’s MPN is 4713037
  • They should be able to display a badge with their competencies like this.

Google Cloud - Microsoft Partner
Validate Partner Program Membership
Microsoft Silver Partner
  • They should be able to show you a letter like this:

Google Cloud - Microsoft Partner
Validate Partner Program Membership
Microsoft Silver Competency

If they are a Google Cloud Partner Program member they should be displaying the current version of the Google Cloud Program logo which looks like this:

Google Cloud - Microsoft Partner
Google Cloud Platform Partner
Google Cloud Partner
  • If the Google Cloud badge they display doesn’t look like that one, then you may NOT be dealing with a legitimate, current partner.
  • The second simple thing they should be able to do if requested is to produce their profile page from the Google Cloud for Work Connection community with their competency badges which looks like this:

Google Cloud - Microsoft Partner
Google Cloud – Microsoft Partner
Google Cloud Partner

Our recent experience with the Xero Partner Program’s leadership has been a cause of substantial concern to us. We work very hard to “play by the rules, and no one should be penalized for doing that. Unfortunately, as we have been sharing, there seems to be very little concern about professional accounting or technology credentials. When leadership “telegraphs” the message that their priority is “selling software” above and beyond the professional standing and bonafide competence of its partners, it undermines and impugns the veracity of those partners that who and what they say that they are. Ultimately, it undermines both the quality of service and credibility in the eyes of their ultimate customers. How would you feel if a loved one was about to have brain surgery and you learned that their surgeon had never gone to medical school, and was in fact, a butcher that was “moonlighting”. They say a picture is worth a thousand words.

Google Cloud - Microsoft Partner
Google Cloud – Microsoft Partner
Breakfast of Champion

Who What Where with the IRS?

If you need to send something to the IRS, they have numerous addresses. This document lists several of the

Internal Revenue Service

more common addresses and links to a bunch more. 

IRS Issues

How much can I contrib. to my SEP plan?

Calculating SEP Contribution Limits

There are rules to consider in calculating SEP contribution limits. The contributions you make to each employee’s SEP-IRA each year cannot exceed the lesser of:

  1. 25% of compensation, or
  2. $55,000 for 2018 ($54,000 for 2017 and subject to annual cost-of-living adjustments for later years).

These limits apply to contributions you make for your employees to all defined contribution plans, which includes SEPs. Compensation up to $275,000 in 2018 ($270,000 in 2017 and subject to cost-of-living adjustments for later years) of an employee’s compensation may be considered. If you’re self-employed, use a special calculation to determine contributions for yourself.

Contributions must be made in cash; you cannot contribute property.

If you’ve contributed more than the annual limits to your SEP plan, find out how to correct this mistake.


How much can I contribute if I’m self-employed?

The same limits on contributions made to employees’ SEP-IRAs also apply to contributions if you are self-employed. However, special rules apply when figuring the maximum deductible contribution. See Publication 560 for details on determining the contribution amount.


Must I contribute the same percentage of salary for all participants?

Most SEPs, including the IRS model Form 5305-SEP, require you to make allocations proportional to your employees’ salary/wages. This means that everyone’s contribution is the same percentage of salary. 

If you haven’t made contributions to participants’ SEP-IRAs equal to the same percentage of each participant’s compensation, find out how you can correct this mistake.

If you are self-employed, base your contribution on net profit – minus one-half of the self-employment tax – minus your SEP contribution. See IRS Publication 560 on determining the contribution amount.


If I participate in a SEP plan, can I also make tax-deductible traditional IRA contributions to my SEP-IRA?

If the SEP-IRA permits non-SEP contributions, you can make regular IRA contributions (including IRA catch-up contributions if you are age 50 and older) to your SEP-IRA, up to the maximum annual limit. However, the amount of the regular IRA contribution that you can deduct on your income tax return may be reduced or eliminated due to your participation in the SEP plan.

If you have further questions, you can submit a ticket, or try the IRS SEP page

 

How file a complaint about a tax pro or return preparer?

File Complaint – Tax Pro Return

If you need to File Complaint – Tax Pro Return

  • IRS OPR Circular 230 Tax Professional Complaint – is submitted in a letter to OPR. 

Internal Revenue Service
Office of Professional Responsibility
SE:OPR – Room 7238/IR
1111 Constitution Avenue NW
Washington, DC 20224

The Internal Revenue Service’s [“IRS’s”] Office of Professional Responsibility [“OPR”] is the point of contact for Circular 230 tax practitioner professional discipline and regulation. 

OPR’s organizational structure includes three major segments: Office of the Director, Legal Analysis Branch, and Operations and Management Branch.

OPR is committed to:

  • Independent, fair and equitable treatment of all tax practitioners consistent with our Title 31 authority and principles of due process.
  • Rendering fair and independent determinations regarding alleged misconduct in violation of Circular 230, Regulations Governing Practice before the Internal Revenue Service.
  • Educating/maintaining tax professionals’ knowledge of relevant Circular 230 provisions.
  • Providing guidance and feedback to field/agency sources regarding essential referral criteria for each relevant Circular 230 provision.
  • Strengthening partnerships with other parts of the IRS and with external practitioner organizations.
  • Developing procedures that ensure timely case resolution.
  • Developing policies and regulations that ensure fair and equitable disposition of Circular 230 cases.
  • Developing and implementing proactive strategies for identifying violations of Circular 230.

OPR maintains a FAQ for Circular 230 Tax Professionals that can be found here

Treasury Inspector General for Tax Administration [“TIGTA”]     

audits, investigations, and inspections and evaluations protect and promote the fair administration of the Federal tax system and work to ensure that the Internal Revenue Service (IRS) is properly doing its job. 

File Complaint - Tax Pro Return
TIGTAaccountable for the trillions of dollars in tax revenue it collects each year.

TIGTA reports directly to the Secretary of the Treasury and has oversight and review responsibility that extends to the IRS Office of Chief Counsel, the IRS Oversight Board, and the Taxpayer Advocate Service.

A maintains a highly skilled, proactive, and diverse Inspector General organization dedicated to working in a collaborative environment with key stakeholders to foster and promote fair tax administration.

Regulation Tax Pros

How report cash pmt > $10,000 to IRS?

Report cash payment over $10,000 to IRS

Form 8300 – Is Your Business Filing the Proper Cash Transaction Forms?

Has your business ever received a large cash payment, and you were not quite sure what your reporting obligations were regarding that large payment? The general rule is that you must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions.

The Form 8300 provides valuable information to the Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN)

in their efforts to combat money laundering. This is an important effort, since money laundering is a tool used to facilitate various criminal activities, ranging from tax evasion to terrorist financing to drug dealing, to hide the proceeds from their illegal activities.

Filing Form 8300

Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file a Form 8300. Persons includes an individual, a company, a corporation, a partnership, an association, a trust, or an estate. Persons must file a Forms 8300 with the IRS if any part of the transaction occurs within any of the 50 states, the District of Columbia, or a U.S. possession or territory (American Samoa, The Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico and the U.S. Virgin Islands).

If you are required to file Form 8300, you must do so by the 15th day after the date the cash transaction occurred. A person can file Forms 8300 electronically or by mailing the form to the IRS at: Detroit Computing Center, P.O. Box 32621, Detroit, Michigan 48232.

In addition to filing Forms 8300 with the IRS, companies need to furnish a written statement to each person whose name is required to be included in the Form 8300 by January 31 of the year following the transaction. This statement must include the name, address, contact person, and telephone number of the business filing Form 8300, the aggregate amount of reportable cash the business was required to report to the IRS from the person receiving the statement, and that the business provided this information to the IRS.

Meeting the proper filing requirement and the requirement to furnish a written statement to each person named on the Form 8300 is very important, because there are potential civil and criminal penalties for failure to file Form 8300. Penalties for violation of the Form 8300 filing and furnishing requirements have been increased by the Trade Preferences Extension Act of 2015. Increased penalties apply to Forms 8300 and related notices requiring filing or furnishing after December 31, 2015. In addition, penalty amounts are now adjusted annually for inflation.

Electronic Filing of Form 8300

On Sept 19, 2012, FinCEN announced that businesses may electronically file their Forms 8300 using the Bank Secrecy Act (BSA) Electronic Filing (E-Filing) System. E-filing is free, and is a quick and secure way for persons to file Forms 8300. Filers will receive an electronic acknowledgment of each submission. For more information about Form 8300 e-filing, see the FinCEN news release.

Doing Business in Cash

How do I use the Client Support Portal?

 

  • The first step is to select the Support Portal which can be found on the  upper right of most pages on the website or in the navigation bars.

    Support Portal Access

 

 

 

 

  • The second step is to register with the support portal.
Support Portal Registration

 

 

 

  • Once you have completed the registration, you must accept our General Terms and Conditions, then submit.

    Accept Support Terms and Submit
  • The next step is to give your issue a short title.
    Give Your Support Issue a Title

     

     

 

 

 

 

  • Once you have given the issue a title, then you need to select the aBIZinaBOX Services Category
    Select A Support Service Type

     

  • and select the proper Service Priority for your issue.
    Setting Ticket Priority

     

 

  • Once those are set, you can select one of the pre-existing FAQs or references already contained on the website. These show up in the yellowish box. If you don’t see relevant content, you can ignore the list an finish describing your issue. You may also upload certain types of attachments [we don’t permit certain types of attachments due to potentially dangerous content.
    Completing a Support Ticket

    Once you have completed the Support Ticket, hit submit and we will get back to you shortly.

  • You can always come back to the portal to view your current or prior tickets.
    Existing Tickets

    Return to our home page.

What are the definitions applicable to Cultivation?

§ 8000. Definitions.

The following definitions, in addition to those stated in section 26001 of the Business and Professions Code, apply to this chapter.

  1. “Act” means the Medicinal and Adult-Use Cannabis Regulation and Safety Act, division 10, chapter 1 (commencing with section 26000) of the Business and Professions Code.
  2. “Applicant” means an owner of the applicant entity applying for a state license pursuant to this division. (c) “Applicant entity” means the entity applying for a state cannabis cultivation license.
  1. “Batch” or “harvest batch” means a specifically identified quantity of dried flower or trim, leaves, and other cannabis plant matter that is uniform in strain, harvested in whole, or in part, at the same time, and, if applicable, cultivated using the same pesticides and other agricultural chemicals.
  2. “Bureau” means the Bureau of Cannabis Control within the Department of Consumer affairs, formerly named the Bureau of Marijuana Control, the Bureau of Medical Cannabis Regulation, and the Bureau of Medical Marijuana Regulation.
  3. “Canopy” means the designated area(s) at a licensed premises, except nurseries, that will contain mature plants at any point in time, as follows:
    1. Canopy shall be calculated in square feet and measured using clearly identifiable boundaries of all area(s) that will contain mature plants at any point in time, including all of the space(s) within the boundaries;
    2. Canopy may be noncontiguous but each unique area included in the total canopy calculation shall be separated by an identifiable boundary that includes, but is not limited to, interior walls, shelves, greenhouse walls, hoop house walls, garden benches, hedgerows, fencing, garden beds, or garden plots; and
    3. If mature plants are being cultivated using a shelving system, the surface area of each level shall be included in the total canopy calculation.
  4. “Commercial cannabis activity” includes the cultivation, possession, manufacture, distribution, processing, storing,

laboratory testing, packaging, labeling, transportation, delivery or sale of cannabis and cannabis products as provided for this chapter.

  1. “Cultivation” means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis.
  2. “Cultivation site” means a location where commercial cannabis is planted, grown, harvested, dried, cured, graded, or trimmed, or that does all or any combination of those activities.
  3. “Department” means the California Department of Food and Agriculture.
  4. “Dried flower” means all dead cannabis that has been harvested, dried, cured, or otherwise processed, excluding leaves and stems.
  5. “Flowering” means that a cannabis plant has formed a mass of pistils measuring greater than one half inch wide at its widest point.
  6. “Immature plant” or “immature” means a cannabis plant that is not flowering.
  7. “Indoor cultivation” means the cultivation of cannabis within a permanent structure using exclusively artificial light or within any type of structure using artificial light at a rate above twenty-five watts per square foot.
  8. “Kief” means the resinous trichomes of cannabis that may accumulate in containers or be sifted from loose, dry cannabis flower with a mesh screen or sieve.
  9. “Licensee” means any person holding a license pursuant to this chapter. (q) “Lot” means a batch, or a specifically identified portion of a batch.
  1. “Mature plant” means a cannabis plant that is flowering.
  2. “Mixed-light cultivation” means the cultivation of mature cannabis in a greenhouse, hoop-house, glasshouse, conservatory, hothouse, or other similar structure using light deprivation and/or one of the artificial lighting models described below:
    1. “Mixed-light Tier 1” the use of artificial light at a rate of six watts per square foot or less;
    2. “Mixed-light Tier 2” the use of artificial light at a rate above six and below or equal to twenty-five watts per square foot.
  3. “Net weight” means the weight of harvested cannabis and cannabis products that meet the requirements in section 8406(b).
  4. “Nonmanufactured cannabis product” means flower, shake, kief, leaf, and pre-rolls.
  5. “Nursery” means a licensee that produces only clones, immature plants, seeds, and other agricultural products used specifically for the propagation and cultivation of cannabis.
  6. “Outdoor cultivation” means the cultivation of mature cannabis without the use of artificial lighting in the canopy area at any point in time. Artificial lighting is permissible only to maintain immature plants.
  7. “Pest” means any of the following that is, or is liable to become, dangerous or detrimental to the agricultural or

nonagricultural environment of the state:

    1. Any insect, predatory animal, rodent, nematode or weed; and
    2. Any form of terrestrial, aquatic, or aerial plant or animal virus, fungus, bacteria, or other microorganism (except viruses, fungi, bacteria, or other microorganisms on or in living man or other living animals).
  1. “Premises” means the designated structure or structures and land specified in the application that is owned, leased, or otherwise held under the control of the applicant or licensee where the commercial cannabis activity will be or is conducted. The premises shall be a contiguous area and shall only be occupied by one licensee.
  2. “Pre-roll” means nonmanufactured cannabis product(s) rolled in paper.

(aa) “Process”, ”Processing” and “Processes” means all activities associated with drying, curing, grading, trimming, storing, packaging, and labeling of nonmanufactured cannabis products.

(ab) “Track-and-trace system” means the state-approved system used to track commercial cannabis activity and movement.

(ac) “Unique identifier” or “UID” means an alphanumeric code or designation used for reference to a specific plant on a licensed premises and any cannabis or cannabis product derived or manufactured from that plant.

(ad) “Watts per square foot” means the sum of the maximum wattage of all lights identified in the designated canopy area(s) in the cultivation plan divided by the sum of the dimensions in square feet of designated canopy area(s) identified in the cultivation plan.

(ae) “Wet weight” means the weight of harvested, non-dried cannabis, on the licensed premises or being transported between licensees, that do not meet the net weight requirements in section 8406(b).

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26001, Business and Professions Code; and Section 12754.5, Food and Agricultural Code.

What are the requirements for Cultivation licenses?

Article 2. Applications.

§ 8100. Temporary Licenses.

A temporary license is a conditional license that authorizes the licensee to engage in commercial cannabis activity as a licensee would be permitted to do under the privileges of an annual license of the same type. A temporary licensee shall follow all applicable statutes and regulations as a licensee would be required to do if the licensee held an annual license of the same type.

  1. Temporary license applications shall be completed and submitted online at calcannabis.cdfa.ca.gov or mailed to the department at P.O. Box 942871, Sacramento, CA 94271.
  2. An application for a temporary cultivation license shall include the following:
    1. The license type, pursuant to section 8201 of this chapter, for which the applicant is applying and whether the

application is for an M-license or A-license;

    1. If the applicant has already submitted an application for annual licensure, the application number; (3) The legal business name of the applicant entity;
  1. The full legal name, mailing address, phone number, email address, and affiliation of the designated responsible party who shall:
    1. Be an owner with legal authority to bind the applicant entity; (B) Serve as agent for service of process; and

(C) Serve as primary contact for the application. (5) The physical address of the premises;

(6) A copy of a valid license, permit, or other authorization, issued by a local jurisdiction, that enables the applicant entity to conduct commercial cannabis activity at the location requested for the temporary license. For the purposes of this section, “other authorization” shall include, at a minimum, a written statement or reference that clearly indicates the local jurisdiction intended to grant permission to the applicant entity to conduct commercial cannabis activity at the premises.

  1. When the applicant provides a license, permit, or other authorization from the local jurisdiction where the licensed premises will be or is located, the department shall notify the contact person for the local jurisdiction pursuant to section 26055 of the Business and Professions Code. If the local jurisdiction does not respond to the department’s   notification within ten (10) calendar days, the department may issue a temporary license to the applicant.
  2. A temporary license issued pursuant to this chapter shall be valid for one-hundred twenty (120) days from the effective date. No temporary license shall be effective prior to January 1, 2018.
  3. A temporary license may be extended for additional ninety (90) day periods if a complete application for licensure has been submitted to the department pursuant to section 8102 of this chapter.
  4. A temporary license does not obligate the department to issue an annual license nor does the temporary license create a vested right in the holder to either an extension of the temporary license or to the granting of a subsequent annual license.
  5. Temporary applications and licenses are exempt from fees. (h) This section shall remain in effect until January 1, 2019.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26050.1 and 26055, Business and Professions Code.

§ 8101. Annual License Application Fees.

The following are nonrefundable application fees for the specified annual license type and shall be paid by the applicant at the time the complete application is submitted to the department:

(a) Specialty Cottage Outdoor $135 (b) Specialty Cottage Indoor $205 (c) Specialty Cottage Mixed-Light Tier 1 $340 (d) Specialty Cottage Mixed-Light Tier 2 $580 (e) Specialty Outdoor $270 (f) Specialty Indoor $2,170 (g) Specialty Mixed-Light Tier 1 $655 (h) Specialty Mixed-Light Tier 2 $1,125 (i) Small Outdoor $535 (j) Small Indoor $3,935 (k) Small Mixed-Light Tier 1 $1,310 (l) Small Mixed-Light Tier 2 $2,250 (m) Medium Outdoor $1,555 (n) Medium Indoor $8,655 (o) Medium Mixed-Light Tier 1 $2,885 (p) Medium Mixed-Light Tier 2 $4,945 (q) Nursery $520 (r) Processor $1,040

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26012, Business and Professions Code.

§ 8102. Annual License Application Requirements.

Applications for a cultivation license shall be completed and submitted online at calcannabis.cdfa.ca.gov or by mailing a hard copy of the application to the department at P.O. Box 942872, Sacramento, CA 94271-2872. Application fees, pursuant to section 8101 of this chapter, shall accompany the applications submitted online at calcannabis.cdfa.ca.gov or by mail to the department at P.O. Box 942872, Sacramento, CA 94271-2872. Applications shall include the following, if applicable:

  1. The legal business name of the applicant entity.
  2. The license type, pursuant to in section 8201 of this chapter, for which the applicant is applying and whether the application is for an M-license or A-license;
  3. A list of all the types, including the license numbers of valid licenses, from the department and other cannabis licensing

authorities that the applicant already holds; (d) The physical address of the premises;

  1. The mailing address of the applicant;
  2. A designated responsible party, who shall also be an owner, with legal authority to bind the applicant entity, and the primary contact for the application. The following information shall be provided for the designated responsible party: full legal name, title, mailing address, primary contact phone number, email address, and a copy of the owner’s government-issued identification. Acceptable forms of identification are a document issued by a federal, state, county, or municipal government, including, but not limited to, a driver’s license, that contains the name, date of birth, physical description, and picture of the individual;
  3. An individual or entity serving as agent for service of process for the applicant. The following information shall be provided for the agent for service of process: full legal name, mailing address, primary contact phone number, and email address;
  4. A complete list of every owner of the applicant entity pursuant to section 8103 of this chapter. Each individual owner named shall submit the following information:
    1. Full legal name;
    2. Title within the applicant entity; (3) Date of birth;

(4) Social security number or individual taxpayer identification number; (5) Home address;

(6) Primary phone number; (7) Email address;

  1. Date ownership interest in the applicant entity was acquired;
  2. Percentage of the ownership interest held in the applicant entity by the owner;
  3. A list of all the valid licenses, including license type(s) and license number(s), from the department and other cannabis licensing authorities that the owner is listed as either an owner or financial interest holder;
  4. A copy of their government-issued identification. Acceptable forms of identification are a document issued by a federal, state, county, or municipal government, including that includes the name, date of birth, physical description, and picture of the person, such as a driver’s license.
  5. If applicable, a detailed description of criminal convictions. A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere. Convictions dismissed under sections 1203.4, 1203.4a and 1203.41 of the Penal Code or equivalent non-California law shall be disclosed. Juvenile adjudications and traffic infractions do not need to be included. For each conviction, all of the following shall be provided:
    1. The date of conviction;
    2. Date(s) of incarceration, if applicable; (C) Date(s) of probation, if applicable; (D) Date(s) of parole, if applicable;
  1. A detailed description of the offense for which the owner was convicted; and
  2. A statement of rehabilitation for each conviction. The statement of rehabilitation is to be written by the owner and may contain evidence that the owner would like the department to consider that demonstrates the owner’s fitness for licensure. Supporting evidence may be attached to the statement of rehabilitation and may include, but is not limited to, a certificate of rehabilitation under section 4852.01 of the Penal Code, dated letters of reference from employers, instructors, or professional counselors that contain valid contact information for the individual providing the reference.
  1. A copy of their completed application for electronic fingerprint images submitted to the Department of Justice.
  1. A complete list of financial interest holders pursuant to section 8103 of this chapter, including the following information for:
    1. Individuals: full legal name, tax identification number (social security number, individual taxpayer identification number, or national identifcation number), government identification number, and type of government identification; and
    2. Business entities: legal business name and employer identification number.
  2. Copies of all documents filed with the California Secretary of State, which may include, but are not limited to, articles of incorporation, operating agreement, partnership agreement, fictitious business name statement, certificate of stock, articles of organization, certificate of limited partnership, and statement of partnership authority. If an applicant is a foreign corporation, a certificate of qualification issued by the California Secretary of State pursuant to section 2105 of the Corporations Code;
  3. A valid seller’s permit number issued by the California Department of Tax and Fee Administration, or confirmation from the California Department of Tax and Fee Administration that a seller’s permit is not needed. If the applicant entity has not yet received a seller’s permit, the applicant entity shall attest that they are currently applying for a seller’s permit;
  4. For applicants that are a cannabis cooperative as defined by division 10, chapter 22 (commencing with section 26220) of the Business and Professions Code, identification of all members;
  5. Evidence that the applicant entity has the legal right to occupy and use the proposed location pursuant to section 8104 of this chapter;
  6. Evidence of having obtained a surety bond in the amount of not less than $5,000, payable to the department. The bond shall be issued by a corporate surety licensed to transact surety business in the State of California;
  7. Evidence of enrollment with the applicable Regional Water Quality Control Board or State Water Resources Control

Board for water quality protection programs or written verification from the appropriate board that enrollment is not necessary;

  1. Evidence that the applicant has conducted a hazardous materials record search of the EnviroStor database for the proposed premises. If hazardous sites were encountered, the applicant shall provide documentation of protocols implemented to protect employee health and safety;
  2. Evidence of exemption from, or compliance with, division 13 (commencing with section 21000) of the Public Resources Code, California Environmental Quality Act (CEQA). The evidence provided shall be one of the following:
    1. A copy of the applicant’s license, permit, or other authorization from the local jurisdiction, if the local jurisdiction has adopted an ordinance, rule, or regulation pursuant to section 26055(h) of the Business and Professions Code   that requires discretionary review and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity.
    2. A copy of the Notice of Determination or Notice of Exemption and a copy of the CEQA document, or reference to where it can be located electronically, if the applicant does not wish to provide a copy of the license, permit, or other authorization provided by the local jurisdiction or if the local jurisdiction has not adopted an ordinance, rule, or regulation pursuant to section 26055(h) of the Business and Professions Code that requires discretionary review   and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity.
    3. If an applicant does not have the evidence specified in subsections (1) or (2), or if the local jurisdiction did not prepare a CEQA document, the applicant will be responsible for the preparation of an environmental document in compliance with CEQA that can be approved or certified by the department, unless the department specifies otherwise.
  3. For indoor and mixed light license types, identification of all power sources for cultivation activities, including but not limited to, illumination, heating, cooling, and ventilation;
  4. A property diagram pursuant to section 8105 of this chapter;
  5. A proposed cultivation plan pursuant to section 8106 of this chapter;
  6. Identification of all of the following applicable water sources used for cultivation activities and the applicable supplemental information for each source pursuant to section 8107 of this chapter:
    1. A retail water supplier; (2) A groundwater well;
  1. A rainwater catchment system;
  2. A diversion from a surface waterbody or an underground stream flowing in a known and definite channel;
  1. A copy of any final lake or streambed alteration agreement issued by the California Department of Fish and Wildlife, pursuant to sections 1602 or 1617 of the Fish and Game Code, or written verification from the California Department of Fish and Wildlife that a lake and streambed alteration agreement is not required;
  1. An attestation that the proposed location is at least a six-hundred (600) foot radius from a school providing instruction in kindergarten or any grades one (1) through twelve (12), or a day care center or youth center as defined in section 26001 of the Business and Professions Code, that is in existence at the time the application is submitted, or that the premises complies with a local ordinance specifying a different radius. The distance shall be measured in the same manner as provided in subsection (c) of section 11362.768 of the Health and Safety Code unless otherwise provided by   law;
  2. An attestation that they will enter into, or have already entered into, and will abide by the terms of a labor peace agreement if the applicant entity will have twenty (20) or more employees on payroll at any one time;
  3. An attestation that the applicant entity is an “agricultural employer” as defined by the Alatorre-Zenovich-Dunlap- Berman Agricultural Labor Relations Act of 1975; division 2, part 3.5 (commencing with section 1140) of the Labor Code;
  4. An attestation that the local fire department has been notified of the cultivation site if the applicant entity is an indoor license type;

(aa) Any applicant that may fall within the scope of sovereign immunity that may be asserted by a federally recognizable tribe or other sovereign entity shall waive any sovereign immunity defense that the applicant may have, may be

asserted on its behalf, or may otherwise be asserted in any state or local administrative or judicial enforcement actions against the applicant or licensee, regardless of the form of relief sought, whether monetary or otherwise, under the state laws and regulations governing commercial cannabis activity, and shall provide documentation as may be requested by the department that establishes that the applicant has the lawful authority to enter into the waiver described above and has effectively done so. The limited waiver of sovereign immunity shall meet the requirements of the following:

    1. The written limited waiver shall include that the applicant or licensee has the lawful authority to enter into the waiver required by this section, the applicant or licensee hereby waives sovereign immunity, and the applicant or licensee agrees to do all of the following:
      1. Provide documentation to the department that establishes that the applicant or licensee has the lawful authority to enter into the waiver required by this section;
      2. Conduct all commercial cannabis activity in full compliance with the state laws and regulations governing commercial cannabis activity, including submission to all enforcement provisions thereof;
      3. Allow access as required by statute or regulation by persons or entities charged with duties under the state laws and regulations governing commercial cannabis activity to any premises or property at which the   applicant conducts any commercial cannabis activity, including premises or property where records of commercial cannabis activity are maintained by or for the applicant or licensee;
      4. Provide any and all records, reports, and other documents as may be required under the state laws and regulations governing commercial cannabis activity;
      1. Conduct commercial cannabis activity with other state commercial cannabis licensees only, unless otherwise specified by state law;
      2. Meet all of the requirements for licensure under state laws and regulations governing the conduct of commercial cannabis activity, and provide truthful and accurate documentation and other information of the applicant’s qualifications and suitability for licensure as may be requested by the department;
      3. Submit to the personal and subject matter jurisdiction of the California courts to address any matter related to the waiver or commercial cannabis application, license, or activity, and that all such matters and proceedings shall be governed, construed and enforced in accordance with California substantive and procedural law, including but not limited to the Act;
    1. Any applicant or licensee shall immediately notify the department of any changes that may materially affect the applicant and licensee’s compliance with subsection (1).
    2. Any failure by an applicant or licensee to comply with the requirements of subsections (1) and (2) shall be a basis for denial of an application or renewal or discipline of a licensee.

(bb) The department shall not approve an application for a state license if approval of the license would violate the provisions of any local ordinance or regulation adopted in accordance with section 26200 of the Business and Professions Code by a county or, if within a city, a city, within which the licensed premises is to be located.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26051.5, 26054, 26055, 26060.1, 26066, Business and Professions Code.

§ 8103. Owners and Financial Interests Holders. (a) “Owner” means any of the following:

  1. A person with an aggregate ownership interest of twenty (20) percent or more in the person applying for a license or a licensee, unless the interest is solely a security, lien, encumbrance.
  2. The chief executive officer of a nonprofit or other entity. (3) A member of the board of directors of a nonprofit.

(4) An individual who will be participating in the direction, control, or management of the person applying for a license. (b) An owner who is an individual participating in the direction, control, or management of the commercial cannabis

business includes any of the following:

  1. A partner of a commercial cannabis business that is organized as a partnership;
  2. A managing member of a limited liability company of a commercial cannabis business that is organized as a limited liability company;
  3. An officer or director of a commercial cannabis business that is organized as a corporation.
  1. All individuals and business entities that have a financial interest in a commercial cannabis business but are not owners as defined in subsections (a) or (b) of this section shall be listed on an application for licensure under section 8102 (i) of this chapter. “Financial interest” means an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other fully-vested equity interest in a commercial cannabis business.
  2. Notwithstanding subsections (a), (b), or (c), the following are not considered to be owners or financial interest holders: (1) A bank or financial institution whose interest constitutes a loan;
  1. Persons whose only financial interest in the commercial cannabis business is through an interest in a diversified mutual fund, blind trust, or similar instrument;
  2. Persons whose only financial interest is a security, lien, or encumbrance on property that will be used by the commercial cannabis business; and
  3. Persons who hold a share of stock that is less than five (5) percent of the total shares in a publicly traded company.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26001 and 26051, Business and Professions Code.

§ 8104. Legal Right to Occupy.

  1. If the applicant is the owner of the property on which the premises is located, the applicant shall provide to the department a copy of the title or deed to the property.
  2. If the applicant is not the owner of the property upon which the premises is located, the applicant shall provide the following to the department:
    1. A document from the property owner or property owner’s agent where the commercial cannabis activity will occur that states the applicant has the right to occupy the property and acknowledges that the applicant may use the property for commercial cannabis cultivation;
    2. The property owner’s mailing address and phone number; and
    3. A copy of the lease or rental agreement, or other contractual documentation.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26051.5, Business and Professions Code.

§ 8105. Property Diagram.

A property diagram shall be submitted with each application and shall contain the following:

  1. Boundaries of the property and the proposed premises wherein the license privileges will be exercised with sufficient detail to enable ready determination of the bounds of the premises showing all perimeter dimensions, entrances, and

exits to both the property and premises;

  1. If the proposed premises consists of only a portion of a property, the diagram shall be labeled indicating which part of the property is the proposed premises and what the remaining property is used for.
  2. All roads and water crossings on the property;
  3. If the applicant is proposing to use a diversion from a waterbody, groundwater well, or rain catchment system as a water source for cultivation, include the following locations on the property diagram with locations also provided as coordinates in either latitude and longitude or the California Coordinate System:
    1. Sources of water used, including the location of waterbody diversion(s), pump location(s), and distribution system; and
    2. Location, type, and capacity of each storage unit to be used for cultivation. (e) The assessor’s parcel number(s);
  1. The diagram shall be to scale; and
  2. The diagram shall not contain any highlighting.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012, 26051.5, and 26060, Business and Professions Code.

§ 8106. Cultivation Plan Requirements.

  1. The cultivation plan for Specialty Cottage, Specialty, Small and Medium licenses shall include all of the following: (1) A detailed premises diagram showing all boundaries and dimensions in feet of the following proposed areas to

scale:

    1. Canopy area(s), including aggregate square footage if the canopy areas are noncontiguous; (B) Area(s) outside of the canopy where only immature plants shall be maintained, if applicable; (C) Designated pesticide and other agricultural chemical storage area(s);
  1. Designated processing area(s) if the licensee will process on site;
  2. Designated packaging area(s) if the licensee will package products on site;
  3. Designated composting area(s) if the licensee will compost cannabis waste on site; (G) Designated secured area(s) for cannabis waste if different than subsection (F) above; (H) Designated area(s) for harvested cannabis storage; and
  1. For indoor and mixed-light license type applications, a lighting diagram with the following information shall be included:
    1. Location of all lights in the canopy area(s); and
    2. Maximum wattage, or wattage equivalent, of each light.
  1. A pest management plan which shall include, but not be limited to, the following:
    1. Product name and active ingredient(s) of all pesticides to be applied to cannabis during any stage of plant growth; and
    2. Integrated pest management protocols, including chemical, biological and cultural methods the applicant anticipates using to control or prevent the introduction of pests on the cultivation site.
  2. A cannabis waste management plan meeting the requirements of section 8108 of this chapter. (b) The cultivation plan for nursery licenses shall include the following information:
  1. A detailed premises diagram showing all boundaries and dimensions, in feet, of the following proposed areas to scale:
    1. Area(s) which shall contain only immature plants;
    2. Designated research and development area(s) which may contain mature plants; (C) Designated seed production area(s) which may contain mature plants;
  1. Designated pesticide and other agricultural chemical storage area(s);
  2. Designated composting area(s) if the licensee will compost cannabis waste on site; and (F) Designated secured area(s) for cannabis waste if different than subsection (E) above.
  1. A pest management plan that shall include, but not be limited to, the following:
    1. Product name and active ingredient(s) of all pesticides to be applied to cannabis during any stage of plant growth; and
    2. Integrated pest management protocols, including chemical, biological and cultural methods the applicant anticipates using to control or prevent the introduction of pests on the cultivation site.
  2. A cannabis waste management plan pursuant to section 8108 of this chapter.
  1. The cultivation plan for processor licenses shall include a detailed premises diagram showing all boundaries and dimensions, in feet, of the following proposed areas:
    1. Designated processing area(s);
    2. Designated packaging area(s), if the licensee will package and label products on site; (3) Designated composting area(s) if the licensee will compost cannabis waste on site;

(4) Designated secured area(s) for cannabis waste if different than subsection (3) above; and; (5) Designated area(s) for harvested cannabis storage;

(6) A cannabis waste management plan pursuant to section 8108 of this chapter.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012, 26051.5, 26060, and 26060.1, Business and Professions Code.

§ 8107. Supplemental Water Source Information.

The following information shall be provided for each water source identified by the applicant: (a) Retail water supply sources:

  1. If the water source is a retail water supplier, as defined in section 13575 of the Water Code, such as a municipal provider, identify the retail water supplier.
  2. If the water source is a small retail water supplier, such as a delivery service, and is subject to subsection (a)(1)(B) of section 26060.1 of the Business and Professions Code:
    1. If the retail water supplier contract is for delivery or pickup of water from a surface water body or an underground stream flowing in a known and definite channel, provide all of the following:
      1. The name of the retail water supplier under the contract;
      2. The geographic location coordinates in either latitude and longitude or the California Coordinate System of any point of diversion used by the retail water supplier to divert water delivered to the applicant under the contract;
      3. The authorized place of use of any water right used by the retail water supplier to divert water delivered to the applicant under the contract; and
      4. The maximum amount of water delivered to the applicant for cannabis cultivation in any year.
    2. If the retail water supplier contract is for delivery or pickup of water from a groundwater well, provide all of the following:
      1. The name of the retail water supplier;
      2. The geographic location coordinates for any groundwater well used to supply water delivered to the applicant, in either latitude and longitude or the California Coordinate System;
      3. The maximum amount of water delivered to the applicant for cannabis cultivation in any year; and (iv) A copy of the well log filed with the Department of Water Resources pursuant to section 13751 of the

Water Code for each percolating groundwater well used to divert water delivered to the applicant. If no well log is available, the applicant shall provide evidence from the Department of Water Resources indicating that the Department does not have a record of the well log. When no well log is available, the State Water Resources Control Board may request additional information about the well.

  1. If the water source is a groundwater well:
    1. The groundwater well’s geographic location coordinates in either latitude and longitude or the California Coordinate System; and
    2. A copy of the well log filed with the Department of Water Resources pursuant to section 13751 of the Water Code. If no well log is available, the applicant shall provide evidence from the Department of Water Resources indicating that the Department of Water Resources does not have a record of the well log. If no well log is available, the State

Water Resources Control Board may request additional information about the well. (c) If the water source is a rainwater catchment system:

  1. The total square footage of the catchment footprint area(s);
  2. The total storage capacity, in gallons, of the catchment system(s); and
  3. A detailed description of the type, nature, and location of each catchment surface. Examples of catchment surfaces include a rooftop and greenhouse.
  1. If the water source is a diversion from a waterbody, provide any applicable statement, application, permit, license, or small irrigation use registration identification number(s); and either
    1. A copy of any applicable registrations, permits, or licenses or proof of a pending application, issued under part 2 (commencing with section 1200) of division 2 of the California Water Code as evidence of approval of a water diversion by the State Water Resources Control Board;
    2. A copy of any statements of diversion and use filed with the State Water Resources Control Board before October 31, 2017 detailing the water diversion and use; or
    3. A copy of documentation submitted to the State Water Resources Control Board before October 31, 2017 demonstrating that the diversion is authorized under a riparian right and that no diversion occurred in any calendar year between January 1, 2010 and January 1, 2017.
    4. If the applicant has claimed an exception from the requirement to file a statement of diversion and use pursuant to section 5101 of the Water Code, the applicant shall provide a copy of the documentation submitted to the State Water Resources Control Board before January 1, 2019 demonstrating that the diversion is subject to subsection (a), (c), (d), or (e) of section 5101 of the Water Code.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26060.1, Business and Professions Code; and Section 13149, Water Code.

§ 8108. Cannabis Waste Management Plan.

For the purposes of this section, “cannabis waste” is organic waste, as defined in section 42649.8(c) of the Public Resources Code. An applicant’s cannabis waste management plan shall identify one or more of the following methods for managing cannabis waste generated on their licensed premises:

      1. On-premises composting of cannabis waste;
      2. Collection and processing of cannabis waste by a local agency, a waste hauler franchised or contracted by a local agency, or a private waste hauler permitted by a local agency;
      3. Self-haul cannabis waste to one or more of the following;
        1. A manned fully permitted solid waste landfill or transformation facility;
        1. A manned fully permitted composting facility or manned composting operation;
        2. A manned fully permitted in-vessel digestion facility or manned in-vessel digestion operation;
        3. A manned fully permitted transfer/processing facility or manned transfer/processing operation; or (5) A manned fully permitted chip and grind operation or facility.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013 and 26060, Business and Professions Code; and Sections 40141 and 42649.8, Public Resources Code.

§ 8109. Applicant Track-and-Trace Training Requirement.

  1. Each applicant shall register for track-and-trace system training provided by the department within ten (10) business days of receiving notice from the department that their application for licensure has been received and is complete.
  2. Documentation of training completion shall be provided to the department within ten (10) business days of completion.

Applicants approved for an annual license shall not have access to the track-and-trace system until the licensee’s designated account manager has completed, and provided proof of completion, of the track-and-trace training prescribed by the department.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26067, Business and Professions Code.

§ 8110. Proof of Local License, Permit, or Other Authorization.

When the applicant provides a license, permit, or other authorization from the local jurisdiction where the licensed premises will be or is located, the department will notify the contact person identified pursuant to section 26055 of the Business and Professions Code. If the local jurisdiction does not respond to the department’s notification within ten (10) calendar days, the department may issue a license to the applicant.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26050.1 and 26055, Business and Professions Code.

§ 8111. Priority Application Review.

  1. Priority review of annual license applications shall be given to applicants that can demonstrate the commercial cannabis business was in compliance with the Compassionate Use Act of 1996 before September 1, 2016.
  2. Eligibility for priority application review shall be demonstrated by any of the following, dated prior to September 1, 2016.
    1. Local license, permit or other authorization;
    2. Collective or Cooperative Membership Agreement;
    3. Tax or business forms submitted to the California Department of Tax and Fee Administration or Franchise Tax Board;
    4. Incorporation documents filed with the Secretary of State;
    5. Any other verifiable business record adequate to demonstrate the operation of the business prior to September 1, 2016; or
    6. Any applicant identified by the local jurisdiction pursuant to section 26054.2(b) of the Business and Professions Code.
  1. The department may request additional documentation to verify the applicant’s date of commencement of operations. (d) This section shall cease to be operative on December 31, 2019, unless otherwise provided by law.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26054.2, Business and Professions Code.

§ 8112. Annual License Application Review for Completeness.

The department shall notify the applicant in writing that the application is either: (a) Complete and accepted for further review; or

  1. Incomplete and the reasons for the incompleteness.
    1. The department shall receive the missing information from the applicant no later than ninety (90) calendar days from the date of the notification from the department. Failure to provide the designated missing information will result in disqualification of the application from further consideration.
    2. If disqualified, the applicant may reapply and pay a new application fee.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26012, Business and Professions Code.

§ 8113. Substantially Related Offenses Review.

  1. The following convictions shall be considered substantially related to the qualifications, functions, or duties of the business for which the application is made and may be a basis for denying the license:
    1. A violent felony conviction, as specified in subsection (c) of section 667.5 of the Penal Code; (2) A serious felony conviction, as specified in subsection (c) of section 1192.7 of the Penal Code; (3) A felony conviction involving fraud, deceit, or embezzlement;
  1. Any felony conviction involving the hiring, employment, or use of children in transporting, carrying, selling, giving away, preparing for sale or peddling any controlled substance to a minor, or offering, furnishing, or selling any controlled substance to a minor; and
  2. A felony conviction for drug trafficking with enhancements pursuant to sections 11370.4 or 11379.8 of the Health and Safety Code.
  1. Except as provided in subsections (a)(4) and (5) and notwithstanding chapter 2 (commencing with section 480) of division 1.5 of the Business and Professions Code, a prior conviction, where the sentence, including any term or probation, incarceration, or supervised release, is completed, for possession of, possession for sale, sale, manufacture, transportation, or cultivation of a controlled substance is not considered substantially related, and shall not be the sole   ground of denial for a license. Conviction for any controlled substance felony subsequent to licensure shall be grounds   for revocation of a license or denial of the renewal of the license.
  2. To determine whether an applicant who has been convicted of a criminal offense that is substantially related to the qualifications, functions, or duties of the business for which the application is made should be issued a license, the department shall conduct a review of the nature of the crime, conviction, circumstances, and evidence of rehabilitation. Evidence of rehabilitation includes:
    1. The nature and severity of the criminal offense;
    2. Whether the person has a felony conviction based on possession or use of cannabis or cannabis products that would not be a felony if the person was convicted of the offense on the date of the person’s application;
    3. The applicant’s criminal record as a whole;
    4. Evidence of any conviction of a criminal offense committed subsequent to the criminal offense under consideration that could be considered grounds for denial, suspension, or revocation of a commercial cannabis activity license;
    5. The time that has elapsed since commission of the act or offense;
    6. The extent to which the applicant has complied with any terms of parole, probation, restitution, or any other sanctions lawfully imposed against the applicant;
    7. If applicable, evidence of dismissal under sections 1203.4, 1203.4a, and 1203.41 of the Penal Code or another state’s similar law;
    8. If applicable, a certificate of rehabilitation obtained under section 4852.01 of the Penal Code or another state’s similar law; and
    9. Other evidence of rehabilitation submitted by the applicant.

(c) If an applicant has been denied a license based on a conviction, the applicant may request a hearing pursuant to section 26058 of the Business and Professions Code to determine if the applicant should be issued a license.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26057 and 26058, Business and

Professions Code.

§ 8114. Withdrawal of Application.

An applicant may withdraw an application at any time prior to the department’s issuance of a license or denial of a license. (a) Requests to withdraw an application shall be submitted to the department in writing, dated, and signed by the

designated responsible party.

  1. The department will not refund application fees for a withdrawn application.
  2. An applicant may reapply and pay a new application fee at any time following the withdrawal of an application.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26012, Business and Professions Code.

§ 8115. Notification and Grounds for Denial of License; Petition for Reconsideration.

(a) The department shall notify the applicant in writing if the application is denied with the reasons for denial.

(b) In addition to the reasons for denial in section 26057 of the Business and Professions Code, a license may be denied for the following reasons:

    1. The applicant’s premises does not fully comply with standards pursuant to this chapter;
    2. The applicant denied the department access to the premises to verify compliance with this chapter; (3) The applicant made a material misrepresentation on the application;
  1. The licensee had a license, permit, or other authorization to engage in commercial cannabis activity denied, suspended, or revoked by a state licensing authority or local agency; or
  2. The applicant or licensee has outstanding fees owed to the department.

(c) Within thirty (30) days upon service of the denial of an application, the applicant may file a written petition. Upon receipt of a timely filed petition, the department shall set a date for a hearing to be conducted pursuant to chapter 5 (commencing with section 11500) of part 1 of division 3 of title 2 of the Government Code.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012 and 26057, Business and Professions Code.

Article 3: Cultivation License Fees and Requirements

What are the fees and requirements for Cultivation licenses?

Article 3: Cultivation License Fees and Requirements

§ 8200. Annual License Fees.

An annual license fee shall be paid to the department prior to issuance of a license or renewal license. The fee schedule is as follows:

(a) Specialty Cottage Outdoor $1,205 (b) Specialty Cottage Indoor $1,830 (c) Specialty Cottage Mixed-Light Tier 1 $3,035 (d) Specialty Cottage Mixed-Light Tier 2 $5,200 (e) Specialty Outdoor $2,410 (f) Specialty Indoor $19,540 (g) Specialty Mixed-Light Tier 1 $5,900 (h) Specialty Mixed-Light Tier 2 $10,120 (i) Small Outdoor $4,820 (j) Small Indoor $35,410 (k) Small Mixed-Light Tier 1 $11,800 (l) Small Mixed-Light Tier 2 $20,235 (m) Medium Outdoor $13,990 (n) Medium Indoor $77,905 (o) Medium Mixed-Light Tier 1 $25,970 (p) Medium Mixed-Light Tier 2 $44,517 (q) Nursery $4,685 (r) Processor $9,370

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012 and 26180, Business and Professions Code.

§ 8201. Cultivation License Types. License types include:

  1. Specialty Cottage:
    1. “Specialty Cottage Outdoor” is an outdoor cultivation site with up to 25 mature plants.
    2. “Specialty Cottage Indoor” is an indoor cultivation site with 500 square feet or less of total canopy.
    3. “Specialty Cottage Mixed-Light Tier 1 and 2” is a mixed-light cultivation site with 2,500 square feet or less of total canopy.
  2. Specialty:
    1. “Specialty Outdoor” is an outdoor cultivation site with less than or equal to 5,000 square feet of total canopy, or up to 50 mature plants on noncontiguous plots.
    2. “Specialty Indoor” is an indoor cultivation site between 501 and 5,000 square feet of total canopy.
    1. “Specialty Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 2,501 and 5,000 square feet of total canopy.
  1. Small:
    1. “Small Outdoor” is an outdoor cultivation site between 5,001 and 10,000 square feet of total canopy. (2) “Small Indoor” is an indoor cultivation site between 5,001 and 10,000 square feet of total canopy.

(3) “Small Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 5,001 and 10,000 square feet of total canopy.

  1. Medium:
    1. “Medium Outdoor” is an outdoor cultivation site between 10,001 square feet and one acre of total canopy. (2) “Medium Indoor” is an indoor cultivation site between 10,001 and 22,000 square feet of total canopy.

(3) “Medium Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 10,001 and 22,000 square feet of total canopy.

  1. “Nursery” is a cultivation site that conducts the cultivation of cannabis solely as a nursery.
  2. “Processor” is a cultivation site that conducts only trimming, drying, curing, grading, packaging, or labeling of cannabis and nonmanufactured cannabis products.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012 and 26050, Business and Professions Code.

§ 8202. General License Requirements.

  1. Cultivation licenses shall be valid for twelve (12) months from the date of issuance.
  2. Every business entity shall obtain a separate license for each premises where it engages in commercial cannabis cultivation.
  3. Cultivation licenses are not transferrable or assignable to any other person, entity, or property.
  4. Licensees are prohibited from transferring any commercially cultivated cannabis or nonmanufactured cannabis products from their licensed premises. All transfer of cannabis and nonmanufactured cannabis product from a licensed cultivation site must be conducted by a distributor licensed by the bureau.
  5. The license shall be prominently displayed on the licensed premises where it can be viewed by state or local agencies. (f) Except as provided in section 8209, a licensee may hold both an A and an M license on the same premises, provided the

inventory for each license type is kept separate and distinct. (g) A licensee shall not sublet any portion of the licensed premises.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26010, 26012, 26050, and 26053,

Business and Professions Code.

§ 8203. Renewal of License.

  1. An application for renewal of a cultivation license shall be submitted to the department at least thirty (30) calendar days prior to the expiration date of the current license. No renewal application shall be accepted by the department more than sixty (60) calendar days prior to the expiration date of the current license.
  2. If a complete renewal application is submitted in compliance with subsection (a) above, the licensee may continue to operate until the department approves or denies the renewal application.
  3. If the department receives the renewal application less than thirty (30) calendar days prior to the expiration, or within thirty (30) calendar days after the expiration, of the current license, a licensee shall submit a late fee of fifty (50) percent of the application fee to be paid in addition to the required annual renewal fee.
  4. A licensed cultivator that does not submit a complete license renewal application to the department within thirty (30) calendar days after the expiration of the current license shall forfeit their eligibility to apply for a license renewal and, instead, shall be required to submit a new license application.
  5. The license renewal application shall be submitted to the department and contain the following: (1) The legal name of the licensed entity;
  1. The license number and expiration date;
  2. The licensee’s mailing address and premises address;
  3. The annual license fee pursuant to section 8200 of this chapter;
  4. If applicable, documentation regarding any changes that have occurred from the information originally submitted to the department pursuant to section 8102 of this chapter; and
  5. An attestation that all information provided to the department is accurate and current.
  1. Beginning January 1, 2022, an application for renewal of a license shall include the following records, for each power source indicated on the application for licensure, for the previous annual licensed period:
    1. Total electricity supplied by local utility provider, name of local utility provider, and greenhouse gas emission intensity per kilowatt hour reported by the utility under section 398.4(c) of the Public Utilities Code for the most recent calendar year available at time of submission.
    2. Total electricity supplied by a zero net energy renewable source, as set forth in section 398.4(h)(5) of the Public Utilities Code, that is not part of a net metering or other utility benefit.
    3. Total electricity supplied from other unspecified sources, as defined in 398.2(e) of the Public Utilities Code, and other on-site sources of generation not reported to the local utility provider (e.g., generators, fuel cells) and the   greenhouse gas emission intensity from these sources.
    4. Average weighted greenhouse gas emission intensity considering all electricity use in subsections (1), (2), and (3).

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26050, 26051.5, and 26055, Business and Professions Code.

§ 8204. Notification of License Information Change.

  1. Licensees shall notify the department in writing within ten (10) calendar days of any change to any item listed in the application, and any of the following events:
    1. Disciplinary proceeding initiated by any state or local government agency; (2) Bankruptcy filing by any owner listed on the application for licensure;
  1. Temporary closure longer than thirty (30) calendar days. Include in the notification the reason for temporary closure and expected duration of closure;
  2. Modifications to the cultivation plan pursuant to section 8106 of this chapter that do not require preapproval pursuant to section 8205 of this chapter; and
  3. Any change in ownership that does not affect the business entity type. New owners shall submit all information pursuant to section 8102(h) of this chapter.
  1. Any change to the business entity type requires a new application and application fee.
  2. Licensee shall notify the department in writing of the following within forty-eight (48) hours of: (1) Receiving a criminal conviction or civil judgment rendered against the licensee; and

(2) Receiving notification of the revocation of a local license, permit or other authorization.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26012, Business and Professions Code.

§ 8205. Physical Modification of Premises.

A licensee shall not make a physical modification of the licensed premises that materially or substantially alters the licensed premises or the use of the licensed premises from the premises diagram originally filed with the license application without the prior written approval of the department.

  1. The following premises modifications require approval in writing from the department prior to modification:
    1. Modification to any area described in the licensee’s cultivation plan including, but not limited to, the removal, creation, or relocation of canopy, processing, packaging, composting, harvest storage, and chemical storage areas;
    2. Change in water or power source(s); and
    3. Modifications or upgrades to electrical systems at a licensed premises shall be performed by a licensed electrician. A copy of the electrician’s license shall be submitted with any premises modification requests for electrical systems.
  1. A licensee shall request approval of a physical change, alteration, or modification in writing to the department, and the request shall include a new premises diagram and/or cultivation plan pursuant to section 8106 of this chapter.
  2. A licensee shall provide additional documentation requested by the department to evaluate the licensee’s request.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012 and 26055, Business and Professions Code.

§ 8206. Death or Incapacity of a Licensee.

  1. In the event of the death, incapacity, receivership, assignment for the benefit of creditors of a licensee, or other event rendering a licensee incapable of performing the duties associated with the license, the licensee’s successor in interest (e.g., appointed guardian, executor, administrator, receiver, trustee, or assignee) shall notify the department within ten   (10) business days.
  2. To continue operations or surrender the existing license, the successor in interest shall submit to the department the following:
    1. The name of the successor in interest;
    2. The name of the licensee for which the successor in interest is succeeding and the license number; (3) The phone number, mailing address, and email address of the successor in interest; and

(4) Documentation demonstrating that the licensee is incapable of performing the duties associated with the license such as a death certificate or a court order finding the licensee lacks capacity, and documentation demonstrating that the individual making the request is the licensee’s successor in interest, such as a court order appointing guardianship, or a will or trust agreement.

  1. The department may give the successor in interest written approval to continue operations on the license business premises for a period of time specified by the department if:
    1. The successor in interest or another person has applied for a license from the department for the license location and that application is under review; or
    2. The successor in interest needs additional time to destroy or sell cannabis or nonmanufactured cannabis products; or
    3. At the discretion of the department.
  2. The licensee’s successor in interest is held subject to all terms and conditions under which a state cannabis license is held pursuant to the Act and the regulations of this chapter.
  3. The approval creates no vested right to the issuance of a state cannabis license.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26012, Business and Professions

Code.

§ 8207. Disaster Relief.

  1. If a licensee is unable to comply with any licensing requirement(s) due to a disaster, the licensee may notify the department of this inability to comply and request relief from the specific licensing requirement(s).
  2. The department may exercise its discretion to provide temporary relief from specific licensing requirements for licensees whose operations have been impacted by a disaster.
  3. Temporary relief from specific licensing requirements shall be issued for a reasonable amount of time in order to allow the licensee to recover from the disaster.
  4. The department may require that certain conditions be followed in order for a licensee to receive temporary relief from specific licensing requirements.
  5. A licensee shall not be subject to an enforcement action for a violation of a licensing requirement in which the licensee has received temporary relief.
  6. For the purposes of this section, “disaster” means fire, flood, storm, tidal wave, earthquake, or similar public calamity, when the Governor through an executive order has declared a state of emergency, whether or not it resulted from natural causes.
  7. A licensed premises that has been vacated by a licensee due to a disaster shall not be deemed to have been surrendered, abandoned, or quit pursuant to section 8208 of this chapter.
  8. Notwithstanding subsection (a) of this section, if a licensee needs to move cannabis and nonmanufactured cannabis products stored on the premises to another location immediately to prevent loss, theft, or degradation of the cannabis and nonmanufactured cannabis products from the disaster, the licensee may move the cannabis without obtaining prior approval from the department if the following conditions are met:
    1. The cannabis and nonmanufactured cannabis products are moved to a secure location where access to the cannabis can be restricted to the licensee, its employees, and contractors;
    2. The licensee notifies the department in writing that the cannabis and nonmanufactured cannabis products have been moved and that the licensee is requesting relief from complying with specific licensing requirements pursuant to subsection (a) of this section within twenty-four (24) hours of moving the cannabis;
    3. The licensee provides the department access to the location where the cannabis and nonmanufactured cannabis products have been moved to for inspection; and
    4. The licensee submits in writing to the department within ten (10) calendar days of moving the cannabis and nonmanufactured cannabis products a request for temporary relief that clearly indicates what the statutory and regulatory sections relief is requested from, the time period for which the relief is requested, and the reasons relief is needed for the specified amount of time.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26012, Business and Professions Code.

§ 8208. Surrender of License.

  1. A licensee who surrenders, abandons, or quits the licensed premises, or who closes the licensed premises for a period exceeding thirty (30) consecutive calendar days without notifying the department pursuant to section 8204 of this chapter shall surrender the license to the department, and the department shall immediately cancel the license.
  2. Upon the voluntary request by any licensee to surrender a license, the department shall immediately cancel the license.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26012, Business and Professions Code.

§ 8209. Medium Cultivation License Limits.

A person shall be limited to one (1) Medium Outdoor, or one (1) Medium Indoor, or one (1) Medium Mixed-Light A-License or M-License. This section shall remain in effect until January 1, 2023.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012, 26050, and 26061, Business and Professions Code.

§ 8210. Sample Collection by the Bureau.

When a licensee transfers possession, but not title, of cannabis to a licensed distributor, the licensee shall allow the bureau to collect samples for the bureau’s own laboratory analysis.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012 and 26110, Business and Professions Code.

§ 8211. Prohibition of Product Returns.

Licensees are prohibited from accepting returns of cannabis plants or nonmanufactured cannabis products after transferring possession of cannabis plants or nonmanufactured cannabis to another licensee after testing is performed pursuant to section 26110 of Business and Professions Code.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012, 26060, and 26110

Business and Professions Code.

§ 8212. Packaging and Labeling of Cannabis and Nonmanufactured Cannabis Products.

  1. All cannabis and nonmanufactured cannabis product packaged and/or labeled by a licensed cultivator shall meet all of the following:
    1. All applicable requirements including implementing regulations pursuant to sections 26070, 26120 and 26121 of the Business and Professions Code;
    2. Any other requirements for cannabis and nonmanufactured cannabis product specified by the bureau and the California Department of Public Health.
    3. Packaging and labeling requirements pursuant to chapter 6 (commencing with section 12601), division 5 of the Business and Professions Code.
  2. A label may specify the county of origin only if one hundred (100) percent of the cannabis or nonmanufactured cannabis product contained in the package was produced within the designated county, as defined by finite political boundaries.

Authority: Sections 26012, 26013, and 26106, Business and Professions Code. Reference: Sections 26063, 26070, 26120, and 26121, Business and Professions Code.

§ 8213. Requirements for Weighing Devices and Weighmasters.

  1. Weighing devices used by a licensee for commercial purposes shall be approved, tested and sealed pursuant to chapter 5 (commencing with section 12500) of division 5 of the Business and Professions Code, and registered with the county   sealer consistent with chapter 2 (commencing with section 12240) of division 5 of the Business and Professions Code. Approved and registered devices shall be used whenever:
    1. Cannabis and nonmanufactured cannabis are bought or sold by weight or count; (2) Cannabis and nonmanufactured cannabis are packaged for sale by weight or count;

(3) Cannabis and nonmanufactured cannabis are weighed or counted for entry into the track-and-trace system; and (4) The weighing device is used for commercial purposes as defined in section 12500 of the Business and Professions

Code.

  1. For the purposes of this chapter a licensee must use wet weight or net weight. Wet weight and net weight shall be measured, recorded and reported in U.S. customary units (e.g., ounce or pound); or International System of Units (e.g., kilograms, grams, or milligrams).
  2. For the purposes of this chapter, count means the numerical count of the individual cannabis plants, seeds or nonmanufactured cannabis product units.
  3. A licensee shall be licensed as a weighmaster for bulk shipments of cannabis and nonmanufactured cannabis products.

A certificate issued by a licensed weighmaster shall be consistent with the requirements in chapter 7 (commencing with section 12700) of division 5 of the Business and Professions Code.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Chapter 7 (commencing with Section 12700) of Division 5, Business and Professions Code.

§ 8214. Transition Period.

Notwithstanding any other provision, until July 1, 2018, licensees may conduct commercial cannabis activities with any other licensee, regardless of the A or M designation of the license.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26001, 26013 and 26053, Business and Professions Code.

§ 8215. Personnel Prohibited from Holding Licenses.

  1. A license authorized by the Act and issued by the department may not be held by, or issued to, any person holding office in, or employed by, any agency of the State of California or any of its political subdivisions when the duties of such person have to do with the enforcement of the Act or any other penal provisions of law of this State prohibiting or regulating the sale, use, possession, transportation, distribution, testing, manufacturing, or cultivation of cannabis.
  2. This section applies to, but is not limited to, any persons employed in the State of California Department of Justice as a peace officer, in any district attorney’s office, in any city attorney’s office, in any sheriff’s office, or in any local police department.
  3. All persons listed in subsection (a) or (b) may not have any ownership interest, directly or indirectly, in any business to be operated or conducted under a cannabis license.
  4. This section does not apply to any person who holds a license in the capacity of executor, administrator, or guardian.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26010 and 26012, Business and Professions Code.

§ 8216. License Issuance in an Impacted Watershed.

If the State Water Resources Control Board or the Department of Fish and Wildlife finds, based on substantial evidence, that cannabis cultivation is causing significant adverse impacts on the environment in a watershed or other geographic area, the department shall not issue new licenses or increase the total number of plant identifiers within that watershed or area.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26069 of Business and Professions Code.

What are Cultivation site requirements?

Article 4. Cultivation Site Requirements

§ 8300. Cultivation Requirements for Specialty Cottage, Specialty, Small, and Medium Licenses.

  1. Cannabis plants maintained outside of the designated canopy area(s) for specialty cottage, specialty, small and medium licenses are prohibited from flowering. Should plants outside of the canopy area(s) begin to flower, a UID shall be applied, the plant(s) shall be moved to the designated canopy area without delay, and reported in the track-and-trace system.
  2. All plants or portions of a plant used for seed production shall be tagged with a UID pursuant to section 8403 of this chapter.
  3. Licensees propagating immature plants for distribution or seed for distribution to another licensee shall obtain a nursery license.
  4. Licensees shall process their harvested cannabis only in area(s) designated for processing in their cultivation plan provided they are compliant with packaging and labeling requirements pursuant to section 8212 of this chapter, or transfer their harvested cannabis to a licensed processor, manufacturer or distributor via a licensed distributor.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26060, 26070, and 26120, Business and Professions Code.

§ 8301. Seed Production Requirements for Nurseries.

Nurseries producing seed for distribution shall tag all mature plants pursuant to section 8403 of this chapter. All products, except seed, derived from these plants are prohibited from entering the commercial distribution chain.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013, 26060, and 26067, Business and Professions Code.

§ 8302. Research and Development Requirements for Nurseries.

Nurseries may maintain a research and development area, as identified in their cultivation plan, for the cultivation of mature plants. All mature plants shall be tagged with a UID pursuant to section 8403 of this chapter. All products derived from these plants are prohibited from entering the commercial distribution chain.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013, 26060, and 26067,

Business and Professions Code.

§ 8303. Cultivation Requirements for Processor Licenses.

Processor licensees shall comply with all of the following requirements:

  1. All aggregation of product shall adhere to track-and-trace requirements pursuant to sections 8405 and 8406 of this chapter;
  2. Licensees may produce nonmanufactured cannabis products without a manufacturing license, provided compliance with packaging and labeling requirements pursuant to section 8212 of this chapter; and
  3. Cultivation of cannabis plants is prohibited at a licensed processor premises.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26060, 26067, 26069, and 26120, Business and Professions Code.

§ 8304. General Environmental Protection Measures.

All licensees shall comply with all of the following environmental protection measures:

  1. Compliance with section 13149 of the Water Code as implemented by the State Water Resources Control Board, Regional Water Quality Control Boards or California Department of Fish and Wildlife.
  2. Compliance with any conditions requested by the California Department of Fish and Wildlife or the State Water Resources Control Board under section 26060.1(b)(1) of the Business and Professions Code.
  3. All outdoor lighting used for security purposes shall be shielded and downward facing.
  4. Immediately halt cultivation activities and implement section 7050.5 of the Health and Safety Code if human remains are discovered.
  5. Requirements for generators pursuant to section 8306 of this chapter.
  6. Compliance with pesticide laws and regulations as enforced by the Department of Pesticide Regulation pursuant to section 8307 of this chapter.
  7. Mixed-light license types of all tiers and sizes shall ensure that lights used for cultivation are shielded from sunset to sunrise to avoid nighttime glare.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26060, 26066, and 26201, Business and Professions Code.

§ 8305. Renewable Energy Requirements.

Beginning January 1, 2023, all indoor, tier 2 mixed-light license types of all sizes, and nurseries using indoor or tier 2 mixed-

light techniques, shall ensure that electrical power used for commercial cannabis activity meets the average electricity greenhouse gas emissions intensity required of their local utility provider pursuant to the California Renewables Portfolio   Standard Program, division 1, part 1, chapter 2.3, article 16 (commencing with section 399.11) of the Public Utilities Code. As evidence of meeting the standard, licensees shall comply with the following:

(a) If a licensee’s average weighted greenhouse gas emission intensity as provided in section 8203(f)(4) is greater than the local utility provider’s greenhouse gas emission intensity, the licensee shall provide evidence of carbon offsets or allowances from any of the following sources to cover the excess in carbon emissions from the previous annual licensed period:

    1. Allowances purchased from California Cap and Trade Auctions. Any currently acceptable vintages are allowed pursuant to section 95910 of the Public Utilities Code.
    2. Offsets purchased from Offset Project Registry System used for the California Cap and Trade Program, pursuant to section 95981 of the Public Utilities Code.
    3. Offsets purchased from California Air Pollution Control Officers Association California-based Greenhouse Gas Credit Exchange.

(b) New licensees, without a record of weighted greenhouse gas emissions intensity from the previous calendar year, shall report the average weighted greenhouse gas emissions intensity, as provided in section 8203(f)(4), used during their licensed period at the time of license renewal. If a licensee’s average weighted greenhouse gas emissions intensity is greater than the local utility provider’s greenhouse gas emissions intensity for the most recent calendar year, the licensee shall provide evidence of carbon offsets or allowances to cover the excess in carbon emissions from any of the sources provided in subsection (a).

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26060, 26066, and 26201, Business and Professions Code.

§ 8306. Generator Requirements.

  1. For the purposes of this section, generator is defined as a stationary or portable compression ignition engine pursuant to title 17, division 3, chapter 1, subchapter 7.5, section 93115.4 of the California Code of Regulations.
  2. Licensees using generators rated at fifty (50) horsepower and greater shall demonstrate compliance with Airborne Toxic Control Measures pursuant title 17, division 3, chapter 1, subchapter 7.5, sections 93115 through 93115.5 of the California Code of Regulations. Compliance shall be demonstrated by providing a copy of one of the following to the department upon request:
    1. A Portable Equipment Registration Certificate provided by the California Air Resources Board, or;
    2. A Permit to Operate obtained from the Local Air District with jurisdiction over the licensed premises.
  1. Licensees using generators rated below fifty (50) horsepower shall comply with the following by 2023:
    1. Designate the generator as emergency or low use as defined in title 17, division 3, chapter 1, subchapter 7.5, sections 93116.2(a)(12) and 93116.2(a)(22) of the California Code of Regulations,
    2. Either (A) or (B);
      1. Meet Tier 3 with level 3 diesel particulate filter requirements pursuant to title 13, division 3, chapter 9, article 4, section 2423 of the California Code of Regulations;
      2. Meet Tier 4 engine requirements pursuant to title 13, division 3, chapter 14, section 2702 of the California Code of Regulations.
  2. All generators shall be equipped with nonresettable hour-meters.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26060, 26066, and 26201, Business and Professions Code.

§ 8307. Pesticide Use Requirements.

  1. Licensees shall comply with all pesticide laws and regulations enforced by the Department of Pesticide Regulation.
  2. For all pesticides that comply with subsection (a) above and are exempt from registration requirements, licensees shall comply with the following pesticide application and storage protocols:
    1. Comply with all pesticide label directions;
    2. Store chemicals in a secure building or shed to prevent access by wildlife; (3) Contain any chemical leaks and immediately clean up any spills;

(4) Apply the minimum amount of product necessary to control the target pest; (5) Prevent offsite drift;

  1. Do not apply pesticides when pollinators are present;
  2. Do not allow drift to flowering plants attractive to pollinators;
  3. Do not spray directly to surface water or allow pesticide product to drift to surface water. Spray only when wind is blowing away from surface water bodies;
  4. Do not apply pesticides when they may reach surface water or groundwater; and
  5. Only use properly labeled pesticides. If no label is available consult the Department of Pesticide Regulation.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26060, 26066, and 26201, Business and Professions Code.

§ 8308. Cannabis Waste Management.

  1. For the purposes of this section, “cannabis waste” is organic waste, as defined in section 42649.8(c) of the Public Resources Code.
  2. A licensee shall manage all hazardous waste, as defined in section 40141 of the Public Resources Code, in compliance with all applicable hazardous waste statutes and regulations.
  3. A licensee shall manage all cannabis waste in compliance with division 30, part 3, chapters 12.8, 12.9 and 13.1 of the Public Resources Code. In addition, licensees are obligated to obtain all required permits, licenses, or other clearances and comply with all orders, laws, regulations, or other requirements of other regulatory agencies, including, but not limited to, local health agencies, regional water quality control boards, air quality management districts or air pollution control districts, local land use authorities, and fire authorities.
  4. A licensee shall dispose of cannabis waste in a secured waste receptacle or in a secured area on the licensed premises designated on the licensee’s premises diagram and as identified in the licensee’s cultivation plan. For the purposes of this section, “secure waste receptacle” or “secured area” means that physical access to the receptacle or area is restricted only  to the licensee, employees of the licensee, or the local agency, a waste hauler franchised or contracted by a local agency, or   a private waste hauler permitted by the local agency. Public access to the designated receptacle or area shall be strictly prohibited.
  5. A licensee shall comply with the method(s) for managing cannabis waste identified on their cannabis waste management plan in accordance with section 8108.
  6. If composting cannabis waste on the licensed premises, a licensee shall do so in compliance with title 14 of the California Code of Regulations, division 7, chapter 3.1 (commencing with section 17850).
  7. If a local agency, a waste hauler franchised or contracted by a local agency, or a private waste hauler permitted by a local agency is being used to collect and process cannabis waste, a licensee shall do all the following:
    1. Provide the department with the following information for the local agency, a waste hauler franchised or contracted by the local agency, or private waste hauler permitted by the local agency who will collect and process the licensee’s cannabis waste;
      1. Name of local agency providing waste hauling services, if applicable;
      2. Company name of the waste hauler franchised or contracted by a local agency or private waste hauler permitted by the local agency, if applicable;
      3. Local agency or company business address; and
      4. Name of the primary contact person at the local agency or company and contact person’s phone number; (2) Obtain and retain documentation from the local agency, the waste hauler franchised or contracted by a local

agency, or private waste hauler permitted by the local agency that indicates the date and time of each collection of cannabis waste at the licensed premises;

  1. Obtain and retain a copy of the certified weight ticket, or other documentation prepared by the local agency, the waste hauler franchised or contracted by a local agency, or private waste hauler permitted by the local agency evidencing receipt of the cannabis waste at one or more of the solid waste facilities in section 8108(c); and
  2. Cannabis waste may be collected from a licensee in conjunction with a regular organic waste collection route used by the local agency, the waste hauler franchised or contracted by a local agency, or private waste hauler permitted by the local agency.
  1. If self-hauling cannabis waste to one or more of the solid waste facilities in section 8108(c) above, a licensee shall obtain and retain, for each delivery of cannabis waste by the licensee, a copy of a certified weight ticket, or receipt documenting delivery, prepared by a representative(s) of the solid waste facility receiving the self-hauled cannabis  waste. Transportation of self-hauled cannabis waste shall only be performed by the licensee or employees of the licensee.
  2. In addition to all other tracking requirements set forth in sections 8405 and 8406 of this chapter, a licensee shall use the track-and-trace system and documentation required pursuant to this section to ensure the cannabis waste is identified,   weighed, and tracked while on the licensed premises and when disposed of in accordance with subsections (f), (g) and (h) above.
  3. A licensee shall maintain accurate and comprehensive records regarding cannabis waste that account for, reconcile, and evidence all activity related to the generation or disposition of cannabis waste. All records required by this section are records subject to inspection by the department and shall be kept pursuant to section 8400 of this chapter.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013 and 26060, Business and Professions Code; and Sections 40141 and 42649.8, Public Resources Code.

What are the record-keeping and reporting requirements for Cultivation?

Article 5. Records and Reporting

§ 8400. Record Retention.

For the purposes of this chapter, the term record includes all records, applications, reports or other supporting documents required by the department.

  1. Each licensee shall keep and maintain the records listed in subsection (d) for at least seven (7) years from the date the document was created.
  2. Records shall be kept in a manner that allows the records to be provided at the licensed premises or delivered to the department, upon request.
  3. All records are subject to review by the department during standard business hours or at any other reasonable time as mutually agreed to by the department and the licensee. For the purposes of this section, standard business hours are

deemed to be 8:00am 5:00pm (Pacific Standard Time). Prior notice by the department to review records is not required.

  1. Each licensee shall maintain all of the following records on the licensed premises, including but not limited to: (1) Department issued cultivation license(s);
  1. Cultivation plan;
  2. All records evidencing compliance with the environmental protection measures pursuant to sections 8304, 8305, 8306 and 8307 of this chapter;
  3. All supporting documentation for data or information input into the track-and-trace system;
  4. All UIDs assigned to product in inventory and all unassigned UIDs. UIDs associated with product that has been retired from the track-and-trace system must be retained for six (6) months after the date the tags were retired;
  5. Financial records related to the licensed commercial cannabis activity, including but not limited to, bank statements, tax records, sales invoices, and sales receipts;
  6. Personnel records, including each employee’s full name, social security, or individual tax payer identification number, date of beginning employment, and date of termination of employment if applicable;
  7. Records related to employee training for the track-and-track system or other requirements of this chapter. Records shall include, but are not limited to, the date(s) training occurred, description of the training provided, and the names of the employees that received the training;
  8. Contracts with other state licensed cannabis businesses;
  9. Permits, licenses, and other local authorizations to conduct the licensee’s commercial cannabis activity;

(11) Records associated with composting or disposal of cannabis waste.

(12) Documentation associated with loss of access to the track-and-trace system prepared pursuant to section 8402(d) of this chapter.

  1. All required records shall be prepared and retained in accordance with the following conditions: (1) Records shall be legible; and

(2) Records shall be stored in a secured area where the records are protected from debris, moisture, contamination, hazardous waste, fire and theft.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013, 26055, 26060, 26060.1, 26067, 26069, 26160, and 26161, Business and Professions Code.

§ 8401. Sales Invoice or Receipt Requirements.

The licensee shall prepare a sales invoice or receipt for every sale, transport, or transfer of cannabis or nonmanufactured cannabis product to another licensee. Sales invoices and receipts may be retained electronically but must be readily

accessible for examination by the department, other state licensing authorities, any state or local law enforcement authority, and the California Department of Tax and Fee Administration. Each sales invoice or receipt shall include all the following:

  1. Name, business address, and department issued license number of the seller;
  2. Name, business address, and department issued license number of the purchaser;
  3. Date of sale or transfer (month, day and year). The date of any sale or transfer of cannabis and nonmanufactured cannabis products shall be the date of transfer to the licensee receiving it;
  4. Invoice or receipt number;
  5. Weight or quantity of cannabis and nonmanufactured cannabis products sold;
    1. Weight. For the purposes of this section a licensee must use wet weight or net weight. Wet weight and net weight shall be measured, recorded and reported in U.S. customary units (e.g., ounce or pound); or International System of Units (e.g., kilograms, grams, or milligrams).
    2. Weighing Devices. A licensee shall follow weighing device requirements pursuant to section 8213 of this chapter. (3) Count. For the purposes of this section, “count” means the numerical count of the individual plants or units.
  6. Cost to the purchaser, including any discount applied to the total price, shall be recorded on the invoice. (g) Description for each item including strain or cultivar, and all of the applicable information below:
    1. Plant;
    2. Flower;
    3. Leaf;
    4. Shake;
    5. Kief; and
    6. Pre-rolls.
  1. Signature of the seller, or designated representative of the seller, acknowledging accuracy of the cannabis and nonmanufactured cannabis products being shipped.
  2. Signature of the purchaser, or designated representative of the purchaser, acknowledging receipt or rejection of the cannabis or nonmanufactured cannabis products.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26161, Business and Professions Code.

§ 8402. Track-and-Trace System.

Except as provided in section 8405 (e) of this chapter, each licensee shall report in the department’s track-and-trace system the disposition of immature and mature plants, nonmanufactured cannabis products on the licensed premises, any

transfers associated with commercial cannabis activity between licensees, and any cannabis waste pursuant to this chapter. (a) The licensee is responsible for the accuracy and completeness of all data and information entered into the track-and-

trace system. Data entered into the track-and-trace system is assumed to be accurate and can be used to take enforcement action against the licensee if not corrected.

  1. Each licensee shall use the track-and-trace system for recording all applicable commercial cannabis activities. Each licensee shall:
    1. Designate an owner or other party(ies) in the licensee’s organization that can legally represent the licensee to be the licensee’s track-and-trace account manager(s);
    2. Require the track-and-trace account manager to complete track-and-trace system training. If the designated account manager did not complete the track-and-trace system training prior to the licensee receiving their annual license, the account manager will be required to register for the track-and-trace system training provided by the department within five (5) business days of license issuance;
    3. Designate track-and-trace system users, as needed, and require the users to be trained by the licensee’s track-and- trace account manager in the proper and lawful use of the track-and-trace system before the users are permitted to access the track-and-trace system;
    4. Require the track-and-trace account manager to maintain an accurate and complete list of all track-and-trace system account managers and users and update the list immediately when changes occur;
    5. Cancel any track-and-trace users from the licensee’s track-and-trace system account if that individual is no longer a licensee representative; and
    6. Correct any data that is entered into the track-and-trace system in error within three (3) business days of discovery of the error.
  2. The licensee is responsible for all actions any licensee representatives take while logged into the track-and-trace system or otherwise conducting commercial cannabis activities.
  3. If a licensee loses access to the track-and-trace system for any reason, the licensee shall prepare and maintain comprehensive records detailing all required inventory tracking activities conducted during the loss of access.
    1. Once access to the track-and-trace system is restored all inventory tracking activities that occurred during the loss of access shall be entered into the track-and-trace system within three (3) business days.
    2. A licensee shall document the date and time when access to the track-and-trace system was lost and when it was restored and the cause for each loss of access.
    3. A licensee shall not transfer cannabis or nonmanufactured cannabis products to a distributor until such time as access to the system is restored and all information is recorded into the track-and-trace system.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26067, 26069, 26070, and 26160

Business and Professions Code.

§ 8403. Track-and-Trace System Unique Identifiers (UID).

  1. Within five (5) business days of the date the licensee’s designated account manager(s) was credentialed by the department to use the track-and-trace system, the licensee shall request UIDs using the track-and-trace system as prescribed by the department.
    1. The licensee shall only use UIDs provisioned and distributed by the department, or the department’s designee. (2) The licensee shall maintain a sufficient supply of UIDs in inventory to support tagging in accordance with this

section.

  1. The licensee shall use the track-and-trace system to document receipt of provisioned and distributed UIDs within three (3) business days of physical receipt of the UIDs by the licensee.
  2. Except as provided in section 8407 of this chapter, all cannabis shall be entered into the track-and-trace system by the licensee starting with seed, cannabis which has been propagated onsite or purchased from a licensed nursery, or seedling purchased from a licensed nursery pursuant to this chapter.
  1. The UID shall accompany the cannabis products through all phases of the growing cycle, as follows:
    1. Licensees with immature plants shall assign a UID to each established lot respectively. The lot UID shall be placed in a position so it is visible and within clear view of an individual standing next to the immature lot to which the UID was assigned, and all UIDs shall be kept free from dirt and debris. For the purposes of this subsection, each lot of   immature plants shall not have more than one hundred (100) immature plants at any one time. All immature plants   in a lot shall be labelled with the corresponding UID number assigned to the lot and shall be contiguous to one another in order to facilitate identification by the department.
    2. Immature plants transferred from a licensed nursery, via a distributor, to a licensed cultivator shall meet requirements of subsection (b)(1) above. Each immature plant intended for retail sale shall have a UID affixed, or be labeled with the corresponding UID number of the lot, and be recorded in the track-and-trace system prior to transfer from the licensed nursery.
    3. The licensee shall apply a UID to all individual plants at the time any plant is moved to the designated canopy area or when an individual plant begins flowering, as defined in section 8000(l).
    4. UIDs are required for each mature plant. UIDS shall be attached to the main stem, at the base of each plant. The UID shall be attached to the plant using a tamper evident strap or zip tie and placed in a position so it is visible and within clear view of an individual standing next to the mature plant to which the UID was assigned and UIDs shall be kept free from dirt and debris. Licensees are prohibited from removing the UID from the mature plant to which it was attached and assigned until the plant is harvested, destroyed or disposed.
  2. Each harvest batch shall be assigned a unique harvest batch name which will be associated with all UIDs for each

individual plant, or portion thereof, contained in the harvest batch.

  1. UIDs are required for all cannabis and nonmanufactured cannabis products and shall be associated with the corresponding harvest batch name from which the cannabis and nonmanufactured cannabis products were derived.
  2. Upon destruction or disposal of any cannabis or nonmanufactured cannabis products, the applicable UIDs shall be retired in the track-and-trace system by the licensee within three (3) business days of the destruction or disposal and be performed in accordance with the licensee’s approved cannabis waste management plan.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26067, 26069, 26070, and 26160 Business and Professions Code.

§ 8404. Track-and-Trace System User Requirements.

  1. All track-and-trace account managers or users, as identified by the licensee pursuant to section 8402 of this chapter, shall enter all commercial cannabis activities in the track-and-trace system.
  2. Each track-and-trace account manager and user shall have a unique log-on, consisting of a username and password, which shall not be used by or shared with any other person.
  3. No track-and-trace account manager, user, or other licensee representative shall intentionally misrepresent or falsify information entered into the track-and-trace system.
  4. The account manager shall monitor all notifications from the track-and-trace system and resolve all issues included in the notification in the timeframe specified in the notification. An account manager shall not dismiss a notification from the track-and-trace system until the issue(s) included in the notification has been resolved.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012, 26067, and 26069, Business and Professions Code.

§ 8405. Track-and-Trace System Reporting Requirements.

  1. Except as provided in subsection (e) below, the track-and-trace account manager or users shall report in the track-and- trace system any and all transfers of cannabis or nonmanufactured cannabis products to another licensed entity prior to the movement of the cannabis or nonmanufactured cannabis product off the licensed premises.
  2. The track-and-trace account manager or users shall report in the track-and-trace system, any and all cannabis or nonmanufactured cannabis products physically received or rejected from another licensee within twenty-four (24) hours of receipt or rejection of the products.
  3. The track-and-trace account manager or users shall report in the track-and-trace system any change in the disposition of cannabis plants, as applicable, on the licensed premises. All changes in disposition shall be made within three (3)

business days of the change in disposition of the cannabis plants. Changes in disposition of cannabis plants include but are not limited to:

    1. Flowering;
    2. Destruction or disposal; (3) Harvest;
  1. Processing;
  2. Storage; and
  3. Packaging.
  1. The account manager or user shall be required to report information in the track-and-trace system for each transfer of cannabis or nonmanufactured cannabis products to, or cannabis or nonmanufactured cannabis products received from,   other licensed premises. Required information to be entered includes, but is not limited to:
    1. Name, business address, and department issued license number of the seller;
    2. Name, business address, and department issued license number of the purchaser; (3) Name and department issued license number of the distributor;
  1. Date of, transfer or receipt (month, day and year) of cannabis or nonmanufactured cannabis products;
  2. Weight or count of individual units of cannabis or nonmanufactured cannabis products sold, transferred or received;
    1. Weight. For the purposes of this section a licensee must use wet weight or net weight. Wet weight and net weight shall be measured, recorded and reported in U.S. customary units (e.g., ounce or pound); or International System of Units (e.g., kilograms, grams, or milligrams).
    2. Weighing Devices. A licensee shall follow weighing device requirements pursuant to section 8213 of this chapter.
    3. Count. For the purposes of this section count means the numerical count of the individual plants or units. (6) Estimated departure and arrival time;
  1. Actual departure time;
  2. Description for each item including strain or cultivar, and all of the applicable information below: (A) Plant;

(B) Flower; (C) Leaf;

(D) Shake; (E) Kief; and (F) Pre-rolls.

  1. UID(s).
  1. Temporary Licensees. A licensee operating under a temporary license, issued by the department pursuant to section 8100 of this chapter, is not required to record commercial cannabis activity in the track-and-trace system as otherwise   required by this chapter. Temporary licensees shall record all commercial cannabis activity in accordance with section 8401 of this chapter.
  2. Annual licensees may continue to conduct commercial cannabis activities with temporary licensees pursuant to section 8401 of this chapter.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26067 and 26160, Business and Professions Code.

§ 8406. Track-and-Trace System Inventory Requirements.

Licensees shall use the track-and-trace system for all inventory tracking activities at a licensed premises, including, but not limited to, all the following:

  1. Reconcile all on-premises and in-transit cannabis or nonmanufactured cannabis products inventories at least once every fourteen (14) business days; and
  2. Record the net weight of all harvested cannabis once the majority of drying, trimming and curing activities have been completed, or within sixty (60) calendar days from the initial harvest date, whichever is sooner.
  3. Licensees shall close out their physical inventory of all cannabis and nonmanufactured cannabis products and UIDs, if applicable, prior to the effective date of any of the following changes to their license:
    1. Voluntary surrender of a temporary license or annual license. (2) Expiration of an annual license.

(3) Revocation of a license.

  1. Close-out of physical inventory includes, but is not limited to, all of the following items: (1) Immature plants and their corresponding lot UID(s);

(2) Mature plants and their corresponding plant UID(s); (3) Harvest batches and their corresponding UID(s);

  1. Nonmanufactured cannabis products and their corresponding UID(s); and
  2. UIDs in the licensee’s possession which have not been assigned in the track-and-trace system. (e) All transfers and sales shall be documented pursuant to sections 8401 and 8405 of this chapter.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26067, Business and Professions Code.

  1. Within thirty (30) business days of receipt of the UIDs ordered pursuant to section 8403 of this chapter, the licensee shall enter into the track-and-trace system and assign and apply a UID to each existing immature plant lot, each individual mature plant, and all nonmanufactured cannabis products physically located on the licensed premises.
  2. After the thirty (30) day time frame referenced in subsection (a) above expires, all cannabis at the licensed premises shall be entered into the track-and-trace system starting with seed, clone propagated onsite or purchased from a licensed nursery, or seedling purchased from a licensed nursery pursuant to this chapter. This section shall remain in effect until July 1, 2019.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26067, Business and Professions Code.

§ 8408. Inventory Audits.

The department may perform an audit of the physical inventory and inventory as reported in the track-and-trace system of any licensee at the department’s discretion. Audits of the licensee shall be conducted during standard business hours or at other reasonable times as mutually agreed to by the department and the licensee. For the purposes of this section standard business hours are 8:00am 5:00pm (Pacific Standard Time). Prior notice of audit is not required.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26015 and 26067, Business and Professions Code.

§ 8409. Notification of Diversion, Theft, Loss, or Criminal Activity.

Licensees shall notify the department and law enforcement authorities within three (3) business days of discovery of any diversion, theft, loss of, or criminal activity related to licensee’s cannabis or nonmanufactured cannabis products.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013 and 26015, Business and Professions Code.

What are inspect, investigate, audit reqs for Cultivation ?

Article 6. Inspections, Investigations and Audits

§ 8500. Inspections, Investigations and Audits Applicability.

All licensees and applicants shall be subject to inspection, investigation or audit of their licensed premises and records by the department to determine compliance with applicable laws and regulations.

Professions Code.

§ 8501. Inspections, Investigations and Audits.

The department shall conduct inspections, investigations and audits of licensees including, but not limited to, a review of any books, records, accounts, inventory, or onsite operations specific to the license.

  1. The department may conduct an inspection, investigation or audit for any of the following purposes: (1) To determine accuracy and completeness of the application prior to issuing a license;

(2) To determine compliance with license requirements including, but not limited to, the cultivation plan; (3) To audit or inspect any records outlined in section 8400 of this chapter;

  1. To respond to a complaint(s) received by the department regarding the licensee;
  2. To inspect incoming or outgoing shipments of cannabis and nonmanufactured cannabis products; and (6) As deemed necessary by the department.
  1. All inspections, investigations and audits of the licensed premises shall be conducted during standard business hours or at other reasonable times as mutually agreed to by the department and the licensee. For the purposes of this section, standard business hours are 8:00am 5:00pm (Pacific Standard Time). Prior notice of inspection, investigation or audit  is not required.
  2. No applicant, licensee, its agent or employees shall interfere with, obstruct or impede the department’s inspection, investigation or audit. This includes, but is not limited to, the following actions:
    1. Denying the department access to the licensed premises; (2) Providing false or misleading statements;

(3) Providing false, falsified, fraudulent or misleading documents and records; and (4) Failing to provide records, reports, and other supporting documents.

  1. Upon completion of an inspection, investigation or audit, the department shall notify the applicant or licensee of any violation(s) and/or action(s) the department is taking.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013, 26015, and 26160, Business and Professions Code.

Article 7. Enforcement

§ 8600. Enforcement Applicability.

Notwithstanding any other provision of law, the department may take a licensing or administrative action at any time within five (5) years after the department discovers, or with reasonable diligence should have discovered, any violation of state law

or local ordinances.

Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Section 26031, Business and Professions Code.

§ 8601. Administrative Actions.

The department shall use the violation classes and applicable fine amounts as follows:

  1. For the purpose of this section, violation classes are designated as “Minor,” “Moderate,” and “Serious”.
    1. “Serious”. Violations which preclude or significantly interfere with enforcement, or those that cause significant false, misleading or deceptive business practices, potential for significant level of public or environmental harm, or for any violation that is a repeat of a Moderate violation that occurred within a two-year period and that resulted in an administrative civil penalty. All serious violations are subject to revocation
    2. “Moderate”. Violations that undermine enforcement, are likely to cause public or environmental harm, or are a repeat of a Minor violation that occurred within a two-year period and resulted in an administrative civil penalty.
    3. “Minor”. Violations that are not likely to have an adverse effect on public safety or environmental health. (b) Repeat violations may result in an escalation of violation class.
  1. Pursuant to section 26038(a) of the Business and Professions Code, a person(s) engaging in commercial cannabis activity without a license shall be subject civil penalties of up to three (3) times the amount of the license fee for each violation.
  2. Pursuant to section 26160(f) of the Business and Professions Code, if a licensee, or an agent or employee of the licensee, fails to maintain or provide required records, the licensee shall be subject to a citation and a fine of up to thirty thousand dollars ($30,000) per individual violation.
  3. Table A below shall be used to establish the initial level of severity of a particular violation and the corresponding penalty range for “Serious,” “Moderate,” and “Minor” violation classes.

LARGE TABLE

Authority: Sections 26012, 26013 and 26031, Business and Professions Code. Reference: Section 26031, Business and Professions Code.

§ 8602. Notice of Violation.

  1. The department shall issue a Notice of Violation to a licensee that is in violation of applicable statutes and regulations. A Notice of Violation shall be served upon the licensee and legal owner of the property. The Notice of Violation shall contain all of the following:
    1. A brief statement of the violation(s) alleged; (2) The proposed penalty;

(3) A statement of whether the violation is correctable, and a timeframe in which the violation shall be corrected; and (4) Notice of an administrative hold of property, if applicable.

  1. The right to a hearing will be deemed waived if respondent fails to respond in writing within thirty (30) calendar days from the date the Notice of Violation was received by the licensee.

Authority: Sections 26012, 26013 and 26031, Business and Professions Code. Reference: Section 26031, Business and Professions Code.

§ 8603. Administrative Hold Procedure.

To prevent destruction of evidence, illegal diversion of cannabis or nonmanufactured cannabis products, or to address potential threats to the environment or public safety, while allowing a licensee to retain its inventory pending further inspection, or enforcement action, the department may order an administrative hold of cannabis or nonmanufactured cannabis products pursuant to the following procedure:

  1. The notice of administrative hold shall provide a documented description of the cannabis or nonmanufactured cannabis products to be subject to the administrative hold and a concise statement regarding the basis for issuing the

administrative hold.

  1. Following the issuance of a notice of administrative hold to the licensee, the department shall identify the cannabis or nonmanufactured cannabis products subject to the administrative hold in the track-and-trace system.
  2. Within twenty-four (24) hours of receipt of the notice of administrative hold, the licensee shall physically segregate all designated cannabis or nonmanufactured cannabis products subject to the hold and shall safeguard and preserve the subject property as noticed.
  3. While the administrative hold is in effect, the licensee is restricted from selling, donating, transferring, transporting, gifting, giving away or destroying the subject property noticed.
  4. Nothing herein shall prevent a licensee from the continued possession, cultivation, or harvesting of the cannabis subject to the administrative hold. During the hold period, all cannabis or nonmanufactured cannabis products subject to an administrative hold shall be put into separate batches.
  5. Nothing herein shall prevent a licensee from voluntarily surrendering cannabis or nonmanufactured cannabis products that are subject to an administrative hold. The licensee shall identify the cannabis or nonmanufactured cannabis products being voluntarily surrendered in the track-and-trace system. Voluntary surrender does not waive the right to a hearing and any associated rights.
  6. The licensee shall have the right to appeal an administrative hold ordered by the department pursuant to section 8604 of this chapter. The department shall schedule an informal hearing within ten (10) calendar days from receipt of the request for an informal hearing and issue the written decision within five (5) calendar days after the conclusion of the hearing.

Authority: Sections 26012, 26013 and 26031, Business and Professions Code. Reference: Section 26031, Business and Professions Code.

§ 8604. Informal Administrative Hearings.

  1. The respondent may appeal a Notice of Violation or an administrative hold and request an informal hearing by written correspondence to the California Department of Food and Agriculture, Legal Office of Hearings and Appeals, 1220 “N” Street, Suite 400, Sacramento, California 95814 or via email to [email protected] The request shall be received within thirty (30) calendar days from the date the Notice of Violation was received by the respondent. The request shall include the following:
    1. The respondent’s name, mailing address, and daytime phone number; (2) If applicable, the license number issued by the department;
  1. Copy of the Notice of Violation; and
  2. A clear and concise statement for the basis of the appeal or counts within the Notice of Violation.
  1. Failure to submit a timely written request constitutes a waiver of the respondent’s right to contest the Notice of Violation. Untimely requests for an informal hearing will not be considered.
  2. If the Notice of Violation places an administrative hold on cannabis or nonmanufactured cannabis products, the hold shall remain in effect pending the outcome of the informal hearing.

Authority: Sections 26012, 26013 and 26031, Business and Professions Code. Reference: Section 26031, Business and Professions Code.

§ 8605. Informal Hearing Schedule and Notification.

  1. The department shall schedule an informal hearing within forty-five (45) calendar days from receipt of the request for an informal hearing.
  2. The department shall provide a notice of the informal hearing to the respondent containing the following information: (1) Date, location, and time of the informal hearing;
  1. Summary of the violations;
  2. Any other information or documentation necessary for the hearing; and (4) Standard of Proof.

Authority: Sections 26012, 26013 and 26031, Business and Professions Code. Reference: Section 26031, Business and Professions Code.

§ 8606. Conduct of Informal Hearings.

Informal hearings shall be conducted as follows:

(a) The standard of proof to be applied by the hearing officer shall be a preponderance of the evidence; (b) Hearings may be conducted by phone at the request of the respondent;

  1. The decision of the hearing officer shall be in writing and shall include a statement of the factual legal basis of the decision;
  2. The written decision shall be issued within thirty (30) calendar days after the conclusion of the hearing and may be issued orally at the conclusion of the hearing subject to written confirmation;
  3. The decision shall be served on the respondent either by personal service, mail, email or via facsimile per respondent’s request/direction; and
  4. The respondent may appeal the hearing officer’s decision by filing a petition for a writ of administrative mandamus in accordance with the provisions of the section 1094.5 of the Code of Civil Procedure.

Professions Code.

§ 8607. Licensing Actions.

  1. The department may take a licensing action for any violation of this chapter.
  2. If the licensee holds multiple cultivation licenses, the department may take any one of, or combination of, the following actions on all the licensee’s cultivation licenses:
    1. Revocation of the license;
    2. Suspension of the license for a specified period of time;
    3. Issuance of a probationary license with terms and conditions determined by the department; and (4) Order an administrative hold of cannabis or nonmanufactured cannabis products.

Authority: Sections 26012, 26013 and 26031, Business and Professions Code. Reference: Section 26031, Business and Professions Code.

§ 8608. Formal Administrative Hearings.

  1. Notice shall be given to the applicant or licensee of the department’s intent to hold adjudication proceedings to consider the following actions:
    1. Denial of an application for a license; (2) Denial of a license renewal;
  1. Revocation of a license; and
  2. Suspension of a license for a specified period of time.
  1. Hearings concerning proceedings in subsection (a) above shall be held pursuant to chapter 5 (commencing with section 11500) of part 1 of division 3 of title 2 of the Government Code.

Authority: Sections 26012, 26013 and 26031, Business and Professions Code. Reference: Section 26031, Business and Professions Code.

CDFA

Who do the Manufacturer definitions apply to?

§40101. Applicability. (a) Unless otherwise specified, the requirements of this chapter apply to licensed manufacturers and to the manufacture of cannabis products for either the medicinal-use market or the adult-use market. (b) The requirements of subchapters 3, 4, and 5 shall apply to licensed microbusinesses conducting manufacturing operations.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26050; and 26106, Business and Professions Code.

Manufacturing

What are definitions for Cannabis Manufacturing?

In addition to the definitions in Business and Professions Code section 26001, the following definitions shall govern the construction of this chapter: (a) “A-license” means a license issued for commercial cannabis activities involving cannabis and cannabis products that are intended for individuals 21 years of age and older and who do not possess physician’s recommendations. (b) “Act” means the Medicinal and Adult-Use Cannabis Regulation and Safety Act, codified at Business and Professions Code section 26000, et seq. (c)“Actual yield” means the quantity that is actually produced at any appropriate step of manufacture or packaging of a particular cannabis product. (d) “Adequate” means that which is necessary to accomplish the intended purpose to ensure cannabis product quality in keeping with good public health practice. (e) “Adult-use Market” means the products intended for sale at an A-licensed retailer or microbusiness to individuals 21 years of age and older and who do not possess physician’s recommendations. (f) “Adulterated” or “adulteration” has the meaning stated in section 26131 of the Business and Professions Code. (g) “Allergen” means a major food allergen including any of the following: (1) Milk, eggs, fish (e.g., bass, flounder, or cod), crustacean shellfish (e.g., crab, lobster, or shrimp), tree nuts (e.g., almonds, pecans, or walnuts), wheat, peanuts, and soybeans. (2) A food ingredient that contains protein derived from a food specified in (1), except the following: Any highly refined oil derived from a food specified in (1) and any ingredient derived from such highly refined oil. (h) “Allergen cross-contact” means the unintentional incorporation of a food allergen into a cannabis product.

(i) “Applicant” means the owner that is applying on behalf of the commercial cannabis business for a license to manufacture cannabis products. (j) “Batch” or “production batch” means either: (1) An amount of cannabis concentrate or extract produced in one production cycle using the same extraction methods and standard operating procedures; or (2) An amount of a type of cannabis product produced in one production cycle using the same formulation and standard operating procedures. (k) “Bureau” means the Bureau of Cannabis Control in the Department of Consumer Affairs. (l) “Cannabis concentrate” means cannabis that has undergone a process to concentrate one or more active cannabinoids, thereby increasing the product’s potency. For purposes of this chapter, “cannabis concentrate” includes, but is not limited to, the separated resin obtained from cannabis, whether crude or purified, tinctures, capsules, suppositories, extracts, and vape cartridges. (m) “Cannabis product” as used in this chapter means cannabis that has undergone a process whereby the plant material has been transformed into a concentrate, including, but not limited to, concentrated cannabis, or an edible or topical product containing cannabis or concentrated cannabis and other ingredients. (n) “Cannabis product quality,” “quality cannabis product,” or “quality” means that the cannabis product consistently meets the established specifications for identity, cannabinoid concentration (as defined in Section 5724 of Title 16 of the California Code of Regulations) , composition, and limits on contaminants (as defined in Section 5718 to 5723, inclusive, of Title 16 of the California Code of Regulations), and has been manufactured, packaged, labeled, and held under conditions to prevent adulteration and misbranding. (o) “Cannabis waste” is waste that contains cannabis or cannabis products. (p) “CBD” means the compound cannabidiol. (q) “Commercial-grade, non-residential door lock” means a lock manufactured for commercial use. (r) “Component” means any substance or item intended for use in the manufacture of a cannabis product, including those substances or items that are not intended to

appear in the final form of the product. “Component” may include cannabis, cannabis products used as ingredients, other ingredients, and processing aids. (s) “Contact surface” means any surface that contacts cannabis products and cannabis product components and those surfaces from which drainage, or other transfer, onto the cannabis product or cannabis product components, occurs during the normal course of operations. Examples of contact surfaces include containers, utensils, tables, and equipment. (t) “Department” means the State Department of Public Health. (u) “Distribution” means the procurement, sale, and transport of cannabis and cannabis products between licensees. (v) “Edible cannabis product” means a cannabis product intended to be used orally, in whole or in part, for human consumption. For purposes of this chapter, “edible cannabis product” does not include any product otherwise defined as “cannabis concentrate.” (w) “Environmental pathogen” means a pathogen capable of surviving and persisting within the manufacturing environment such that cannabis products may be contaminated and may result in illness if consumed or used without treatment to significantly minimize the environmental pathogen. Examples of environmental pathogens include Listeria monocytogenes and Salmonella spp. but do not include the spores of pathogenic spore-forming bacteria. (x) “Extraction” means a process by which cannabinoids are separated from cannabis plant material through chemical or physical means. (y) “Finished product” means a cannabis product in its final form to be sold at a retail premises. (z) “Hazard” means any biological, chemical, radiological, or physical agent that has the potential to cause illness or injury. (aa) “Holding” means storage of cannabis or cannabis products and includes activities performed incidental to storage of a cannabis product and activities performed as a practical necessity for the distribution of that cannabis product. (bb) “Informational panel” means any part of the cannabis product label that is not the primary panel and that contains required labeling information.

(cc) “Infusion” means a process by which cannabis, cannabinoids, or cannabis concentrates are directly incorporated into a product formulation to produce a cannabis product. (dd) “Ingredient” means any substance that is used in the manufacture of a cannabis product and that is intended to be present in the product’s final form. (ee) “In-process material” means any material that is fabricated, compounded, blended, ground, extracted, sifted, sterilized, derived by chemical reaction, or processed in any other way for use in the manufacture of a cannabis product. (ff) “Labeling” means any label or other written, printed, or graphic matter upon a cannabis product, or upon its container or wrapper, or that accompanies any cannabis product. (gg) “Limited-access area” means an area in which cannabis is stored or held and is only accessible to a licensee and authorized personnel. (hh) “M-license” means a license issued for commercial cannabis activity involving medicinal cannabis. (ii) “Manufacturer licensee” or “licensee” means the holder of a manufacturer license issued pursuant to the Act. (jj) “Manufacture” means to compound, blend, extract, infuse, or otherwise make or prepare a cannabis product. (1) The term “manufacture” includes the following processes: (A) Extraction processes; (B) Infusion processes; (C) Packaging or repackaging of cannabis products; and (D) Labeling or relabeling the packages of cannabis products. (2) The term “manufacture” does not include the following: (A) The repacking of cannabis products from a bulk shipping container by a distributor or dispensary where the product’s original packaging and labeling is not otherwise altered; (B) The placing of cannabis products into opaque packaging at a retail premises for purpose of complying with section 26070.1 of the Act; or

(C) The collection of the glandular trichomes that are dislodged from the cannabis plant incident to cultivation activities. (kk) “Manufacturing” or “manufacturing operation” means all aspects of the extraction and/or infusion processes, including processing, preparing, holding, storing, packaging, or labeling of cannabis products. Manufacturing also includes any processing, preparing, holding, or storing of components and ingredients. (ll) “Microorganisms” means yeasts, molds, bacteria, viruses, protozoa, and/or microscopic parasites and includes species that are pathogens. The term “undesirable microorganisms” includes those microorganisms that are pathogens, that subject a cannabis product to decomposition, that indicate that a cannabis product is contaminated with filth, or that otherwise may cause a cannabis product to be adulterated. (mm) “Monitor” means to conduct a planned sequence of observations or measurements to assess whether control measures are operating as intended. (nn) “Nonvolatile solvent” means any solvent used in the extraction process that is not a volatile solvent. For purposes of this chapter, “nonvolatile solvents” include carbon dioxide and ethanol. (oo) “Package” or “packaging” means any container or wrapper that may be used for enclosing or containing any cannabis products. The term “package” does not include any shipping container or outer wrapping used solely for the transportation of cannabis products in bulk quantity to another licensee or licensed premises. (pp) “Pathogen” means a microorganism that can cause illness or injury. (qq) “Personnel” means any worker engaged in the performance or supervision of operations at a manufacturing facility and includes full-time employees, part-time employees, temporary employees, contractors, and volunteers. For purposes of training requirements, “personnel” also includes owner-operators. (rr) “Person” includes any individual, firm, partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, and the plural as well as the singular.

(ss) “Pest” means an undesired insect, rodent, nematode (small worm), fungus, bird, vertebrate, invertebrate, weed, virus, bacteria, or other microorganism (except microorganisms on or in humans or animals) injurious to health or the environment. (tt) “Premises” means the designated structure(s) and land specified in the application that is owned, leased, or otherwise held under the control of the applicant or licensee where the commercial cannabis activity (as defined in subdivision (k) of section 26001 of the Business and Professions Code) will be or is conducted. The premises shall be a contiguous area and shall only be occupied by one licensee. (uu) “Preventive controls” means those risk-based, reasonably appropriate procedures, practices, and processes that a person knowledgeable about the safe manufacturing, processing, packing, or holding of food would employ to significantly minimize or prevent the hazards identified pursuant to a hazard analysis. (vv) “Primary panel” means the part of a cannabis product label that is most likely to be displayed, presented, shown, or examined under customary conditions of display for retail sale. (ww) “Processing aid” means any substance that is added to a cannabis product during manufacture but is removed in some manner from the cannabis product before it is packaged in its finished form. This includes substances that are converted into constituents normally present in the product, and do not significantly increase the amount of the constituent naturally found in the product. This also includes substances that are added to a product for their technical or functional effect in the processing but are present in the finished product at insignificant levels and do not have any technical or functional effect in that product. (xx) “Product Identity” or “identity of the product” means the generic name of the product type by which it is most commonly known. For edible products, the product identity shall not contain any trademarked identity of a traditional food product or the term “candy” or “candies.” (yy) “Qualified individual” means a person who has the education, training, or experience (or a combination thereof) necessary to manufacture quality cannabis products as appropriate to the individual’s assigned duties. A qualified individual may be, but is not required to be, an employee of the licensee.

(aaa) “Quality control” means a planned and systematic operation or procedure for ensuring the quality of a cannabis product. (bbb) “Quality control operation” means a planned and systematic procedure for taking all actions necessary to prevent cannabis product(s) from being adulterated or misbranded. (ccc) “Quality control personnel” means any person, persons, or group, designated by the licensee to be responsible for quality control operations. (ddd) “Quarantine” means the storage or identification of a product, to prevent distribution or transfer of the product. (eee) “Raw material” means any unprocessed material in its raw or natural state that is intended to become part of the components of a cannabis product. (fff) “Sanitize” means to adequately treat cleaned surfaces by a process that is effective in destroying vegetative cells of pathogens, and in substantially reducing numbers of other undesirable microorganisms, but without adversely affecting the product or its safety for the consumer. (ggg) “Serving” means the designated amount of cannabis product established by the manufacturer to constitute a single unit. (hhh) “THC” means the compound tetrahydrocannabinol. For purposes of this chapter, “THC” refers specifically to delta 9-tetrahydrocannabinol. (iii) “Theoretical yield” means the quantity of a particular cannabis product that would be produced at any appropriate step of manufacture or packaging, based upon the quantity of components or packaging to be used, in the absence of any loss or error in actual production. (jjj) “Topical cannabis product” means a cannabis product intended to be applied to the skin rather than ingested or inhaled. (kkk) “Track and trace system” means the program for reporting the movement of cannabis and cannabis products through the distribution chain established by the Department of Food and Agriculture in accordance with Section 26067 of the Act.

(lll)“UID” means the unique identifier for use in the track-and-trace system established by the Department of Food and Agriculture in accordance with section 26069 of the Act. (mmm) “Universal symbol” means the symbol developed by the Department pursuant to paragraph (7) of subdivision (c) of section 26130 of the Act to indicate a product contains cannabinoids. (nnn) “Validation” means obtaining and evaluating scientific and technical evidence that a control measure, combination of control measures, or quality control procedures as a whole, when properly implemented, is capable of effectively controlling the identified hazard. (ooo) “Verification” means the application of methods, procedures, tests, or other evaluations, in addition to monitoring, to determine whether a control measure or combination of control measures is or has been operating as intended and to establish the validity of the quality control procedures. (ppp) “Volatile solvent” means any solvent that is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures. Examples of volatile solvents include, but are not limited to, butane, hexane, and propane. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26001; 26120; and 26130, Business and Professions Code. Section 11018.1, Health and Safety Code.

Manufacturing

What are the Manufacturer licenses and types?

(a) Manufacturing licenses may be issued for either the adult-use market or the medicinal-use market.

(b) The following license types are available from the Department:

(1) “Type 7,” for extractions using volatile solvents as defined by Section 40100. A Type 7 licensee may also:

(A) Conduct extractions using nonvolatile solvents or mechanical methods on the licensed premises provided that the extraction process is noted on the application form and the relevant information pursuant to Section 40131 is provided to the Department;

(B) Conduct infusion operations on the licensed premises, provided that the infusion method is noted on the application form and that the relevant information pursuant to Section 40131 is provided to the Department; and (C) Conduct packaging and labeling of cannabis products on the licensed premises.

(2) “Type 6,” for extractions using mechanical methods or nonvolatile solvents as defined by Section 40100. A Type 6 licensee may also conduct infusion operations and packaging and labeling of cannabis products on the licensed premises provided that the infusion method is noted on the application form and that the relevant information pursuant to Section 40131 is provided to the Department.

(3) “Type N,” for manufacturers that produce edible products or topical products using infusion processes, or other types of cannabis products other than extracts or concentrates. A Type N licensee may also package and label cannabis products on the licensed premises.

(4) “Type P,” for manufacturers that only package or repackage cannabis products or label or relabel the cannabis product container or wrapper. Manufacturers that engage in packaging or labeling of cannabis products as part of the manufacturing operation do not need to hold a separate Type P license.

Authority: Sections 26012; 26013 and 26130, Business and Professions Code. Reference: Sections 26012; 26050; and 26130, Business and Professions Code.

Manufacturing

What are the requirements for Manufacturers premises?

The applicant shall submit all of the following information regarding the manufacturing premises and operation: (a) The physical address of the manufacturing premises; (b) Whether the premises manufactures medicinal-use and/or adult-use cannabis products; (c) The type of activity conducted at the premises (extraction, infusion, packaging, and/or labeling); (d) The types of products that will be manufactured, packaged, or labeled;(e) The name, title and phone number of the on-site individual who manages the operation of the premises; (f) The name, title and phone number of an alternate contact person for the premises; (g) The number of employees at the premises; (h) The anticipated gross annual revenue from products manufactured at the premises. An applicant for an M-license shall submit the anticipated gross annual revenue from the sale of medicinal-use products manufactured at the premises and an applicant for an A-license shall submit the anticipated gross annual revenue from the sale of adult-use products manufactured at the premises; (i) A premises diagram. The diagram shall be specific enough to enable ready determination of the bounds of the property and the proposed premises to be licensed, showing all boundaries, dimensions, entrances and exits, interior partitions, walls, rooms, windows, and common or shared entryways. The diagram must show the areas in which all commercial cannabis activities will be conducted. The diagram shall be to scale. If the proposed premises consists of only a portion of a property, the diagram shall be labeled to indicate which part of the property is the proposed premises and identifying what the remaining property is used for. (j) The following information: (1) A description of inventory control procedures sufficient to demonstrate how the applicant will comply with the requirements of Section 40282, or a copy of the standard operating procedure addressing inventory control; (2) A description of quality control procedures sufficient to demonstrate how the applicant will comply with all of the applicable requirements specified in Sections 40232- 40268 or a copy of the standard operating procedure addressing quality control; (3) A description of the transportation process to be used by the applicant that is in compliance with state law, or a copy of the standard operating procedure addressing transportation; (4) A description of security procedures sufficient to demonstrate how the applicant will comply with the requirements of Section 40200, or a copy of the standard operating procedure addressing security procedures;

(5) A description of the waste disposal procedures sufficient to demonstrate how the applicant will comply with the requirements of Section 40290, or a copy of the standard operating procedure addressing waste management. (k) A written statement signed by the owner of the property, or the owner’s agent, identifying the physical location of the property and acknowledging and consenting to the manufacture of cannabis products on the property. The name, address and contact phone number for the owner or owner’s agent shall be included. (l) Any manufacturer submitting operating procedures and protocols to the Department pursuant to the Act and this chapter may claim such information as a trade secret or confidential by clearly identifying such information as “confidential” on the document at the time of submission. Any claim of confidentiality by a manufacturer must be based on the manufacturer’s good faith belief that the information marked as confidential constitutes a trade secret as defined in Civil Code section 3426.1(d), or is otherwise exempt from public disclosure under the California Public Records Act in Government Code section 6250 et seq. Authority: Sections 26012; 26013 and 26130, Business and Professions Code. Reference: Sections26050; 26050.1; 26055; and 26130, Business and Professions Code.

Manufacturing

What are rules regarding changing a Manufacturer License?

License Constraints

(a) A manufacturer licensee shall not manufacture, prepare, package or label any products other than cannabis products at the licensed premises. For purposes of this section, the term “cannabis products” also includes products that do not contain cannabis, but are otherwise identical to the cannabis-containing product, and are intended for use as samples. (b) No licensee shall employ an individual under 21 years of age. (c) A M-licensee shall only conduct commercial cannabis activities with M-licensees. (d) An A-licensee shall only conduct commercial cannabis activities with A-licensees. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26050; and 26140, Business and Professions Code.

Change in Licensed Operations

(a) At any time after issuance of a license and prior to submission of an application to renew the license, a licensee may request to change the manufacturing operations conducted at the licensed premises. To request approval for additional manufacturing operations, the licensee shall submit the following: (1) The information required under Section 40131; and (2) A non-refundable $1,000 application processing fee to review all documents. (b) The information submitted under subsection (a) shall be evaluated on a case-bycase basis by the Department, and upon approval of the request by the Department, the licensee may begin conducting the additional manufacturing operation. The existing license shall be amended to reflect the change in operations, but the date of expiration shall not change. (c) Pursuant to section 26055, subdivision (c) of the Act, the licensee shall also obtain approval from the Department prior to making any material or substantial changes to the premises. The request describing the proposed material or substantial change shall be submitted in writing to the Department and shall be evaluated on a case-by-case basis. (d) Licensees that choose to cease operation of any licensed activity shall notify the Department within 10 days of cessation of the activity. License fees shall not be prorated or refunded upon cessation of any activity. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26050; and 26055, Business and Professions Code.

Add or Remove Owners

The licensee shall notify the Department of the addition or removal of an owner occurring any time between issuance of a license and submission of an application to renew the license within 10 calendar days of the change. The new owner shall submit the information required under Section 40130 to the Department. The Department shall review the qualifications of the owner in accordance with the Act and these regulations and determine whether the change would constitute grounds for denial of the license. The Department may approve the addition of the owner, deny the addition of the owner, or condition the license as appropriate, to be determined on a case-by-case basis.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26050; and 26057, Business and Professions Code

Manufacturing

What are the security requirements for a Manufacturer?

Every applicant and licensee shall develop and implement a security plan. At a minimum, the security plan shall include a description of the security measures to be taken to: (a) Prevent access to the manufacturing premises by unauthorized personnel and protect the physical safety of employees. This includes, but is not limited to: (1) Establishing physical barriers to secure perimeter access and all points of entry into a manufacturing premises (such as locking primary entrances with commercialgrade, non-residential door locks, or providing fencing around the grounds, driveway, and any secondary entrances including windows, roofs, or ventilation systems); (2) Installing a security alarm system to notify and record incident(s) where physical barriers have been breached; (3) Establishing an identification and sign-in/sign-out procedure for authorized personnel, suppliers, and/or visitors; (4) Maintaining the premises such that visibility and security monitoring of the premises is possible; and (5) Establishing procedures for the investigation of suspicious activities. (b) Prevent against theft or loss of cannabis and cannabis products. This includes but is not limited to: (1) Establishing an inventory system to track cannabis and cannabis products and the personnel responsible for processing it throughout the manufacturing process; (2) Limiting access of personnel within the premises to those areas necessary to complete job duties, and to those time-frames specifically scheduled for completion of job duties; (3) Supervising tasks or processes with high potential for diversion (including the loading and unloading of cannabis transportation vehicles); and (4) Providing designated areas in which personnel may store and access personal items.

(c) Secure and back up electronic records in a manner that prevents unauthorized access and that ensures the integrity of the records is maintained. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: 26011.5; and 26051.5, Business and Professions Code. §40205. Video Surveillance. (a) At a minimum, licensed premises shall have a digital video surveillance system with a minimum camera resolution of 1280 × 720 pixels. The video surveillance system shall be able to effectively and clearly record images of the area under surveillance. (b) The video surveillance system shall be accessible via remote access by the licensee. (c) To the extent reasonably possible, all video surveillance cameras shall be installed in a manner that prevents intentional obstruction, tampering with, and/or disabling. (d) Areas that shall be recorded on the video surveillance system include the following: (1) Areas where cannabis or cannabis products are weighed, packed, stored, quarantined, loaded and/or unloaded for transportation, prepared, or moved within the premises; (2) Limited-access areas; (3) Security rooms; (4) Areas containing surveillance-system storage devices shall contain at least one camera to record the access points to such an area; and (5) The interior and exterior of all entrances and exits to the premises. (e) The surveillance system shall record continuously 24 hours per day and at a minimum speed of 15 frames per second. (f) All recording and monitoring equipment shall be located in secure rooms or areas of the premises in an access-controlled environment. (g) All surveillance recordings shall be kept on the licensee’s recording device for a

minimum of 90 days. (h) All video surveillance recordings are subject to inspection by the Department and shall be copied and sent, or otherwise provided, to the Department upon request. (i) The video recordings shall display the current date and time of recorded events. Time is to be measured in accordance with the U.S. National Institute of Standards and Technology standards. The displayed date and time shall not significantly obstruct the view of recorded images.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5 and 26070, Business and Professions Code.

Manufacturing

What are permissible extracts for a Manufacturer?

a) Except as provided in subsection (b), cannabis extraction shall only be conducted using the following methods: (1) Mechanical extraction; (2) Chemical extraction using a nonvolatile solvent such as a nonhydrocarbon-based or other solvent such as water, vegetable glycerin, vegetable oils, animal fats, or foodgrade glycerin. Nonhydrocarbon-based solvents shall be food grade; (3) Chemical extraction using a professional closed loop CO2 gas extraction system; (4) Chemical extraction using a volatile solvent, as defined in Section 40100; or (5) Any other method authorized by the Department pursuant to subsection (b). (b) To request authorization from the Department to conduct cannabis extraction using a method other than those specified in paragraphs (1) through (4) of subsection (a), the applicant or licensee shall submit a detailed description of the extraction method, including any documentation that validates the method and any safety procedures to be utilized to mitigate any risk to public or worker health and safety.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5 and 26130, Business and Professions Code.

Manufacturing

What are the rules for Manufacturer’s extraction systems?

Volatile Solvent Extractions. Chemical extractions using volatile solvents shall be subject to the following requirements: (a) Hydrocarbon-based solvents shall be at least 99 percent purity; (b) All extractions shall be performed in a closed loop extraction system as described in Section 40225; (c) No volatile solvent extraction operations shall occur in an area zoned as residential; and (d) The extraction operation shall be approved by the local fire code official and shall be operated in accordance with all relevant state and local requirements. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; 26105; and 26130, Business and Professions Code. §40223. Ethanol Extractions. (a) Ethanol used for extractions or for post-extraction processing shall be foodgrade. (b) The extraction operation shall be approved by the local fire code official and shall be operated in accordance with Division of Occupational Health and Safety (Cal/OSHA) regulations and any other relevant state and local requirements.

Authority: Section 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26130, Business and Professions Code.

Closed-Loop Extraction System Requirements. (a) Chemical extractions using CO2 or a volatile solvent shall be conducted in a professional closed loop extraction system. The system shall be commercially manufactured and bear a permanently affixed and visible serial number. The system shall be certified by a California-licensed engineer that the system was commercially manufactured, safe for its intended use, and built to codes of recognized and generally accepted good engineering practices, such as: (1) The American Society of Mechanical Engineers (ASME); (2) American National Standards Institute (ANSI); (3) Underwriters Laboratories (UL); or (4) The American Society for Testing and Materials (ASTM). (b) Professional closed loop systems, other equipment used, the extraction operation, and facilities must be approved for use by the local fire code official and comply with any required fire, safety, and building code requirements related to the processing, handling and storage of the applicable solvent or gas. (c) The certification document required pursuant to subsection (a) shall contain the signature and stamp of a California-licensed professional engineer and the serial number of the extraction unit being certified.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Section 26011.5, Business and Professions Code.

 

Manufacturing

 

What are operational best practices for a Manufacturer?

Requirements for Personnel. The licensee shall establish and implement written procedures to ensure the following for all personnel: (a) Disease control. Any individual who by medical examination or supervisory observation is shown to have, or appears to have, an illness, open lesion (such as boils, sores, or infected wounds), or any other source of microbial contamination presenting a reasonable threat of contamination to cannabis products, contact surfaces, or packaging materials, shall be excluded from any related manufacturing operations until their health condition is corrected. Open lesions, boils, and/or infected wounds shall be adequately covered (e.g., by an impermeable cover). Personnel shall be instructed to report such health conditions to their supervisors. (b) Cleanliness. All individuals working in direct contact with cannabis products, cannabis product-contact surfaces, and cannabis product-packaging materials shall conform to hygienic practices to the extent necessary to protect against allergen crosscontact and contamination of cannabis products while on duty. The methods for maintaining cleanliness include: (1) Wearing appropriate outer garments to protect against allergen cross-contact and contamination of cannabis products, contact surfaces, and/or packaging materials; (2) Maintaining adequate personal cleanliness; (3) Washing hands thoroughly in an adequate hand-washing facility before starting work, after each absence from the work station, and at any time when the hands may have become soiled or contaminated, and sanitizing hands if necessary to protect against contamination with undesirable microorganisms; (4) Removing all unsecured jewelry and other objects that might fall into cannabis products, equipment, or containers, and removing hand jewelry that cannot be adequately sanitized during periods in which cannabis products are manipulated by hand. If such hand jewelry cannot be removed, it may be covered by material which can be maintained in an intact, clean, and sanitary condition and which effectively protects against the contamination by these objects of the cannabis products, cannabis productcontact surfaces, or cannabis product-packaging materials.

(5) Maintaining any gloves, if they are used in cannabis product handling in an intact, clean, and sanitary condition. (6) Wearing hair nets, headbands, caps, beard covers, or other hair restraints in an effective manner, where appropriate. (7) Storing clothing or other personal belongings in areas separate from those where cannabis products are exposed or where equipment or utensils are washed. (8) Confining the following activities to areas separate from those where cannabis products may be exposed or where equipment or utensils are washed: eating food, chewing gum, drinking beverages, and/or using tobacco. (9) Taking any other necessary precautions to protect against allergen cross-contact and against contamination of cannabis products, cannabis product-contact surfaces, or cannabis product-packaging materials by microorganisms or foreign substances (including perspiration, hair, cosmetics, tobacco, chemicals, and medicines applied to the skin). Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40234. Grounds. The licensee shall establish and implement written procedures to ensure that the grounds of the premises controlled by the licensee are kept in a condition that prevents the contamination of components and cannabis products. The methods for adequate maintenance of the grounds shall include at minimum: (a) The proper storage of equipment, removal of litter and waste, and cutting of weeds or grass within the immediate vicinity of the cannabis manufacturing facility so that the premises shall not constitute an attractant, breeding place, or harborage for pests. (b) The proper maintenance of roads, yards, and parking lots so that these areas shall not constitute a source of contamination in areas where cannabis products are handled or transported.

(c) The provision of adequate draining areas in order to prevent contamination by seepage, foot-borne filth, or the breeding of pests due to unsanitary conditions. (d) The provision and maintenance of waste treatment systems so as to prevent contamination in areas where cannabis products may be exposed to such a system’s waste or waste by-products. (e) If the grounds of the cannabis manufacturing facility are bordered by grounds outside the licensee’s control that are not maintained in the manner described in subsections (a) through (d) of this section, inspection, extermination, and other reasonable care shall be exercised within the cannabis manufacturing facility in order to eliminate any pests, dirt, and/or filth that pose a source of cannabis product contamination. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40236. Facility Construction and Design. At minimum, a cannabis manufacturing facility shall: (a) Provide adequate space for such placement of equipment and storage of materials as is necessary for maintenance, sanitary operations, and the production of quality cannabis products. (b) Permit the taking of adequate precautions to reduce the potential for allergen cross-contact and for contamination of cannabis products, cannabis product-contact surfaces, or cannabis product-packaging materials by microorganisms, chemicals, filth, and other extraneous material. (c) Permit the taking of adequate precautions to protect product components in installed outdoor bulk vessels by any effective means, including: (1) Using protective coverings; (2) Controlling areas over and around the vessels in order to eliminate harborages for pests; or (3) Checking such vessels on a regular basis for pests and pest infestation.

(d) Be constructed in such a manner that floors, walls, and ceilings may be adequately cleaned and kept clean and in good repair. (e) Be constructed in such a manner that drip or condensate from fixtures, ducts and pipes does not contaminate cannabis products, cannabis product-contact surfaces, or cannabis product-packaging materials. (f) Be constructed in such a manner so as to provide adequately wide and unobstructed aisles or working spaces between equipment and walls that permit employees to both perform their duties and protect against the contamination of cannabis products, cannabis product-contact surfaces, or cannabis product-packaging materials via clothing or personal contact. (g) Provide adequate lighting in hand-washing areas; dressing and locker rooms; toilet facilities; all areas where components or cannabis products are examined, manufactured, processed, packed, or held; and in all areas where equipment or utensils are cleaned. (h) Provide shatter-resistant light bulbs, fixtures, skylights, and/or other shatterresistant glass fixtures in all areas where glass breakage may result in the contamination of exposed cannabis, components or products at any step of preparation. (i) Provide adequate ventilation or control equipment to minimize dust, odors and vapors (including steam and noxious fumes) in areas where they may cause allergen cross-contact or contamination of cannabis products; and locate and operate fans and other air-blowing equipment in a manner that minimizes the potential for allergen crosscontact and contamination of cannabis products, cannabis product-packaging materials, and cannabis product-contact surfaces. (j) Provide, where necessary, adequate screening or other protection against pests. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code.

§40238. Sanitary Operations. The licensee shall establish and implement written sanitary operation procedures to ensure the following: (a) Buildings, fixtures, and other physical facilities on the premises are maintained in a clean and sanitary condition and are kept in good repair so as to prevent cannabis products from becoming adulterated. (b) The cleaning and sanitization of utensils and equipment is conducted in a manner that protects against allergen cross-contact and contamination of cannabis products or product components, cannabis product-contact surfaces, or cannabis product-packaging materials. (c) Cleaning compounds and sanitizing agents used in cleaning and sanitizing procedures are free from undesirable microorganisms and are safe and adequate under their conditions of use. Only the following toxic materials shall be used or stored in a manufacturing facility where cannabis products are processed or exposed: (1) Those required to maintain clean and sanitary conditions; (2) Those necessary for facility and equipment maintenance and operation; and (3) Those necessary for use in the cannabis manufacturing facility’s operations. (d) Toxic cleaning compounds, sanitizing agents, and pesticide chemicals are identified, held, and stored in a manner that protects against contamination of product components, cannabis products, cannabis product-contact surfaces, or cannabis product-packaging materials. (e) Measures are taken to exclude pests from the cannabis manufacturing facility in all areas where cannabis components and/or products may be at risk of contamination by pests. The use of pesticides to control pests in the cannabis manufacturing facility is permitted only under precautions and restrictions that protect against the contamination of cannabis products, cannabis product-contact surfaces, and cannabis productpackaging materials. (f) All cannabis product-contact surfaces including utensils and equipment are cleaned as frequently as necessary to protect against allergen cross-contact and contamination of cannabis products.

(g) Cannabis product-contact surfaces used for manufacturing, processing, packing or holding low-moisture cannabis products shall be maintained in a clean, dry, and sanitary condition before use. When such surfaces are wet-cleaned, they shall, when necessary, be sanitized and thoroughly dried before subsequent use. (h) When cleaning is necessary to protect against allergen cross-contact or the introduction of microorganisms into cannabis products during processing methods that utilize water (wet processing), all cannabis product-contact surfaces shall be cleaned and sanitized before use and after any interruption during which cannabis productcontact surfaces may have become contaminated. Where equipment and utensils are used in a continuous production operation, their surfaces shall be cleaned and sanitized as necessary. (i) Single-service articles (such as utensils intended for one-time use, paper cups, and paper towels) are stored, handled, and disposed of in a manner that protects against allergen cross-contact and contamination of cannabis product, cannabis product-contact surfaces, or cannabis product-packaging materials. (j) The non-cannabis product-contact surfaces of equipment used in the cannabis manufacturing facility are cleaned in a manner and as frequently as necessary to protect against allergen cross-contact and contamination of cannabis products, cannabis product-contact surfaces, and cannabis product-packaging materials. (k) Cleaned and sanitized portable equipment with cannabis product-contact surfaces and utensils are stored in a location and manner that protects cannabis product-contact surfaces from allergen cross-contact and contamination. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40240. Sanitary Facilities and Controls. The facility shall be equipped with adequate sanitary accommodations as follows: (a) Water supply. The water supply shall be adequate for the operations intended and derived from an adequate source. Any water that contacts cannabis products, cannabis product-contact surfaces, or cannabis product-packaging materials shall be

safe and of adequate sanitary quality. Running water shall be provided in all areas where required for the processing of cannabis products, for the cleaning of equipment, utensils, and cannabis product-packaging materials, and/or for employee sanitary facilities. (b) Plumbing. Plumbing systems shall be of adequate size and design and shall be adequately installed and maintained in order to: (1) Carry adequate quantities of water to required locations throughout the manufacturing facility. (2) Properly convey sewage and liquid disposable waste from the facility. (3) Avoid the creation of unsanitary conditions and/or contamination to cannabis products, water supplies, equipment, or utensils. (4) Provide adequate floor drainage in all areas where floors are subject to floodingtype cleaning or where normal operations release or discharge water or other liquid waste on the floor. (5) Provide that there is not backflow from, or cross-connection between, piping systems that discharge waste water or sewage, and piping systems that carry water for cannabis products or cannabis product manufacturing. (c) Sewage disposal. Sewage shall be disposed of into an adequate sewerage system or through other adequate means. (d) Toilet facilities. Each manufacturing facility shall provide employees with adequate, readily accessible toilet facilities. Toilet facilities shall be kept clean and shall not pose a potential source of contamination of cannabis products, cannabis productcontact surfaces, or cannabis product-packaging materials. (e) Hand-washing facilities. Each manufacturing facility shall provide hand-washing facilities designed to ensure that an employee’s hands do not pose a source of contamination to cannabis products, cannabis product-contact surfaces, or cannabis product-packaging materials. Hand-washing facilities shall be adequate, convenient, and furnish running water of at least 100° F (30° C). (f) Waste disposal. Waste shall be conveyed, stored, and disposed of so as to minimize the development of odor, minimize the potential that waste will attract, harbor, or otherwise contribute to the breeding of pests, and protect against the contamination

of cannabis products, cannabis product-contact surfaces, cannabis product-packaging materials, water supplies, and ground surfaces. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Section 26011.5; and 26131, Business and Professions Code. §40242. Equipment and Utensils. (a) All cannabis manufacturing equipment and utensils used in manufacturing cannabis products shall be so designed and of such material and workmanship as to be adequately cleanable, and shall be adequately maintained to protect against allergen cross-contact and contamination. (b) Equipment and utensils shall be designed, constructed, and used appropriately to avoid the adulteration of cannabis products with lubricants, fuel, metal fragments, contaminated water, or any other contaminants. (c) Equipment shall be installed so as to facilitate the cleaning and maintenance of the equipment and of adjacent spaces. (d) Cannabis product-contact surfaces shall be corrosion-resistant when in contact with cannabis products. (e) Cannabis product-contact surfaces shall be made of nontoxic materials, designed to withstand the environment of their intended use, and, if applicable, cleaning compounds, sanitizing agents, and cleaning procedures. (f) Cannabis product-contact surfaces shall be maintained to protect cannabis products from allergen cross-contact and from contamination by any source, including prohibited additives specified in Section 40300. (g) Seams on cannabis product-contact surfaces shall be smoothly bonded or maintained so as to minimize accumulation of particles, dirt, and organic matter and thus minimize the opportunity for growth of microorganisms and allergen cross-contact. (h) Equipment in areas where cannabis products are manufactured and that do not come into contact with cannabis products shall be constructed so that they may be kept in a clean and sanitary condition.

(i) Holding, conveying, and manufacturing systems, including gravimetric, pneumatic, closed, and automated systems, shall be of a design and construction that enables them to be maintained in a clean and sanitary condition. (j) Each freezer and cold storage compartment used to store and hold cannabis products, ingredients, or components capable of supporting growth of microorganisms shall be fitted with an indicating thermometer, temperature-measuring device, or temperature-recording device so installed as to show the temperature accurately within the compartment. (k) Instruments and controls used for measuring, regulating, or recording temperatures, pH, acidity, water activity, or other conditions that control or prevent the growth of undesirable microorganisms in cannabis products or components shall be accurate, precise, adequately maintained and calibrated, and be provided in an adequate number for their designated use(s). (l) Compressed air or other gases mechanically introduced into cannabis products or used to clean cannabis product-contact surfaces or equipment shall be treated in such a way that cannabis products shall not be contaminated.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code.

Manufacturing

What are production and process controls for a Manufacturer?

Production and Process Controls

§40250. General Provisions. (a) Appropriate quality control operations shall be employed to ensure that cannabis products are suitable for human consumption or use, and that cannabis product packaging materials are safe and suitable. (b) Overall sanitation of the premises shall be under the supervision of one or more qualified individuals assigned responsibility for this function. (c) Adequate precautions shall be taken to ensure that production procedures do not contribute to allergen cross-contact and to contamination from any source.

(d) Chemical, microbial, or extraneous-material testing procedures shall be used where necessary to identify sanitation failures or possible allergen cross-contact and cannabis product contamination. (e) Any cannabis product that has become contaminated to the extent that it is adulterated shall be rejected, or if appropriate, treated or processed to eliminate the contamination, as determined by a qualified individual. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40252. Quality of Raw Materials and Ingredients. The licensee shall establish and implement written policies and procedures to ensure the quality of raw materials and ingredients as follows: (a) Raw materials and other ingredients shall be inspected, segregated, or otherwise handled as necessary to ensure that they are clean and suitable for processing into cannabis products, and shall be stored under conditions that protect against allergen cross-contact and contamination, and in such a way as to minimize deterioration. (b) Raw materials must be washed or cleaned as necessary to remove soils and other contaminates. Water used for washing, rinsing, or conveying cannabis product ingredients must be safe and of adequate sanitary quality. (c) Raw materials and other ingredients shall not contain levels of microorganisms that render the cannabis product injurious to human health, or shall be pasteurized or otherwise treated during manufacturing so that they no longer contains levels of microorganisms that would cause the cannabis product to be adulterated. (d) Raw materials and other ingredients susceptible to contamination with aflatoxin or other natural toxins, pests, or extraneous material shall not exceed generally acceptable limits set by the U.S. Food and Drug Administration in the Defect Levels Handbook (Rev. February 2005), which is hereby incorporated by reference, before these raw materials or other ingredients are incorporated into finished cannabis products.

(e) Raw materials and other ingredients shall be held in bulk, or in containers designed and constructed so as to protect against allergen cross-contact or contamination, and shall be held at such temperature and relative humidity and in such a manner as to prevent the cannabis products from becoming adulterated. (f) Frozen raw materials and other ingredients shall be kept frozen. If thawing is required prior to use, it shall be done in a manner that prevents the raw materials and other ingredients from becoming adulterated. (g) Raw materials and other ingredients that are food allergens shall be identified and held in a manner that prevents cross-contact with other raw materials or ingredients. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40254. Manufacturing Operations. The licensee shall establish and implement written manufacturing operation procedures to ensure the following: (a) All cannabis product manufacturing shall be conducted under such conditions and controls as are necessary to minimize the potential for the growth of microorganisms, allergen cross-contact, contamination of cannabis products, and deterioration of cannabis products. (b) Cannabis products capable of supporting the rapid growth of undesirable microorganisms shall be held at temperatures that prevent the cannabis product from becoming adulterated during manufacturing, processing, packing and holding. (c) Measures such as sterilizing, irradiating, pasteurizing, cooking, freezing, refrigerating, controlling pH, or controlling water activity that are undertaken to destroy or prevent the growth of undesirable microorganisms shall be adequate under the conditions of manufacture, handling, and transfer to prevent the cannabis product from being adulterated. For purposes of this chapter, “water activity” (aw) is a measure of the free moisture in a manufactured cannabis product and is the quotient of the water vapor

pressure of the substance divided by the vapor pressure of pure water at the same temperature. (d) Work-in-process shall be handled in a manner that protects against allergen cross-contact, contamination, and growth of microorganisms. (e) Measures shall be taken to protect finished cannabis products from allergen cross-contact and from contamination by raw materials, other ingredients, rejected components, or waste. When raw materials, other ingredients, or waste are unprotected, they shall not be handled simultaneously in a receiving, loading or shipping area if such handling could result in allergen cross-contact or contaminated cannabis products. Cannabis products transported by conveyer shall be protected against allergen cross-contact and against contamination as necessary. (f) Equipment, containers, and utensils used to convey, hold, or store raw materials and other ingredients, work-in-process, or other cannabis products shall be constructed, handled, and maintained during manufacturing, processing, packing, and holding in a manner that protects against allergen cross-contact and contamination. (g) Adequate measures shall be taken to protect against the inclusion of metal or other extraneous material in cannabis products. (h) Adulterated cannabis products, raw materials, or other ingredients shall be either: (1) Disposed of in a manner that protects against the contamination of other cannabis products or ingredients; or (2) Reprocessed, if appropriate, using a method that has been proven to be effective and subsequently reexamined and found to be unadulterated. (i) Steps such as washing, peeling, trimming, cutting, sorting, inspecting, mashing, dewatering, cooling, shredding, extruding, drying, whipping, defatting, and forming shall be performed so as to protect cannabis products against allergen cross-contact and contamination. Cannabis products shall be protected from contaminants that may drip, drain, or be drawn into the cannabis product. (j) When required in the preparation of cannabis products capable of supporting microbial growth, heat blanching shall be conducted by heating the cannabis product or component to a temperature to control microbial growth, holding at that temperature for an amount of time to control microbial growth, and then either rapidly cooling the

cannabis product or passing it to subsequent manufacturing without delay. Growth and contamination by thermophilic microorganisms in blanchers shall be minimized by the use of adequate operating temperatures and by periodic cleaning and sanitization as necessary. (k) Batters, breading, sauces, gravies, dressings, dipping solutions, and other similar preparations that are held and used repeatedly over time shall be treated or maintained in such a manner that they are protected against allergen cross-contact and contamination, and in a manner that minimizes the potential growth of undesirable microorganisms. (l) Filling, assembling, packaging, and related operations shall be performed in such a way that the cannabis product is protected against allergen cross-contact, contamination and growth of undesirable microorganisms. (m) Cannabis products that principally rely on the control of water activity (aw) for preventing the growth of undesirable microorganisms (such as dry mixes, nuts, and dehydrated cannabis products) shall be processed and maintained at a safe moisture level. For purposes of this section “safe moisture level” is a level of moisture low enough to prevent the growth of undesirable microorganisms in the finished product under the intended conditions of manufacturing. The safe moisture level for an edible cannabis product is related to its aw. An aw will be considered safe for a manufactured cannabis product if adequate data is available to demonstrate that at or below the given aw the manufactured cannabis product will not support the growth of undesirable microorganisms. (n) When ice is used in contact with cannabis products, the ice shall be made from water that is safe, potable, and of adequate sanitary quality. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40256. Hazard Analysis

The licensee shall conduct and prepare a written hazard analysis to identify or and evaluate known or reasonably foreseeable hazards for each type of cannabis product produced at their facility in order to determine whether there exist any hazards requiring a preventive control. The hazard analysis shall include: (a) The identification of potential hazards, including: (1) Biological hazards, including microbiological hazards; (2) Chemical hazards, including radiological hazards, pesticide(s) contamination, solvent or other residue, natural toxins, decomposition, or food allergens; and/or (3) Physical hazards, such as stone, glass, metal fragments, hair or insects. (b) The evaluation of the hazards identified in order to assess the severity of any illness or injury that may occur as a result of a given hazard, and the probability that the hazard will occur in the absence of preventive controls. (c)The hazard evaluation shall consider the effect of the following on the safety of the finished cannabis product for the intended consumer: (1) The sanitation conditions of the manufacturing premises; (2) The product formulation; (3) The design, function and condition of the manufacturing facility and its equipment; (4) The raw material, ingredients and other components used in a given cannabis product; (5) Product transportation and transfer practices; (6) The manufacturing and processing procedures; (7) The packaging and labeling activities; (8) The storage of components and/or the finished cannabis product; (9) The intended or reasonably foreseeable use of the finished cannabis product; (10) Any other relevant factors. Authority: Sections 26012; 26013, and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40258. Preventive Controls.

Upon completion of the hazard analysis, the licensee shall identify and implement written preventive controls to provide assurance that any hazards requiring a preventative control will be significantly minimized or prevented such that the manufactured cannabis product is not adulterated or misbranded. The preventive controls shall include the following components: (a) The identification of critical control points. The points, steps or procedures in a given process in which control can be applied, and as a result, a hazard can be prevented, eliminated, or reduced to acceptable levels. (b) The establishment of critical limits for each critical control point. The maximum or minimum value to which a physical, biological, or chemical hazard must be controlled in order to prevent, eliminate, or reduce to an acceptable level the occurrence of an identified hazard. For example: the establishment of specific limits on temperature, humidity, or pH. (c) The establishment and implementation of monitoring procedures in order to use monitoring results to adjust a given process and maintain control. This shall include specifying the frequency and documentation requirements for monitoring. (d) The establishment and implementation of corrective actions to be taken when monitoring indicates there is a deviation from an established critical limit. This shall include procedures for ensuring: (1) Appropriate action is taken to identify and correct a problem that has occurred with implementation of a preventative control; (2) Appropriate action is taken, when necessary, to reduce the likelihood that a problem will recur; (3) All affected material(s) or product(s) are evaluated for safety; (4) All affected material(s) or product(s) are prevented from entering into commerce if the safety or quality of that material(s) or product(s) cannot be verified. (e) The establishment and implementation of record keeping procedures to document hazard analyses and control plans, identify the person responsible for each step, and identify the corrective actions that were taken upon of the discovery of a deviation. These records shall be subject to review by the Department

(f) The establishment and implementation of verification procedures in order to validate that preventative controls are consistently implemented and are effective in minimizing or preventing identified hazards; and that monitoring activities are being conducted as required. Authority: Sections 26012; 26013, and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40260. Equipment and Machinery Qualification. (a) The licensee shall establish and implement written procedures to ensure that each piece of equipment and machinery is suitable for its intended use prior to operation. These procedures include, but are not limited to: (1) Procedures for validating that all equipment and machinery has design specifications, operating procedures, and performance characteristics appropriate for its intended use by the licensee. (2) Procedures for validating that all equipment and machinery are built as designed with proper materials, capacity, and functions, and properly installed, connected, and calibrated. (3) Procedures for validating that all equipment and machinery perform in accordance with quality requirements in all anticipated operating ranges using the licensee’s standard operating procedures. Operating ranges shall be shown to be capable of being held as long as would be necessary during routine production. (4) The establishment of a schedule for routine re-verification of all equipment and machinery. (b) The licensee shall maintain verification records for all equipment and machinery, which contain at minimum: (1) Documentation of successful verification of each piece of equipment and machinery, dated and signed by the person conducting the verification. (2) Documentation of successful re-verifications of each piece of equipment and machinery upon any modification to the equipment or machinery, intended use, or standard operating procedure.

(3) A log documenting the verification and re-verification of all equipment and machinery in operation on the licensed premises. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40262. Master Manufacturing Protocol. The licensee shall establish and follow a written master manufacturing protocol for each unique formulation of cannabis product manufactured, and for each batch size, to ensure uniformity in finished batches and across all batches produced. (a) The master manufacturing protocol shall: (1) Identify specifications for the points, steps, or stages in the manufacturing process where control is necessary to ensure the quality of the cannabis product and that the cannabis product is packaged and labeled as specified in the master manufacturing protocol; and (2) Establish controls and procedures to ensure that each batch of cannabis product manufactured meets the specifications identified in accordance with subsection (a)(1) of this section. (b) The master manufacturing protocol shall include: (1) The name and intended cannabinoid(s) concentration per serving of the cannabis product to be manufactured, and the strength, concentration, weight, or measure of each ingredient for each batch size; (2) A complete list of components to be used; (3) The weight or measure of each component to be used; (4) The identity and weight or measure of each ingredient that will be declared on the ingredients list of the cannabis product; (5) A statement of theoretical yield of a manufactured cannabis product expected at each point, step, or stage of the manufacturing process where control is needed to ensure the quality of the cannabis product, and the expected yield of the finished product, including the maximum and minimum percentages of theoretical yield beyond

which a deviation investigation of a batch is necessary and material review is conducted and disposition decision is made; (6) A description of packaging and a representative label, or a cross-reference to the physical location of the actual or representative label; (7) Written instructions, including the following: (A) Specifications for each point, step, or stage in the manufacturing process where control is necessary to ensure the quality of the cannabis product and that the cannabis product is packaged and labeled as specified in the master manufacturing record; (B) Procedures for product and/or batch sampling and a cross-reference to procedures for tests or examinations of products and/or batches; (C) Specific actions necessary to perform and validate points, steps, or stages in the manufacturing process where control is necessary to ensure the quality of the cannabis product and that the cannabis product is packaged and labeled as specified in the master manufacturing record. (D) Special notations and precautions to be followed; and (E) Corrective action plans for use when a specification is not met. (8) The master manufacturing protocol for any given product may include the ability to adjust the amount or weight of cannabinoid-containing ingredients in order to account for the variability of cannabinoid content in harvest batches. (c) Nothing in this chapter requires disclosure of the master manufacturing protocol to any person other than the individuals conducting activities that utilize the protocol or to the Department and its inspectors and agents, or other law enforcement agencies. The licensee may consider the master manufacturing protocol subject to trade secret protection. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code.

§40264. Batch Production Record.(a) The licensee shall prepare a written batch production record every time a batch of a cannabis product is manufactured. The batch production record shall accurately follow the appropriate master manufacturing protocol, and each step of the protocol shall be performed in the production of the batch. (b) The batch production record shall document complete information relating to the production and control of each batch, including all of the following details: (1) The UID, and if used, the batch or lot number, of the finished batch of cannabis product and the UIDs of all cannabis products used in the batch. (2) The equipment and processing lines used in producing the batch; (3) The date and time of the maintenance, cleaning, and sanitizing of the equipment and processing lines used in producing the batch, or a cross-reference to records, such as individual equipment logs, where this information is retained; (4) The identification number assigned to each component (or, when applicable, to a cannabis product received from a supplier for packaging or labeling as a cannabis product), packaging, and label used; (5) The identity and weight or measure of each component used; (6) A statement of the actual yield and a statement of the percentage of theoretical yield at appropriate phases of processing; (7) The actual results obtained during any monitoring operation; (8) The results of any testing or examination performed during the batch production, or a cross-reference to such results; and (9) Documentation, at the time of performance, of the manufacture of the batch, including: (A) The date on which each step of the master manufacturing protocol was performed; and (B) The initials of the persons performing each step, including: (i) The initials of the person responsible for weighing or measuring each component used in the batch; (ii) The initials of the person responsible for verifying the weight or measure of each component used in the batch; (iii) The initials of the person responsible for adding the component to the batch; and

(iv) The initials of the person responsible for verifying the addition of components to the batch. (10) Documentation, at the time of performance, of packaging and labeling operations, including: (A) An actual or representative label, or a cross-reference to the physical location of the actual or representative label specified in the master manufacturing record; (B) The expected number of packaging and labels to be used, the actual quantity of the packaging and labels used, and, when label reconciliation is required, reconciliation of any discrepancies between issuance and use of labels; and (C) The results of any tests or examinations conducted on packaged and labeled cannabis products (including repackaged or relabeled cannabis products), or a crossreference to the physical location of such results. (11) Documentation at the time of performance that quality control personnel: (A) Reviewed the batch production record; (B) Reviewed all required monitoring operation(s) required by this article; (C) Reviewed the results of all tests and examinations, including tests and examinations conducted on components, in-process materials, finished batches of cannabis product, and packaged and labeled cannabis products; (D) Either approved and released, or rejected, the batch for distribution; and (E) Either approved and released, or rejected, the finished cannabis product, including any repackaged or relabeled cannabis product. (12) Documentation at the time of performance of any required material review and disposition decision. (c) The batch production record shall: (1) Contain the actual values and observations obtained during monitoring and, as appropriate, during verification activities; (2) Be accurate, indelible, and legible; (3) Be created concurrently with performance of the activity documented; and (4) Be as detailed as necessary to provide history of work performed; including: (A) Information to identify any associated manufacturing facility (e.g., the name, license number, and when necessary, the location of the facility);

(B) The date and the time of the activity documented; (C) The signature or initials of the person performing the activity; and (D) The identity of the product, the UID, and the lot number or batch identifier, if any. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40266. Product Complaints. The licensee shall establish and implement written procedures to ensure that: (a) A qualified individual shall review and investigate all product complaints to determine whether such complaints involve a possible failure of a cannabis product to meet any of its specifications; (b) Quality control personnel shall review and approve decisions determining whether to investigate a product complaint and shall review and approve the findings and follow up action(s) of any investigation performed; (c) Pursuant to subdivisions (a) and (b) in this section, any review and/or investigative activities by qualified individuals and quality control personnel shall extend to all relevant batches and records. (d) Quality control personnel shall maintain written records for every product complaint and subsequent investigation, if any. The records shall include: (1) The name and description of the cannabis product; (2) The batch number or UID of the cannabis product, if available; (3) The date the complaint was received and the name, address, and/or telephone number of the complainant, if available; (4) The nature of the complaint including, if known, how the product was used; (5) The reply to the complainant, if any; and (6) Any findings of the investigation and/or follow-up action taken when an investigation is performed. (e) For purposes of this section, “product complaint” means any written, electronic, or oral communication that contains any allegation expressing concern, for any reason, with the quality of a cannabis product that could be related to the manufacturing

practices. Examples of product complaints may include but are not limited to: foul odor, off taste, illness or injury, disintegration time, color variation, foreign material in a cannabis product container, improper packaging, mislabeling, cannabis products that contain incorrect concentration of cannabinoids, or cannabis products contain an unidentified ingredient, or any form of contaminant. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40268. Recalls. A licensee shall establish and implement written procedures for recalling cannabis products manufactured by the licensee that are determined to be misbranded or adulterated. These procedures shall include: (a) Factors which necessitate a recall; (b) Personnel responsible for implementing the recall procedures; and (c) Notification protocols, including: (1) A mechanism to notify all customers that have, or could have, obtained the product, including communication and outreach via media, as necessary and appropriate; (2) A mechanism to notify any licensees that supplied or received the recalled product; (3) Instructions to the general public and/or other licensees for the return and/or destruction of recalled product. (d) Procedures for the collection and destruction of any recalled product. Such procedures shall meet the following requirements: (1) All recalled products that are intended to be destroyed shall be quarantined for a minimum of 72 hours. The licensee shall affix to the recalled products any bills of lading, shipping manifests, or other similar documents with product information and weight. The product held in quarantine shall be subject to auditing by the Department. (2) Following the quarantine period, the licensee shall render the recalled cannabis product unusable and unrecognizable in accordance with Section 40290, and do so on

video surveillance in accordance with Section 40205. A recalled cannabis product that has been rendered unusable and unrecognizable is considered cannabis waste and shall be disposed of in accordance with Section 40290. (3) A licensee shall dispose of chemical, dangerous, or hazardous waste in a manner consistent with federal, state, and local laws. This requirement shall include but is not limited to recalled products containing or consisting of pesticide or other agricultural chemicals, solvents or other chemicals used in the production of manufactured cannabis batches, and cannabis soaked in a flammable solvent for the purpose of producing manufactured cannabis batches. (4) A licensee shall not dispose of recalled cannabis product in an unsecured area or waste receptacle that is not in the possession and/or control of the licensee. (e) In addition to the tracking requirements set forth in Section 40512, a licensee shall use the track-and-trace database and on-site documentation to ensure that recalled cannabis products intended for destruction are identified, weighed, and tracked while on the licensed premises and when disposed of in accordance with this section. For recalled cannabis products, the licensee shall enter the following details into the track and trace database: the weight of the product, reason for destruction, and the date the quarantine period will begin. (f) The licensee shall notify the Department of any recall within 24 hours of initiating the recall.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code.

Manufacturing

 

What are a Manufacturer’s other responsibilities?

§40275. Standard Operating Procedures. A licensee shall establish and maintain written standard operating procedures that are easily accessible to onsite personnel. The standard operating procedures shall, at minimum, include the following: (a) Any policies or procedures developed in accordance with the security plan required by Section 40200; (b) Emergency response procedures; (c) Policies and procedures developed in accordance with Article 3 of this subchapter (Good Manufacturing Practices);

(d) Policies and procedures developed in accordance with Article 4 of this subchapter (Production and Process Control); (e) Procedures for complying with the track-and-trace requirements established in Article 2 of subchapter 5; (f) Inventory control procedures in compliance with Section 40282; and (g) Waste management procedures in compliance with Section 40290. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; 26053, 26130; and 26160, Business and Professions Code. §40277. Weights and Measures (a) Weighing devices used by a licensee shall be approved, tested, and sealed in accordance with the requirements in Chapter 5 (commencing with Section 12500) of Division 5 of the Business and Professions Code, and registered with the county sealer consistent with Chapter 2 (commencing with 12240) of Division 5 of the Business and Professions Code. Approved and registered devices shall be used whenever: (1) Cannabis or cannabis product is bought or sold by weight or count; (2) Cannabis or cannabis product is packaged for sale by weight or count; (3) Cannabis or cannabis product is weighed or counted for entry into the trackand-trace system; and (4) The weighing device is used for commercial purposes as defined in section 12500 of Business and Professions Code. (b) For the purposes of this chapter, “count“ means the numerical count of the individual cannabis product units. (c) Bulk shipments of cannabis and cannabis products shall be weighed by a licensed weighmaster, and shall be issued a certificate consistent with the requirements in Chapter 7 (commencing with section 12700) of Division 5 of Business and Professions Code.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26060, Business and Professions Code. §40280. Training Program. (a) The licensee shall implement a training program to ensure that all personnel present at the premises are provided information and training that, at minimum, covers the following topics: (1) Within 30 days of the start of employment: (A) Health and safety hazards; (B) Hazards presented by all solvents or chemicals used at the licensed premises as described in the material safety data sheet for each solvent or chemical; (C) Emergency procedures; (D) Security procedures; (E) Record keeping requirements; and (F) Training requirements. (2) Prior to independently engaging in any cannabis manufacturing process: (A) An overview of the cannabis manufacturing process and standard operating procedure(s); (B) Quality control procedures; (C) Hazard analysis and control procedures, as appropriate; (D) Proper and safe usage of equipment or machinery; (E) Safe work practices applicable to an employee’s job tasks, including appropriate use of any necessary safety or sanitary equipment; (F) Cleaning and maintenance requirements; (G) Emergency operations, including shutdown; and (H) Any additional information reasonably related to an employee’s job duties. (3) Additionally, a licensee that produces edible cannabis products shall ensure that all personnel who prepare, handle, or package edible products successfully complete a California food handler certificate course from an entity accredited by the American National Standards Institute (ANSI) within 90 days of commencing employment at the premises and again every three years during employment. For licensees in operation

pursuant to Section 40126, applicable personnel shall complete the ANSI-accredited food handler course no later than 90 days after the effective date of the annual license. The licensee shall obtain documentation evidencing the fulfillment of this requirement. (4) The licensee shall ensure that all personnel receive annual refresher training to cover, at minimum, the topics listed in this section. This annual refresher training must be completed within 12 months of the previous training completion date. (b) The licensee shall maintain a record which contains at minimum: (1) A list of all personnel at the premises, including at minimum, name and job duties of each; (2) Documentation of training topics and dates of training completion, including refresher training, for all personnel; (3) The signature of the individual personnel and the licensee verifying receipt and understanding of each training or refresher training completed by the personnel; and (4) Any official documentation attesting to the successful completion of required training by personnel. (c) The licensee may assign responsibility for the training of individual personnel to supervisory personnel. Assigned supervisory personnel must have the education, training, or experience (or a combination thereof) necessary to ensure the production of quality cannabis products by all personnel. The designated training personnel shall sign and date a document on an annual basis attesting that he or she has received and understands all information and training provided in the training program. This documentation shall be maintained as part of the record requirements. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; 26130; and 26160, Business and Professions Code. §40282. Inventory Control – Cannabis and Cannabis Products. (a) A licensee shall establish and implement a written inventory control plan capable of tracking the location and disposition of all cannabis and cannabis products at the licensed premises

(b) A licensee shall reconcile the on-hand inventory of cannabis and cannabis products at the licensed premises with the records in the track-and-trace database least once every thirty (30) calendar days. Reconciliation shall be performed by one person and independently verified by a second person. (c) If a licensee finds a discrepancy between the inventory and the track-and-trace database, the licensee shall conduct an audit. (d) The licensee shall notify the Department within 24 hours of the completion of the audit if the audit reveals a discrepancy that is not within five percent of the documented inventory. (e) If a licensee finds evidence of suspected theft or diversion, the licensee shall report the suspected theft or diversion to the Department within 24 hours of the discovery. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26130, Business and Professions Code. §40290. Waste Management. (a) A licensee shall dispose of all waste, including cannabis waste, in accordance with applicable state and local laws and regulations. It is the responsibility of the licensee to properly evaluate waste to determine if it should be designated a hazardous waste under section 40141 of the Public Resources Code. (b) A licensee shall dispose of any cannabis waste in a secured waste receptacle or secured area on the licensed premises. For the purposes of this section, “secured waste receptacle” or “secured area” means that physical access to the receptacle or area is restricted to the licensee, employees of the licensee, the local agency, waste hauler franchised or contracted by local government, or private waste hauler permitted by the local government only. Public access to the designated receptacle or area shall be strictly prohibited. (c) No cannabis product shall be disposed of in its packaging, and all cannabis products shall be unrecognizable and unusable at the time of disposal.

(d) Cannabis waste shall be entered into the track-and-trace system as required under Section 40512. (e) If a local agency, a waste hauler franchised or contracted by local government, or a private waste hauler permitted by local government is being used to collect and process cannabis waste, a licensee shall do all of the following: (1) Provide the Department with the name of the entity hauling the waste; (2) Obtain documentation from the entity hauling the waste that indicates the date and time of each collection of cannabis waste at the licensed premises; and (3) Obtain a copy of the certified weight ticket, or other documentation prepared by the entity hauling the waste confirming receipt of the cannabis waste at one, or more, of the following solid waste facilities: (A) A manned fully permitted solid waste landfill or transformation facility; (B) A manned fully permitted composting facility or manned composting operation; (C) A manned fully permitted in-vessel digestion facility or manned in-vessel digestion operation; or (D) A manned fully permitted transfer/processing facility or manned transfer/processing operation. (f) If a licensee is self-hauling cannabis waste to one, or more, of the solid waste facilities in subsection (e)(3) of this section, a licensee shall obtain for each delivery of cannabis waste by the licensee a copy of a certified weight ticket or receipt documenting delivery from the solid waste facility. Only the licensee or its employees may transport self-hauled cannabis waste. Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; 26013; and 26130, Business and Professions Code. §40292. Consent to Sample Collection. A manufacturer licensee that transfers possession but not title of cannabis products to a licensed distributor shall allow the Bureau, upon the Bureau’s request, to collect samples for purposes of conducting oversight of licensed testing laboratories.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; 26013; and 26130, Business and Professions Code.

Manufacturing

What are special processing requirements for a Manufacturer?

Special Processing Requirements

Juice Processing. (a) Requirements of this section shall apply to manufacturers of cannabis-infused juice to be sold as either 100% juice or to be used as an ingredient in other products. The requirements of this section do not apply to manufacturers of infused beverages that use non-infused juice as an ingredient.

(b) Manufacturers of juice shall prepare a written juice hazard analysis and control plan in accordance with the requirements of 21 CFR, Part 120, subpart B, (Rev. January 2001), which is hereby incorporated by reference. Authority: Sections 26012; 26013, and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code. §40272. Dried Meat Processing. Manufacturing of cannabis-infused dried meat products shall be conducted in accordance with the United States Department of Agriculture FSIS Compliance Guideline for Meat and Poultry Jerky Produced by Small and Very Small Establishments: 2014 Compliance Guideline (Rev. 2014), which is hereby incorporated by reference. Meat for processing into dried meat products shall be acquired from a commercially-available source.

Authority: Sections 26012; 26013, and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26131, Business and Professions Code

Manufacturing

What are prohibited products for a Manufacturer?

§40300. Prohibited Products. The following types of products shall not be sold as edible cannabis products:

(a) Alcoholic beverages, as defined in section 23004 of the Business and Professions Code. For purposes of this section, “alcoholic beverage” does not include tinctures.

(b) Any product containing any non-cannabinoid additive that would increase potency, toxicity, or addictive potential, or that would create an unsafe combination with other psychoactive substances. Prohibited additives include, but are not limited to, nicotine and caffeine. This prohibition shall not apply to products containing naturally occurring caffeine, such as coffee, tea, or chocolate.

(c) Any cannabis product that must be held at or below 41 degrees Fahrenheit to keep it safe for human consumption, including, but not limited to, cream or custard-filled pies; pies or pastries which consist in whole or in part of milk or milk products, or eggs; or meat-filled pies or pastries. This prohibition shall not apply to juices or beverages that need to be held below 41 degrees Fahrenheit if the juice or beverage was processed in accordance with Section 40270;

(d) Any low-acid cannabis product with a finished equilibrium pH greater than 4.6 and water activity greater than 0.85, packed in a hermetically sealed container in a reduced oxygen package (e.g. vacuum packed);

(e) Any juice that is not shelf-stable or that is not processed in accordance with Section 40270;

(f) Dairy products of any kind, as prohibited by subdivision (t) of section 26001 of the Business and Professions Code, except that butter purchased from a licensed milk products plant or retail location that is subsequently infused or mixed with cannabis may be sold as a cannabis product;

(g) Meat products other than dried meat products prepared in accordance with Section 40272;

(h) Seafood products of any kind;

(i) Any product that is manufactured by application of cannabinoid concentrate or extracts to commercially available candy or snack food items without further processing of the product;

(j) Any cannabis product that the Department determines, on a case-by-case basis, is attractive to children, as defined in Section 40410;

(k) Any cannabis product that the Department determines, on a case-by-case basis, is easily confused with commercially available foods that do not contain cannabis.

(l) Any cannabis product in the shape of a human being, either realistic or caricature, animal, insect, or fruit.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26130, Business and Professions Code; Section 37104, Food and Agricultural Code.

Manufacturing

What are Manufacturer requirements for edible products?

§40305. Requirements for Manufacturer – Requirements Edible, Oral Consumption

(a) Edible cannabis products shall not contain more than ten (10) milligrams of THC per serving.

(b) Edible cannabis products shall not contain more than one hundred (100) milligrams of THC per package.

(c) Except for cannabis, cannabis concentrate, or terpenes, no product ingredient or component shall be used in the manufacture of an edible cannabis product unless that ingredient or component is permitted by the United States Food and Drug Administration for use in food or food manufacturing, as specified in Everything Added to Food in the United States, available at

https://www.fda.gov/Food/IngredientsPackagingLabeling/FoodAdditivesIngredients/ucm115326.htm

(d) Edible cannabis products that consist of more than a single serving shall either be:

(1) Scored or delineated to indicate one serving if the edible cannabis product is in solid form. For purposes of this section, “delineated” includes directly marking the product to indicate one serving or providing a means by which a consumer can accurately identify one serving; or

(2) If the edible cannabis product is not in solid form, packaged in a manner such that a single serving is readily identifiable.

(e) Each serving of an edible cannabis product in a multi-serving package shall be homogenized to contain the same concentration of THC, within the variance established by the Bureau through regulation in Section 5716 of Title 16 of the California Code of Regulations.

Authority: Sections 26012; 26013; and 26130 Business and Professions Code. Reference: Sections 26011.5; and 26130, Business and Professions Code.

Manufacturing

CDPH

What are Manufacturer requirements for topical products and concentrates?

Manufacturer – Topical, Lotions, Emulsions, Concentrates

The following addresses requirements for Manufacturer – Topical, Lotions, Emulsions, Concentrates.

§40306. Requirements for Topical Cannabis Products, Concentrates, and Other Cannabis Products.

Manufacturer - Topical, Lotions, Emulsions, Concentrates,
California Dept. of Public Health

(a) A cannabis product that is not an edible cannabis product and that is manufactured for the adult-use market shall not contain more than 1,000 mg of THC per package.

(b) A cannabis product that is not an edible cannabis product and that is manufactured for the medicinal market shall not contain more than 2,000 mg of THC per package.

(c) Topical cannabis products shall only contain ingredients permitted for cosmetic manufacturing in accordance with Title 21, Code of Federal Regulations, Part 700, subpart B (section 700.11 et seq.) (Rev. March 2016), which is hereby incorporated by reference

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Section 26011.5, Business and Professions Code

Manufacturing

What are Manufacturer requirements for failed batches?

§40310. Failed Product Batches.

(a) No finished cannabis product shall contain a contaminant identified in Section 26100 of the Act at a level set by the Bureau in Section 5718 to 5723, inclusive, of Title 16 of the California Code of Regulations. Any cannabis product batch that fails a laboratory testing requirement required by section 26100 of the Act is adulterated and may be embargoed pursuant to section 26133 of the Act.

(b) Any cannabis product batch that fails quality assurance review required pursuant to section 26100 of the Act is misbranded and may be embargoed pursuant to section 26133 of the Act.

(c) Failed product batches shall be destroyed unless a corrective action plan for remediation or reprocessing is approved by the Department. Corrective action plans shall be approved by the Department on a case-by-case basis.

(d) Remediation or reprocessing of failed product batches or the use of harvest batches that have failed any laboratory test shall comply with any requirements and procedures established by the Bureau in Sections 5727 and 5728 of Title 16 of the California Code of Regulations, in addition to the requirements of this chapter.

(e) Edible products that fail laboratory testing requirements shall not be remediated or reprocessed and shall be destroyed. If any edible product that has failed laboratory testing is remediated, reprocessed, or otherwise mixed with another batch of cannabis product, such action shall render the final cannabis product adulterated, regardless of the defect level of the final cannabis product.

(f) Notwithstanding subsection (e), a cannabis product that is determined through laboratory testing to be labeled with an incorrect amount of THC per package or per serving may be relabeled with the correct information in accordance with a corrective action plan approved by the Department, provided that the THC limits under Sections 40305 and 40306 are met.

(g) Prior to any remediation or reprocessing of a failed product batch or the use of a failed harvest batch, the licensee shall submit a corrective action plan to the Department to include, at minimum, a description of how the product or harvest batch will be remediated such that the product or any product produced therefrom will meet all laboratory testing and quality assurance requirements. A failed product or harvest batch shall not be remediated or reprocessed by a licensee unless the Department has approved the licensee’s corrective action plan. Remediation or reprocessing of edible products shall not be approved.

(h) Any remediation or reprocessing of a product batch that has failed laboratory testing or quality assurance review or the use of a failed harvest batch by a licensee shall be documented in the manufacturing records. All remediated product batches and products produced therefrom shall be tested and undergo quality assurance review in accordance with the requirements established by the Bureau in Article 7 of Chapter 6 of Division 42 of Title 16 of the California Code of Regulations prior to retail sale.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Section 26131, Business and Professions Code.

Manufacturing

What are the general requirements for a Manufacturer for labeling and packaging?

§40400. Applicability. (a) The requirements in this subchapter shall apply to finished cannabis products and shall not apply to cannabis or cannabis products that are transferred between licensees for purpose of further processing or packaging. (b) Except as otherwise provided in Section 40601, the requirements of this subchapter shall apply to any cannabis product manufactured on or after January 1, 2018. Authority: Section 26012; 26013; and 26130, Business and Professions Code. Reference: Section 26130; Business and Professions Code. §40401. Release to Distributor as Finished Product. Prior to release of a product to a distributor, a licensee shall ensure that the product is in finished form and is labeled and packaged in its final form for sale.

Authority: Section 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5 and 26130, Business and Professions Code.

Manufacturing

What are the Manufacturer labeling requirements?

§40403. General Provisions.

(a) Any information required to be listed on a label shall be written in English.

(b) A label shall be unobstructed and conspicuous so that it can be read by the consumer.

(c) All required label information shall be located on the outside container or wrapper of the finished product to be sold at a retailer.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Section 26120, Business and Professions Code.

§40405. Primary Panel Labeling Requirements: All Products.

(a) The label for a cannabis product shall include a primary panel that includes the following information in a type size no less than 6 point font and in relation to the size of the primary panel and container:

(1) The identity of the product in a text size reasonably related to the most prominent printed matter on the panel;

(2) The universal symbol as prescribed in Section 40412;

(3) The net weight or volume of the contents of the package;

(4) The THC content and CBD content for the package in its entirety expressed in milligrams per package.

(b) Nothing in this section prohibits the inclusion of additional information on the primary panel. The content of other cannabinoids or terpenes may be included if such information is verified by the certificate of analysis issued by a licensed testing laboratory.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Section 26120, Business and Professions Code. §40406.

Additional Primary Panel Labeling Requirements: Edible Products. In addition to the requirements of Section 40405, the primary panel of an edible cannabis product shall include the following information:

(a) The words “cannabis-infused” immediately above the identity of the product in bold type and a text size larger than the text size used for the identity of the product.

(b) The THC content and CBD content per serving expressed in milligrams per serving.

Authority: Sections 26012; 26013; 26120; and 26130, Business and Professions Code. Reference: Section 26120, Business and Professions Code.

§40408. Informational Panel Labeling Requirements.

(a) The label for a cannabis product shall include an informational panel that includes the following:

(1) The licensed manufacturer and its contact number or website address;

(2) The date of the cannabis product’s manufacture and packaging;

(3) The following statement in bold print: “GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.”

(4) If the cannabis product is intended for sale in the medicinal-use market, the statement “FOR MEDICAL USE ONLY;”

(5) A list of all product ingredients in descending order of predominance by weight or volume;

(6) If the edible cannabis product contains an ingredient, flavoring, coloring, or an incidental additive that bears or contains a major food allergen, the word “contains,” followed by a list of the applicable major food allergens;

(7) If an edible cannabis product, the names of any artificial food colorings contained in the product;

(8) If an edible cannabis product, the amount, in grams, of sodium, sugar, carbohydrates, and total fat per serving;

(9) Instructions for use, such as the method of consumption or application, and any preparation necessary prior to use;

(10) The product expiration date, “use by” date, or “best by” date, if any; and

(11) The UID and, if used, the batch number.

(b) The informational panel text shall be in a text size of no less than 6 point font and in relation to the size of the primary panel and container unless there is the insufficient area on the container available to print all the required information in a text size of no less than 6 point font. In such a case, the label shall include the warning statements required by paragraph (3) in a text size of no less than 6 point font, and the product shall be accompanied by a supplemental labeling that includes all of the information required by this section. The text of the supplemental labeling shall be no less than 8 point font.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26120; and 26121, Business and Professions Code.

§40410. Labeling Restrictions. The label shall not contain any of the following:

(a) Claims that the cannabis product was produced from cannabis grown in a California county when the cannabis was not grown there.

(b) The name of a California county unless the cannabis used in the product was grown there.

(c) Content that is or designed to be attractive to individuals under the age of 21, including but not limited to:

(1) Cartoons;

(2) Any likeness to images, characters, or phrases that are popularly used to advertise to children;

(3) Any imitation of candy packaging or labeling; or

(4) The terms “candy” or “candies.”

(d) Any information that is false or misleading.

(e) Any health-related statement that is untrue or misleading. Any health-related statement must be supported by the totality of publicly available scientific evidence (including evidence from well-designed studies conducted in a manner which is consistent with generally recognized scientific procedures and principles), and for which there is significant scientific agreement, among experts qualified by scientific training and experience to evaluate such claims.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26062.5; 26120; 26121; and 26154, Business and Professions Code.

§40411. Statement of Characteristic Anticipated Effects.

A cannabis product may include information on the characteristic anticipated effects of the cannabis product if the manufacturer has substantiation that the information is truthful and not misleading. Such information may be located on the informational panel of the label or as an insert included in the product package.

For purposes of this section, “characteristic anticipated effect” includes any physiological effect (a temporary effect on the body related to the consumption of cannabis) that is common to or expected from the particular cannabis strain, but excludes any claim of health benefits (i.e. claims of therapeutic action as a result of the consumption of cannabis)

Authority: Sections 26012; 26013, and 26130, Business and Professions Code. Reference: Sections 26120; and 26130, Business and Professions Code.

§40412. Universal Symbol.

The primary panel of a cannabis product shall be marked, stamped, or otherwise imprinted with the universal symbol.

(a) The symbol shall replicate the following in form and shall be black in color:

(b) The symbol shall be no smaller in size than half (.5) inch by half (.5) inch and shall be printed legibly and conspicuously. For packaging that is dark in color, the symbol may be made conspicuous by printing the symbol on or outlining the symbol with, a contrasting color.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26120; 26121; and 26130, Business and Professions Code.

What are the Manufacturer packaging requirements?

Manufacturer – Packaging Requirements

The manufacturer packaging requirements are

§40415. Packaging. A package used to contain a cannabis product shall adhere to the following requirements:

(a) The package shall protect the product from contamination and shall not expose the product to any toxic or harmful substance.

(b) The package shall be tamper-evident, which means that the product shall be packaged in packaging that is sealed so that the contents cannot be opened without obvious destruction of the seal.

(c) The package shall be child-resistant. A package shall be deemed child-resistant if it satisfies the standard for “special packaging” as set forth in the Poison Prevention Packaging Act of 1970 Regulations (16 C.F.R. §1700.1(b)(4)) (Rev. December 1983), which is hereby incorporated by reference.

(d) The package shall not imitate any package used for products typically marketed to children.

(e) If the product is an edible product, the package shall be opaque.

(f) If the package contains more than one serving of cannabis product, the package shall be re-sealable so that child-resistance is maintained throughout the life of the package.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26120; and 26121, Business and Professions Code

Packaging

What are Manufacturer Record-Keeping Requirements?

Manufacturer Record-Keeping Requirements

This question contains the Manufacturer Record-Keeping Requirements

§40500. Record-Keeping Requirements.

(a) The licensee shall have the following documents available on the premises at all times and shall make the documents available to the Department and any enforcement agency upon request:

(1) The valid state license issued by the Department;

(2) Any other valid license issued by a state cannabis licensing agency;

(3) The valid license, permit, or other approval issued by the local jurisdiction;

(4) The premises diagram, as specified in Section 40131;

(5) The current standard operating procedures as defined in Section 40275;

(6) Shipping manifests;

(7) Employee records, including evidence of employee qualifications and training procedures and logs, as specified in Section 40280; and

(8) Any other record or documentation required to be kept pursuant to this Chapter or the Act.

(b) The records required pursuant to subsection (a) shall be maintained on the premises in a manner immediately accessible to the Department and any enforcement agencies upon request for a period of seven (7) years. Outdated standard operating procedures shall not be accessible to onsite employees.

(c) All documentation shall be maintained in English.

Authority: Sections 26012; 26013; and 26130, Business and Professions Code. Reference: Sections 26011.5; and 26160, Business and Professions Code.

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Frequently Asked Questions - Cannabis
Frequently Asked Questions – Cannabis

 

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