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

Article 5. Records and Reporting

§ 8400. Record Retention. For the purposes of this chapter, “record” includes all records, applications, reports, or other supporting documents required by the department. (a) Each licensee shall keep and maintain the records listed in subsection 8400(d) of this chapter for at least seven (7) years from the date the document was created. (b) Licensees shall keep records, either electronically or otherwise, identified in section 8400(d) of this chapter on the premises of the location licensed. All required rRecords shall be kept in a manner that allows the records to be examined provided at the licensed premises or delivered to the department, upon request. (c) 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 Time). Prior notice by the department to review records is not required. (d) Each licensee shall maintain all the following records on the licensed premises, including but not limited to: (1) Department issued cultivation license(s); (2) Cultivation plan; (3) All records evidencing compliance with the environmental protection measures pursuant to sections 8304, 8305, 8306, and 8307 of this chapter; (4) All supporting documentation for data or information entered into the track-and-trace system; (5) 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; (6) Financial records related to the licensed commercial cannabis activity, including but not limited to, bank statements, tax records, contracts, purchase orders, sales invoices, and sales receipts; (7) Personnel records, including each employee’s full name, social security number or individual tax payer identification number, date of employment, and, if applicable, date of termination of employment; (8) Records related to employee training for the track-and-trace 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; (9) Contracts with other state licensed cannabis businesses; (10) All Ppermits, licenses, and other 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. (e) 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, 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 of the following: (a) Name, business address, and department or other licensing authority issued license number of the seller; (b) Name, business address, and department or other licensing authority issued license number of the purchaser; (c) 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; (d) Invoice or receipt number; (e) Weight or quantity of cannabis and nonmanufactured cannabis products sold or transferred; (1) Weight. For the purposes of this section a licensee must use wet weight or net weight. Wet weight and net weight shall be determined following weighing device requirements pursuant to section 8213 of this chapter and 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. (23) Count. For the purposes of this section, “count” means the numerical count of the individual plants or units. (f) 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 Page 42 of 76 (6) Pre-rolls. (h) Signature of the seller, or designated representative of the seller, acknowledging accuracy of the cannabis and nonmanufactured cannabis products being shipped; (i) 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: Sections 26013 and 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-andtrace 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. (b) Each licensee shall use the track-and-trace system for recording all applicable commercial cannabis activities. (c) Pursuant to section 8109 of this chapter, each licensee shall identify an owner, a designated responsible party, or a designated agent in the licensee’s organization to be the licensee’s track-and-trace system account manager. The licensee’s designated track-and-trace system account manager shall be responsible for all the following: (1) Complete track-and-trace system training provided by the department. If the designated account manager did not complete the track-and-trace system training prior to the licensee receiving his or her annual license, the designated account manager will be required to register for the track-and-trace system training provided by the department within five (5) calendar business days of license issuance; (2) Designate track-and-trace system users, as needed, and require the users to be trained in the proper and lawful use of the track-and-trace system before the users are permitted to access the track-and-trace system; (3) Maintain an accurate and complete list of all track-and-trace system users and update the list immediately when changes occur; (4) Within three (3) calendar days, Immediately cancel the access rights of any track-and-trace user from the licensee’s track-and-trace system account if that individual is no longer authorized to use the licensee’s track-and-trace system account; and (5) Correct any data that is entered into the track-and-trace system in error within three (3) calendar business days of discovery of the error.; and

(6) Notify the department immediately for any loss of access that exceeds three (3) calendar days. (d) The licensee is responsible for all access and use of the licensee’s track-and-trace system account. (e) 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) calendar business days. (2) A licensee shall document the date and time when access to the track-and-trace system was lost, 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 26013, 26067, 26069, and 26160, Business and Professions Code. § 8403. Track-and-Trace System Unique Identifiers (UID). (a) Within five (5) calendar 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 designated account manager shall request UIDs using the track-andtrace 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. (3) The licensee shall use the track-and-trace system to document receipt of provisioned and distributed UIDs within three (3) calendar business days of physical receipt of the UIDs by the licensee. (4) 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. (b) 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 be uniform in strain or cultivar and shall not have more than one hundred (100) immature plants at any one time. All immature plants in a lot shall be labeled with the corresponding UID number assigned to the lot and shall be contiguous to one another to facilitate identification by the department. Page 44 of 76 (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) of this chapter. The licensee may tag individual immature plants prior to movement to the designated canopy area or prior to flowering. (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. (c) 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. (d) 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. (e) 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) calendar 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 26013, 26067, 26069, and 26160 Business and Professions Code. § 8404. Track-and-Trace System User Requirements. (a) 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. (b) 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. (c) No track-and-trace account manager, user, or other licensee, employee, or agent shall intentionally misrepresent or falsify information entered into the track-and-trace system. (d) 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. Page 45 of 76 Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26012, 26013, 26067, and 26069, Business and Professions Code. § 8405. Track-and-Trace System Reporting Requirements. (a) Except as provided in subsection (e) below, the track-and-trace account manager or users shall report in the track-andtrace system any and all transfers of cannabis or nonmanufactured cannabis products to another licensee prior to the movement of the cannabis or nonmanufactured cannabis products off the licensed premises. (b) 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. (c) The track-and-trace account manager or users shall report in the track-and-trace system information related to the disposition of cannabis and nonmanufactured cannabis products, as applicable, on the licensed premises. All applicable information for each event listed below shall be reported in the track-and-trace system within three (3) calendar business days of the applicable event: (1) Creating a planting of an immature plant lot; (2) Moving immature plants to a designated canopy area, or when an individual plant begins flowering, or when applying a UID to an immature plant, in accordance with section 8403(b)(3) of this chapter; (3) Destruction or disposal of an immature or mature plant; (4) Harvest of a mature plant, or portion thereof. The following information must be reported into the track-and-trace system for each harvested plant, or portion thereof, or harvest batch: (A) The wet weight of each harvested plant, or portion thereof, which must be obtained by the licensee immediately after harvest of the plant, or portion thereof; (B) The net weight of each harvest batch, obtained pursuant to section 8406(b) of this chapter;. (C) The weight of cannabis waste associated with each harvest batch.; (D) The unique name of the harvest batch and the initiating date of the harvest. For the purposes of this section, the initiating date of the harvest is the month, day, and year the first mature cannabis plant(s) in the harvest batch were cut, picked, or removed from the soil or other growing media. The initiating date of the harvest shall be recorded using the MM/DD/YYYY. For example, January 1, 2018 would be recorded as 01/01/2018. (5) Packaging.

(d) 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, another licensee. Required information to be entered includes, but is not limited to: Page 46 of 76 (1) Name, business address, and department or other licensing authority issued license number of the seller; (2) Name, business address, and department or other licensing authority issued license number of the purchaser; (3) Name and department issued license number of the distributor; (4) Date of sale, transfer, or receipt (month, day, and year) of cannabis or nonmanufactured cannabis products; (5) Weight or count of individual units of cannabis or nonmanufactured cannabis products sold, transferred, or received; (A) Weight. For the purposes of this section a licensee must use wet weight or net weight. Wet weight and net weight shall be determined following weighing device requirements pursuant to section 8213 of this chapter and 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). (B) Weighing Devices. A licensee shall follow weighing device requirements pursuant to section 8213 of this chapter. (BC) Count. For the purposes of this section count means the numerical count of the individual plants or units. (6) Estimated departure and arrival time; (7) Actual departure time; (8) 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. (9) UID(s). (e) 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. (f) Any commercial cannabis activity conducted between a temporary licensee and an annual licensee shall be reported in the track-and-trace system by the annual licensee based upon the documentation prepared pursuant to section 8401 of this chapter. Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013, 26067, and 26160, Business and Professions Code. Page 47 of 76 § 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 of the following: (a) Reconciling all on-premises and in-transit cannabis or nonmanufactured cannabis products inventories at least once every thirty (30) calendar fourteen (14) business days; and (b) Recording 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; (c) 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. (d) 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); (4) Nonmanufactured cannabis products and their corresponding UID(s); and (5) 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: Sections 26013 and 26067, Business and Professions Code. § 8407. Track-and-Trace System Requirements for Cannabis and Nonmanufactured Cannabis Products in Temporary Licensee Possession at the Time of Annual License Issuance. (a) Within thirty (30) calendar 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. (b) 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. Page 48 of 76 Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013 and 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. Inventory 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 Time). Prior notice of an inventory audit is not required. Authority: Sections 26012 and 26013, Business and Professions Code. Reference: Sections 26013, 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) calendar 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.

Author: abizcannabis

Managing Director & CEO of integrated transactional financial advisory, tax, and technology consulting firm - aBIZinaBOX Inc New York, Chicago, and OaklandCPA.CITP.CISM.CGEIT.CGMAExpertise with: Alt. Investments/Private Equity, Real Estate, Professional Services, CA Cannabis, Tech Start-Ups and Distressed Assets/DebtTechnology Certifications including:Advanced & High Complexity Cloud Integrator AICPA PCPS, CAQ,, IMTA, CITP ISACA CGEIT, CISMState CPA Societies in California, Florida, Illinois, New York and TexasExpertise with Regulatory Compliance - US - HIPAA, FINRA, SEC Rule 17(a)(3)/(4), eDiscovery, FINCEN - EU- EBA, ESMA, EIOPA UK - BoE, PRA, FCA