Cannabis Micro-Business License

Cannabis Micro-Business License

A Cannabis Micro-business License is required for a very small cannabis business to operate.

Micro-Business – Allows a licensee to engage in cultivation (on an area less than 10,000 square feet), manufacturing (Level 1 manufacturing, Type 6), distribution, and retail sale, or any combination of the four activities. Licensees will be required to comply with all rules and regulations, which will include, where applicable, regulations adopted by the California Department of Food and Agriculture and the California Department of Public Health, governing the activities they are engaged in.

Requirements
  • Must engage in at least 3 of the 4 activities
  • Must indicate which activities on the application and supply the appropriate  information for those activities
  • Must comply with all requirements for each activity the licensee engages in

First introduced as part of Proposition 64 in relation to adult-use operations, the microbusiness license is now poised to be available to medical marijuana businesses too, courtesy of SB 94. The license would allow small businesses to act as a one-stop-shop; owners could grow cannabis in an area of less than 10,000 square feet, while also acting as a distributor, non-volatile manufacturer, and retailer.

This is essentially a smaller version of a typical vertical integration model, and can apply to indoor or outdoor cultivation sites, said attorney Habib Bentaleb of Harris Bricken.

“It is supposed to be a nice way for craft cannabis companies to differentiate themselves [from] what will inevitably be large-scale grow cultivations throughout the state,” said Bentaleb, who specializes in cannabis regulation and represents Gray.

Not only does this help preserve the type of small-scale or cottage operations much of the industry was built on, it streamlines and simplifies the application process, allowing entrepreneurs to apply for just one all-encompassing license. This doubles as a dramatic cost-cutting method, which offers mom-and-pop shops a slight leg up when competing against large, venture capital-fueled businesses.

What are Micro-Biz Rules?

§ 5500. Microbusiness

(a) In order to hold a microbusiness license, a Licensee must engage in at least three (3) of the following commercial cannabis activities: cultivation, manufacturing, distribution, and retail sale.

(b) An applicant for a Type 12-Microbusiness license shall indicate on the application for licensure which commercial cannabis activities the applicant intends to engage in.

(c) An application for a Type 12-Microbusiness license shall include:

(1) For an application indicating that the applicant intends to engage in cultivation under the Type 12-Microbusiness license all the required information under sections 5002, 5501, 5502 and 5503 of this division.

(2) For an application indicating that the applicant intends to engage in manufacturing under the Type 12-Microbusiness license all the required information under sections 5002 and 5504 of this division.

(3) For an application indicating that the applicant intends to engage in distribution under the Type 12-Microbusiness license all the required information for an application seeking a Type 11- Distributor license.

(4) For an application indicating that the applicant intends to engage in a retail sale under the Type 12-Microbusiness license, all the required information for an application seeking a Type 10- Retailer license.

(d) All cultivation, manufacturing, distribution; and retail activities performed by a licensee under a Type 12-Microbusiness license shall occur on the same licensed premises.

(e) A holder of a Type 12-Microbusiness license shall comply with the following:

(1) A holder of a Type 12-Microbusiness license engaged in cultivation shall comply with all the rules and requirements applicable to the cultivation license type applicable to the cultivation activities of the licensee.

(2) A holder of a Type 1 Z-Microbusiness license engaged in manufacturing shall comply with all the rules and requirements applicable to a’Fype 6-Manufacturer 1 license.

(3) A holder of a Type 12-Microbusiness license engaged in distribution shall comply. with all the rules and requirements applicable to a Type 11-Distributor license.

(4) A holder of a Type 12-Microbusiness license engaged in retail sale shall comply with all the rules and requirements applicable to a Type 10-Retailer license, or a Type 9-Non-Storefront Retailer license if retail sales are conducted by delivery only. { fl A holder of a Type 12-Microbusiness license may only engage in the commercial cannabis activity requested in the license application and approved by the Bureau at the time the license is issued. If the holder of a Type 12-Microbusiness license wants to engage in an additional commercial cannabis activity after the license is issued, the licensee shall submit an application to the Bweau indicating the requested changes and providing all information required for an application for the commercial cannabis activity the licensee wants to conduct

(g) A suspension or revocation of a Type 12-Microbusiness licensee shall affect all commercial cannabis activities allowed pursuant to that license.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26013 and 26070, Business and Professions Code.

§ 5501. Microbusiness Applications Including Cultivation Activities In addition to the information required in section 5002 of this division, an application for a microbusiness license to engage in cultivation shall include the following:

(a) 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.

(b) 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.

(c) For indoor and mixed-light cultivation, identi&cation of all power sources for cultivation activities, including, but not limited to: illumination, heating, cooling, and ventilation. {d) A premises diagram pursuant to section 5006 of this division that shall also include: (1) All roads and water crossings on the property. (2) If the applicant is proposing to use a diversion from a waterbody, groundwater well, or rain catchment system as a water source for cultivation, the following locations on the property diagram with locations also provided as coordinates in either latitude and longitude or the California Coordinate System: (A) Sources of water used, including the location of waterbody diversion(s), pump location(s), and distribution system; and (B) Location, type, and capacity of each storage unit to be used for cultivation. (e) A proposed cultivation plan pursuant to section 5502 of this division. (f~ Identification of all water sources used for cultivation activities and the applicable supplemental information for each source as required by section 5503 of this division: (L) A retail water supplier, (2) A groundwater well; (3) A rainwater catchment system; or (4) A diversion from a surface waterbody or an underground stream flowing in a known and definite channel (g) A copy of any final lake or streambed alteration agreement issued by the California Department of Fish and Wildlife, pursuant to sections 1602 and 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. (h) An attestation that the applicant entity is an “agricultural employer” as defined by the Alatorre-Zenovich-Dunlap-Berman Agricultural Labor Relations Act of 1975; Part 3.5 (commencing with Section 1140) Division 2 of the Labor Code. (i) An attestation that the local fire department has been notified of the cultivation site if the applicant entity is an indoor license type. (i) An acknowledgement that the applicant understands that the information provided in the application that is relevant to the cultivation operation maybe shared with the Department of Food and Agriculture for purposes of evaluating the applicant’s qualifications far licensure. If the Department of Food and Agriculture corresponds directly with the applicant on matters related to the application, the applicant shall agree to cooperate. The applicant shall further agree that the Department of Food and Agriculture may conduct inspections on the areas of the premises related to their respective oversight authority. (k) If applicable, a detailed description of any fines or penalties for cultivation or production of a controlled substance on public or private land pursuant to Fish and Game Code section 12025 or 12025.1 against the applicant or a business entity in which the applicant was an owner or officer within 3 years preceding the date of application.

Proposed Regs. – October 19, 2018

Subsection (a) now allows for a Type N manufacturing license, which was created in regulation by the State Department of Public Health, to qualify as one of the activities for a microbusiness. This is necessary as the Bureau received comments that many jurisdictions will not allow businesses to engage in full Level 1 manufacturing in certain areas or in combination with certain cannabis activities, but will allow for Type N license infusion only manufacturing activities. This is causing a barrier to entry for small businesses that have previously been in the industry or that want to enter the industry. The Bureau has determined that Type N activities are in fact manufacturing allowable under the Level 1 activity a microbusiness may engage in.

A cross-reference has been changed for accuracy and grammatical correction has been made in this section as well.

The section has also been amended to add sections 26050 and 26051.5 of the Business and Professions Code to the reference section. This change is necessary for accuracy.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26050, 26051.5 and 26070, Business and Professions Code.

§ 5502. Cultivation Plan Requirements A cultivation plan shall include all of the following: Minimum (a) A detailed premises diagram showing all boundaries and dimensions in feet of the following proposed areas to scale, if applicable: (1) Canopy areas) (which shall contain mature plants, aY any point in time) including aggregate square footage; (2) Areas) outside of the canopy where only immature plants shall be maintained, if applicable; (3) Designated pesticide and other agricultural chemical storage area(s); (4) Designated pracessing areas) if the licensee will process on site; (5) Designated packaging areas) if the licensee wi11 package products on site; (6) Designated composting areas) if the licensee will compost plant or cannabis waste on site; (7) Designated secured areas) for cannabis waste if different than subsecrion (a)(6) above; (8) Designated areas) for harvested cannabis storage; (9) Designated research and development areas) which may contain mature plants for nursery only; (10) Designated seed production areas) which may contain mature plants for nursery only; and (b) For purposes of subsection(a)(1) in this section, canopy shall be calculated in square feet and measured using clearly identifiable boundaries of all areas(s) that will contain mature plants at any point in time, including all of the spaces) within the boundaries. Canopy maybe noncontiguous, but each unique area included in hfe total canopy calculation shall be separated by an identifiable boundary which include, but are not limited to: interior walls, shelves, greenhouse walls, hoop house walls, garden benches, hedgerows, fencing, garden beds, or garden plots. If mature plants are being cultivated using a shelving system, the surface area of each level shall be included in the total canopy calculation. (c) For indoor and mixed-light cultivation, a lighting diagram with the following informafion shall be included: (1) Location of alllights in the canopy area(s); and (2) Malcimum wattage, or wattage equivalent, of each light. (d) A pest management plan which shall include, but not be limited to, The following (1) Product name and active ingredients) 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.

Proposed Regs. – October 19, 2018

This section includes certain non-substantive grammatical revisions, including the removal of semi-colons and addition of periods to provide added clarity to readers.

Subsection (b) has been amended to include a statement that for the purposes of cultivation activities of a microbusiness, the definition of immature plants will be as it is defined by the California Department of Food and Agriculture in regulation. This is necessary to ensure that the definition used for cultivation activities is consistent amongst the state licensing authorities.

 

Subsection (e) has been removed from the proposed regulation. This removal is necessary due to the changes made to the sections related to cannabis waste that have rendered this section unnecessary.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26050, 26051.5 and 26070, Business and Professions Code.

§ 5503. 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 supplier, such as a municipal provider, as defined in Secrion 13575 of the Water Code, identify the retail water supplier. (2) If the water source is a sma11 retail supplier, such as a delivery service, and is subject to subdivision (a)(1)(B) of Section 26060.1 of the Business and Professions Code: (A) And if the contract is for delivery or pickup of water from a surface water body or au underground stream flowing in a known and definite channel, provide all of the following: (i) The name of the contract water supplier; (ii) The geographic location coordinates in either latitude and longitude or the California Coordinate System of any point of diversion used by the contract water supplier to divert water delivered to the applicant under the contract; (iii) The authorized place of use for any water right used by the contract water supplier to divert water delivered to the applicant under the contract; and (iv) The maximum amount of water delivered to the applicant for cannabis cultivation in any year. (B) And if the contract is for delivery or pickup of water from a groundwater well, provide all of the following: (i) The name of the contract water supplier; (ii) 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; (iri) The m~imum 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 mailable, 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. When no well log is available, the State Water Resources Control Board may request additional information about the well. (b) If the water source is a groundwater we11: (1) The groundwater wells geographic location coordinates in either latitude and longitude ox 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 sha11 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) ff 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. (d) If the water source is a diversion from a waterbody: (1)’Provide any applicable statement, application, permit, license, or small irrigation use registration identification number(s); and either (A) 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 Water Code as evidence of approval of a water diversion by the State Water Resources Control Board; (B) 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 (C) 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. (2) If the applicant has claimed an exception from the requirement to file a statement of diversion and use, 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 subdivision (a), (c), (d), or (e) of Section 5101 of the Water Code.

Proposed Regs. – October 19, 2018

 

Authority: Section 26013, Business and Professions Code. Reference: Sections 26050, 26051.5 and 26070, Business and Professions Code; and Section 13149, Water Code.

§ 5504. Microbusiness Applications Including Manufacturing Activities In addition to the information required in section 5002 of this division, an application for a microbusiness license that engages or will engage in manufacturing, shall include the following: (a) Type of manufacturing activity to be conducted at the premises (extraction, infusion, packaging, and/or labeling)> and if applicable: (1) For extraction, the method ofnon-volatile extraction. If COz is used as a method of extraotion, a copy of the closed-loop system certification signed by aCalifornia-licensed engineer attesting that the system was commercially manufactured, safe for its intended use, and built to codes of recognized and generally accepted good manufacturing practices. (2) For infusion, a list of all infused products to be manufactured. (b) A list of all producCs that will be manufactured, packaged, or labeled, including the following information: (1) Product type (e.g., edibles) and identity (e.g., brownies); (2) Product brand name; and (3) Amount of cannabidiol (CBD) and tetrahydrocannabinol(THC) iv the product (c) An acknowledgment that the applicant understands that the information provided in the application that is relevant to the manufacturing operation.may be shared yvith the State – Department of Public Health for purposes of evaluating the applicants qualifications for licensure. If the State Department of Public Health corresponds directly with the applicant on matters related to the application, the applicant shall agree to cooperate. The. applicant shall further agree that the State Department of Public Health may conduct inspections on the areas of the premises related to their respective oversight authority,

Proposed Regs. – October 19, 2018

This section has been revised to clarify that where a “licensed” microbusiness’ cannabis cultivation is causing significant adverse impacts on the environment in a watershed or other geographic area, the Bureau shall not issue new microbusiness licenses that include cultivation activities or increase the total number of plant identifiers within that watershed or area. This is necessary because it assures terminology consistency throughout the Bureau’s proposed regulations. It also clarifies that that such findings related to an impacted watershed involve active licensees.

The reference section has been revised to correct a typographical error

Authority: Section 26013, Business and Professions Code. Reference: Sections 26050, 26051.5 and 26070, Business and Professions Code.

§ 5505. Cultivation Records for Licensees Engaging in Cultivation Activities

(a) Cultivation plan(s);

(b) All records evidencing compliance with the environmental protection measures required in sections 5501, 5502, and 5503 of this chapter;

(c) All lot numbers and batch numbers associated with a product in inventory. LoY numbers or batch numbers associated with a 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, and

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

Proposed Regs. – October 19, 2018

This section has been revised to clarify that “licensed” microbusinesses must maintain the identified records in this section. This is necessary because it assures terminology consistency throughout the Bureau’s proposed regulations. It also clarifies that the recordkeeping practices outlined in this section apply to active microbusiness licensees.

Authority: Section 26013, Business. and Professions Code. Reference: Sections 26013, 26069, 26150 and 26161, Business and Professions Code.

 

§ 5506 Microbusiness Records for Licensees Engaging in Manufacturing Activities

(a) In addition to the records required by section 5037 of this division, a microbusiness engaging in manufacturing activities shall maintain batch production records.

(b) The licensee shall prepare a written batch production record every rime a batch of cannabis is manufactured. The batch production record shall accurately follow the appropriate manufacturing protocol, and each step of the protocol shall be performed in the production of the batch.

(c) 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 batch or lot number of the finished batch of cannabis product of all cannabis products used in the batch;

(2) The identity of 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 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 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, packaging and labeling operations, including:

(A) An actual or representative label, or cross-reference to the physical location of the actual or representative label specified in the 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 ar relabeled cannabis products), or cross-reference to the physical location of such results.

(11) Documentation at the time of performance that quality control personnel have:

(A) Reviewed the batch production record;

(B) Reviewed aI1 monitoring operations) required in section 40264 of title 17 of the California Code of Regulations;

(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.

(d) The batch production record shall:

(1) Contain the actual values and observations obtained during monitoring and, as appropriate, dining verification activities;

(2) Be accurate, indelible, and legible;

(3) Be created concurrently with performance of the activity documented;

(4) Be as detailed as necessary to provide history of work performed; and:

(A) Include information adequate to identify any associated manufacturing facility (e.g., the name, license number, and when necessary, the location of the facility);

(B) include the date and, when appropriate, the time of the activity documented;

(C) Include the signature or initials of the person performing the activity; and

(D) Where appropriate, include the identity of the product and the lot number or batch identifier if any.

Proposed Regs. – October 19, 2018

§ 5506. Microbusiness Applications Including Manufacturing Activities

This section includes certain non-substantive grammatical revisions, including the addition of commas and edits regarding capitalization, to provide added clarity to readers.

Subsection (f)(2) has been amended to now require a copy of the product quality plan that meets the requirements established in regulation by the State Department of Public Health. This change is necessary to align with changes made by the State Department of Public Health, as microbusinesses engaged in manufacturing are required to comply with those regulations for their manufacturing activities.

 

In addition, subsection (f)(4) has been removed. This removal is necessary due to the changes made to the sections related to cannabis waste that have rendered this section unnecessary.

Subsection (g) has been removed as unnecessary as the Bureau’s regulations do not contain the process referred to in this section.

§ 5506.1. Microbusiness Failed Manufactured Cannabis Product Batches

This section has been added to the regulations to provide clarity to microbusinesses on what they can do with manufactured cannabis product batches that have failed testing. This section is necessary because the regulations did not have any provisions for microbusinesses that are engaging in manufacturing to be able to remediate failed manufactured cannabis product batches.

Subsection (a) specifies that a failed batch shall be destroyed unless a corrective action plan for remediation is approved by the Bureau. This is necessary to include as it is required under the Act.

Subsection (b) clarifies that remediation or reprocessing of a failed batch must be done in accordance with section 5727. This is necessary for clarity and consistency amongst the sections regarding remediation.

Subsection (c) clarifies that edible products that fail laboratory testing shall not be remediated or reprocessed and shall be destroyed. The subsection also clarifies that if an edible product is remediated, reprocessed, or mixed with another batch, the cannabis product will be considered adulterated. This section is necessary to make clear edible cannabis products cannot be remediated and to provide consistency amongst the sections regarding remediation and to be consistent with the State Department of Public Health which regulates manufacturers.

Subsection (d) specifies that remediation or reprocessing may not occur unless the Bureau has approved a corrective action plan. The section also specifies what the corrective action plan must contain. This is necessary to provide direction to licensees on how to receive approval to remediate or reprocess a failed cannabis batch.

Subsection (e) specifies that all remediation of cannabis goods shall be documented in the microbusiness’ manufacturing records. This is necessary to ensure that licensees are aware of the records they must retain regarding remediation.

Subsection (f) has been added to the section to provide an exception to subsection (c). Under subsection (f) orally dissolving products that have failed laboratory testing due to exceeding the per package THC limits for adult-use manufactured cannabis products may be remediated by repackaging the product as a medicinal cannabis goods if certain requirements are met. This exception is necessary to provide an avenue for some failed cannabis goods to be reintroduced into the market instead of having to be destroyed. Cannabis goods that have failed for exceeding adult-use THC levels but would be compliant under medicinal rules are not inherently dangerous to the public and may potentially be sold as medicinal cannabis goods under this subsection.

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

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