Of course, as our Los Angeles cannabis DUI lawyers can explain, a big part of the reason for that is because it’s none so simple to establish marijuana intoxication simply based on the levels of psychoactive THC in one’s body. Unlike alcohol, which cycles through the body very quickly, THC remains traceable for weeks after consumption. A 0.08 percent blood-alcohol level would likely indicate recent excess alcohol consumption. But the same isn’t true for THC. Person A might have higher levels of THC in their bloodstream than Person B, but still be less intoxicated. The level of THC in one’s system simply doesn’t tell the whole story, particularly if one is a regular cannabis consumer.

Despite this, 18 other states have imposed some sort of limit on the amount of THC drivers can have in their bloodstream before they’re considered “under the influence” of cannabis. (THC, of course, is short for tetrahydrocannabinol, the element contained in marijuana that creates the “high.”)

There are some safe driving advocates trying to change that. One of those is the family of a 25-year-old who died tragically in a California car accident in 2020 – a passenger in a truck driven by her boyfriend. He would later say he saw an animal, jerked the steering wheel, and crashed into another vehicle – totaling his truck and killing his girlfriend instantly. The woman’s father believes the boyfriend was stoned, and he’d even spoken to his daughter about not getting into the car with her boyfriend when he’d been consuming cannabis. Her mother said she’d spoken directly to the boyfriend about what they recognized as a serious safety issue.

The boyfriend, according to a local news outlet, reportedly conceded that he’d consumed marijuana the day of the crash – but he was a habitual user of cannabis and his consumption had been earlier in the day. He insisted he was not impaired.

Authorities didn’t buy his story initially, and charged him with felony DUI. However, with no legal limits on THC, prosecutors had a weaker case. He ultimately pleaded guilty to vehicular manslaughter and served one year in jail. It was reportedly the second time a passenger of his died in a crash; the first time was in 2010.

Investigators say his blood-THC level was 18 nanograms. The THC legal limit for drivers in other states is 5 nanograms. But again, as our Los Angeles DUI cannabis lawyers can explain, that doesn’t necessarily mean the driver was impaired. And there’s bipartisan agreement on this from legislators. Numerous studies have been conducted that conclude if you’re trying to ascertain the level of impairment, a sole reliance on the amount of THC in one’s system would be inconclusive. A person’s impairment might last several hours after consuming cannabis, but the THC in one’s system is going to persist in one’s system for much longer than that.

So while the cases like the one mentioned in this article are undoubtedly tragic and devastating for families, broadening California’s marijuana DUI laws would likely have the consequence of prosecuting people for impaired driving when they weren’t truly impaired – and that is not justice.

It’s worth noting that the State of California has set aside $2 million for research this year on the impacts of THC on drivers to determine whether some sort of a fair standard for intoxication can be identified.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Marijuana and driving: California lacks legal THC limit, March 6, 2023, By David Goldstein, CBS News Los Angeles

Let’s start with trade samples. These are samples of cannabis plants or products that are sent to cannabis licensees by producers, processors, wholesalers, and holders of hemp certificates to create brand and product awareness. It’s considered a solid means to generate more business. Trade samples allow products to be sampled, tasted, and smelled by licensed business buyers. An example would be marijuana producers who sell immature plants to other producers. Prospective buyers may want to know what kind of strain those immature plants are going to ultimately produce. A trade sample can show them. Similarly, producers could send samples to retailers to convince them to stock their product. Other industries have engaged in this for eons, but there has been some question about how those in the California cannabis industry could not only do it lawfully, but without having to pay the hefty taxes associated with retail sales.

Now, with the passage of AB 141 (a large piece of legislation that went into effect Jan. 1, 2022), cannabis products can be designated as trade samples from one licensee to another for marketing purposes. This will allow them to bypass cannabis taxes they’d otherwise have to pay. Exempted exchanges will include all harvested cannabis that has been or will be designated as a trade sample, as well as all cannabis that is used to manufacture a cannabis product that is/will be designated as a trade sample. Furthermore, the cannabis excise tax won’t apply to product that is designated as trade and simply given to another licensee absent consideration.

It should be noted that only operators can distribute trade samples, and they can only do so to other licensees and only after properly designating the product as a sample for targeted advertising. It should be clearly labeled as “TRADE SAMPLE: NOT FOR DONATION OR RESALE.” Event organizers, testing labs, and retailers are NOT allowed to distribute trade samples. Once product is designated as a trade sample, that designation can’t change. The movement of any trade samples must be recorded and trackable by METRC. Trade sample designations are capped monthly at 2 pounds of flower and 900 units of manufactured/non-manufactured products. Conversely, recipients of trade samples can only receive a maximum of 5 grams of flower per strain (no more than 6 strains) and up to 5 units of no more than 6 different products each month. Any employee who is transporting cannabis trade samples can’t carry with them any amount that exceeds the personal possession limits.

Next, let’s look at the updates to provisions of California law on donations of cannabis for medicinal purposes. Starting in March 2020, state law began allowing retailers of cannabis products to donate free medicinal cannabis and marijuana products to patients. Licensees were also allowed to donate free medicinal cannabis to retailers for subsequent donation to medicinal marijuana patients. Cultivation taxes – including excise taxes and use taxes – for crop designated as intended for medical donation is waived, though the cannabis must still be tracked by the state’s track-and-trace system.

Retailers can also designate cannabis products as donations in the METRC system, but they can’t change this designation once it’s set.

Although they don’t have to pay taxes for growing and distributing cannabis designated for this purpose, the plant/product still has to comply with regulatory and quality requirements mandated for other cannabis goods. Whatever is being donated per caregiver or patient can’t exceed personal possession limits. Finally, all information pertaining to these donations must be carefully recorded and those records properly maintained.

If you are a California cannabis company or cultivator with questions about legal compliance with trade samples or medical cannabis donations, our Los Angeles marijuana business lawyers can help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

AB 141, California Legislature

However, it would be erroneous to assert that marijuana sales are legal everywhere in the state. As our Los Angeles marijuana lawyers can explain, cannabis still remains widely unavailable in some of the largest cities in the Golden State.

Of the state’s 482 cities, only 174 of them allow some type of licensed, cannabis business to operate within their district. In a number of those jurisdictions, the only allowable businesses are those that are not classified as retail locations. That means that a key piece of the supply chain puzzle is missing. Ultimately, this leaves millions of people without immediate access to retail recreational cannabis.

The one exception is delivery. Having a state license from the California Department of Cannabis Control authorizing delivery allows that company to deliver in any jurisdiction in the state – something that has been affirmed in subsequent court rulings challenging this right. However, those companies might still be subject to local jurisdictional requirements. All cannabis company owners and operators should be working with an experienced marijuana business attorney to help ensure their operation rights are protected.

But the benefit of accessible cannabis for all communities goes beyond the shop owners. It benefits the industry as a whole, as well as citizens. Accessible legal cannabis constricts opportunities for those in the black market to gain a foothold.

So what’s the holdup?

Primarily, it comes down to a provision of Proposition 64 (the bill that legalized marijuana for adult recreational use) grants a significant degree of local control. Some industry proponents have been lobbying the governor to back efforts to do away with that provision entirely. However, there are a fair number who argue that the local control provision was central to the promise made in Proposition 64 – that cities and counties could retain explicit control marijuana-related businesses within their jurisdictions, including banning them entirely if they so chose. Most cities that approved the introduction of recreational cannabis dispensaries were ones that already had medicinal marijuana and/or needed an economic boost (which cannabis businesses have indeed provided).

But allowing the black market to thrive isn’t serving the communities or their constituents. Increasingly, the people support permitting legal cannabis retail shops in their areas. But the “Nay” votes mostly come down to politics. Voting in favor of retail cannabis could mean lost support from certain PACs (Political Action Committees or groups like local police chiefs, etc.

California’s biggest cities that bar cannabis dispensaries are:

• Fresno, a community of 525,000 people. However, this is on the verge of changing. The city has created an Office of Cannabis Oversight, and is slated to approve nearly two dozen retail businesses within the next few months.
• Bakersfield, a community of more than 400,000 people. Neither this city nor the unincorporated parts of Kern County allow for cannabis sales.
• Anaheim – home of Disneyland, but not to any marijuana dispensaries. The city council in the community of about 350,000 voted against cannabis retail operations last year.

Other larger communities in the state that don’t allow cannabis retail include Irvine, Fremont, Santa Clarita, Fontana, Oxnard, Huntington Beach, and Glendale.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Weedmaps.com

You don’t need to take our Los Angeles marijuana business lawyers‘ word for it. This is according to a new study commissioned by the Insurance Institute for Highway Safety. Despite a few isolated incidents of state law violations (i.e., workers giving out free samples of edibles), the analysis revealed workers at cannabis retail locations are committed to following the rules, protecting minors and staying in business.

Study authors say the largest loophole through which minors obtain cannabis in California is through unlicensed vendors. Consider that black market bud sales are three times bigger than the legal market. They don’t have the regulations and taxes to contend with. They sell products that aren’t verified for safety or quality, but they can sell them cheaper – and they don’t always ensure the people to whom they’re selling are of legal age to do so.

The proliferation of the black market in this state has served as a lesson to other states preparing to oversee the unveiling of similar recreational cannabis industries.

Selling Cannabis to Minors is Illegal in California

Cannabis companies caught selling the drug to minors without a doctor’s recommendation for medicinal use face substantial penalties: Up to six months in jail and a $500 fine for a first-time offense. But what really deters legal cannabis companies is that they risk the lose of their state licenses, which are incredibly competitive, take months to obtain and cost hundreds of thousands of dollars. In L.A. , a licensed cannabis shop that even lets a person under 21 set foot in the shop can face not only a fine, but a suspended or revoked license. That’s why many require identification before you even walk in. Operators who have taken the time and spent the money to qualify for a lawful license aren’t going to want to imperil it to sell to a teenager here and there.

On top of that, there is the potential for liability. A business that sells to a minor who is then hurt or hurts someone else could be held legally liable in civil court for that injury. It’s not a chance most shops are eager to take. Many are vigilant about spotting fake IDs and other work-arounds.

Study on Minors’ Access to Marijuana in California

To examine how cannabis shops in California are restricting sales to minors, the study authors recruited a 22-year-old man and 23-year-old woman who were “young-looking” to randomly visit nearly 50 recreational retailers last January. They made stops in stores located in San Bernardino, Los Angeles and Santa Ana. Each of the decoys attempted to enter the shop without ID.

What they found was that about 50 percent of stores required ID to be shown outside the store. The other half required identification once they entered. None of the shops allowed the decoys to shop without showing proper identification.

About a dozen stores had signage posted outside indicating shoppers had to be 21 and older to enter. Others had signs posted inside the shop. The majority had a security guard, while others had salespeople checking identifications. Some stores had electronic ID scanners, while others relied on retail workers to visibly verify the cardholder’s identity and birthdate.

Given that most cannabis crimes have been downgraded to misdemeanors, law enforcement in Southern California doesn’t devote as much energy to enforcement. They will, however, do random age-compliance checks at licensed retailers. In Los Angeles, the city’s cannabis department does this as well.

Meanwhile, compliance with the minimum age for alcohol sales, set nationally to 21 in 1984, was a lot slower to catch on. Even now, depending on the region of the country, violations are common. One recent analysis of underage alcohol sales in New York City found that 60 percent of shops sold booze to underage decoys without ID. However, it’s still largely accepted that the minimum drinking age was a positive thing, and has likely saved thousands of lives on the roads.

But cannabis and alcohol markets can’t necessarily be compared apples-to-apples. Since alcohol prohibition was repealed in 1933, there really isn’t any such thing still as unlicensed alcohol vendors. The same can’t be said of the cannabis industry. In fact, it’s thriving in California. A survey of state law enforcement agencies across the state said that 8 in 10 underage marijuana users obtaining marijuana were getting it from an unauthorized seller. Now that recreational use is legal, unlicensed sellers may feel they have more freedom to operate and flout the rules.

The only way licensed shops will be outpace illegal operations in this state is if we see more cities welcome the industry (resolving the cannabis deserts we have now) and by reducing taxes so that legal operations can start being truly competitive.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Study: California’s licensed cannabis shops aren’t selling to minors, April 7, 2021, By Brooke Staggs, The Orange County Register

More Blog Entries:

California Cannabis Companies Prep for USPS Vape Product Shipping Ban, April 25, 2021, Los Angeles Marijuana Attorney Blog

That said, our Los Angeles marijuana business lawyers have been fierce defenders of those involved in cultivating, manufacturing, selling, using, prescribing and advertising marijuana for more than a decade. We have become deft at examining the trends as we advise our clients, many of whom were better off than some other businesses due to their designation by the state as “essential.”

In looking at the year ahead, our marijuana lawyers see a handful of factors that will likely impact the future of the industry and the clients we serve.

More Efficient Oversight by the State

Marijuana businesses in California are heavily regulated – some nearly to death. Things could get a little easier in 2021 given a plan by the governor to fold the three state departments responsible for overseeing the state’s legal cannabis markets into one. Marijuana oversight operations in the Department of Public Health for product makers, the Bureau of Cannabis Control for retailers, distributors and labs and the Department of Food and Agriculture for growers would be combined into a single operation, the Department of Cannabis Control. This could be a huge relief to cannabis operators, as every link in the supply chain would have a single point of contact.

It was already supposed to have happened this past summer, but COVID-19 derailed those plans. New estimates are that the DCC will become a reality late this year or possibly even next year.

Last month, the chief of the BCC retired after having been appointed by the previous governor to oversee the launch of industry regulations and oversight. Not everyone has been happy with every decision she’s made, but most agree that loss of her experience may have result in some setbacks for the industry. Although there is some speculation about who her replacement will be, the governor hasn’t yet announced it.

Regional Cannabis Marketing Legalization

We’ve mentioned this in previous blog posts, but the new appellation program is going to allow cannabis to be marketed by city/county/regional name, in the very same way wine is. This is considered to be a big boost when we look at what appellations rights did for California wine businesses in places like Napa Valley. Cannabis cultivators will have the legally protected right to advertise their products as being grown in specific places in the state with certain elevations, soil compositions and climates that are known to impact the end product quality.

That requirement, which requires the cannabis be grown in the ground with local soil and no artificial light, began Jan. 1st. The move is expected to help smaller, sun-grown operations in Northern California especially. Those in Riverside, Orange and Los Angeles counties, however, may actually be adversely affected, as these localities don’t currently allow outdoor cannabis farming.

California Cannabis Reforms on the Table

There is some hope that lawmakers this year will pick up and keep moving on legislative actions that were stalled by the pandemic. Among these:

• Lower tax rates for marijuana products. (The current rate makes it difficult to compete with illegal growers.)
• Regulation of medical cannabis for pets.
• Regulation of hemp-derived CBD.
• Approval of drive-through marijuana retail operations.
• Streamlining of all cannabis business license applications from a single platform.
• Approval of trade samples between businesses.
• Increasing the amount of marijuana that marijuana delivery drivers can legally transport.

And of course, there is as always an ardent hope that federal cannabis law will change. This may take a back seat until the pandemic and related issues are resolved, but it remains a critical matter for California’s budding marijuana businesses.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Marijuana: 4 things to watch for in California in 2021, Dec. 28, 2020, By Brooke Staggs, Orange County Register

Background Under Section 26063 of the Business and Professions Code, The Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), requires that the CDFA Cultivation Licensing Division, also known as CalCannabis:

• Forms standards that allow licensed cannabis growers to elect a county of origin for their cannabis; and
• Establishes a process that licensed cannabis growers can use to establish appellations.

The department has until January 1, 2021 to form the process of appellations of origin. In order to meet this statutory obligation and to fulfill MAUCRSA mandated responsibilities, the department has created what is now know as, the Cannabis Appellations Program (CAP).

Back in 2018, to kick start the gathering of input and feedback from industry stakeholders, the CDFA hosted six public participation sessions right across the state. During each session, the members of the public were given time to contribute their thoughts. And as CAP has continued to develop, the department has also kept lines open with industry experts and associates, throughout.

What is an appellation of origin? An appellation of origin is a description that both distinguishes and protects the place in which a product originated, as well as the process by which that product was made.

There are two major aims of the CDFA’s Cannabis Appellations Program:

• To promote cannabis products and local businesses within a particular region; and
• To improve overall consumer confidence, achieved via offering assurances related to a cannabis’ specific traits, quality and place of origin.

Once complete, the process should clearly outline all practices, standards and specific cannabis varieties produced by selective breeding in select areas of California.

What changes are being proposed? Within Title 3 of the California Code of Regulations, the CDFA has suggested the state amends Chapter 1 and adopts Chapter 2. These changes aim to establish a protocol for creating cannabis appellations of origin, as well as add clarity for cultivators on how they can use the county of origin to help promote their products.

Our Orange County marijuana business lawyers also encourage anyone within the cannabis community to share their comments on the proposed regulations. They can do so either:

• Via email to CDFA.CalCannabis_Appellations@cdfa.ca.gov;
• Verbally or in writing during the public hearing Tuesday, April14, 2020 from 1-3pm at 1220 N Street, Sacramento, CA, in the CDFA Auditorium; or
• By mail to the California Department of Food and Agriculture, Attn: Kristi Armstrong, CalCannabis Cultivation Licensing, Proposed Appellations Regulations, P.O. Box 942871, Sacramento, CA, 94271.

Implications Following concern surrounding product safety that emerged amid the vaping crisis last summer, consumers have rightfully become increasingly concerned about product quality. By establishing a process within the system that clearly signals to consumers where cannabis is grown, and how it was cultivated in any one particular area, will certainly bring an added level of consumer confidence. Initiatives such as these are big positives for licensed cannabis growers and sellers across the board. The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: The Medical and Adult-Use Cannabis Regulation and Safety Act

The bill states licensed growers, distributors, manufacturers, retailers and micro-businesses may allocate any already available inventory of cannabis and related marijuana products, for donation. Products set aside for donation can only be given by licensed retailers either directly to a medical patient, or to their primary caregiver.

Donation Requirements Our Los Angeles marijuana attorneys note that all cannabis and related products allocated for donation, are required to meet state marijuana regulations and provisions outlined in MAUCRSA. Those include:

• All donated marijuana products must travel within the licensed supply chain and meet all requirements surrounding cultivation, laboratory testing, distributing, manufacturing, and labeling and packaging, etc.
• Cannabis products that fail to meet regulatory testing and compliance standards are not permitted for donation.
• Donated marijuana products may only be made to qualified medicinal patients, and may only be donated by licensees permitted for retail sales, or non-profit organizations working directly with such licensed retailers.

Additionally, any licensee allocating items for donation must record each allocation within the Track-and-Trace system, as well as on sales receipts and invoices. Once a donation designation has been made, it cannot be changed. Any licensee that does try to change a donation allocation will have to pay sales and use taxes, and may also suffer disciplinary action. Manufacturers wishing to donate cannabis products must also label products “FOR MEDICINAL USE ONLY.”

Retailer Requirements Section 11362.7 of the Health and Safety Code states that retailers can only donate cannabis and related products to medical marijuana patients, or their primary caregivers, who possess a valid medical marijuana ID card, or recommendation from an attending physician.

Should a medicinal patient not hold a valid ID card, before donating any marijuana, the retailer must first:

• Verify the attending physician recommending the medical marijuana therapy is licensed, and in good standing, to practice osteopathy or medicine within the state of California. This must be verified with:
  • The Medical Board of California;
  • The Osteopathic Medical Board of California; and
  • The California Board of Podiatric Medicine.
• Take a copy of a government issued identification for the patient or primary caregiver; and
• Provide a written certificate stating the retailer has verified a physician’s medicinal marijuana recommendation, accordingly.

Daily Purchase and Possession Limits The Bureau of Cannabis Control (BCC) has clearly outlined daily purchase (Section 5409) and possession limits (Section 11362.77) within the Health and Safety Code. It is important to note that these limits still apply, both to patients and caregivers who may be receiving, or carrying, donated medicinal marijuana.

Implications Making marijuana donations to medical patients, and their caregivers, shows the industry’s compassion for those most in need. Offering cannabis business owners and operators tax incentives to get on board also helps to sweeten the act of donating. What will be interesting to watch is whether it will prove too cumbersome for retailers to jump through the hoops needed to get sign off to donate to those without a valid medical marijuana ID card, or whether they will do so gladly. The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: Senate Bill 34 The Medical and Adult-Use Cannabis Regulation and Safety Act Bureau of Cannabis Control – Health & Safety Code

As Los Angeles marijuana business attorneys can explain, many cannabis companies don’t even fall under the jurisdiction of the landmark act. Still, they are motivated not only by a desire to prove their desire to be in compliance just like any other company. Plus, it’s something most of their customers want.

Most California marijuana businesses are facing enough legal scrutiny as it is. Although the new law applies only to those corporations that generate at least $25 million a year in revenue and glean data on 50,000 or more households, devices or residents, some believe it’s better to make a good faith effort than to skate on the excuse that they aren’t technically beholden to it. It’s a potential marketing opportunity as well as a way to show regulators they are working to be responsible business partners.

Regulators first began enforcing the CCPA back in July. As Bloomberg Law reports, the new law gives consumers the right to demand businesses delete their personal information and, in many cases, immediately cease and desist with selling that their information to third parties.

The majority of California’s marijuana businesses in all likelihood fall short of that $25 million threshold that would mandate their cooperation. However, that could always change. By taking this proactive approach, cannabis companies are ensuring they won’t be scrambling to comply months or years down the road if the rules change. Plus, as the industry becomes more lucrative, more pot shops will be crossing the financial threshold, particularly as an increasing number of operations are consolidating.

BDS Analytics estimates that the state’s cannabis industry raked in nearly $3 billion in profits last year. It’s probable that this will more than double to more than $7 billion within the next four years.

What’s not clear at this point is how much personal information cannabis companies are retaining on their customers. Most are increasingly in possession of significant amounts of data as their customer base grows. This too means more marijuana businesses are likely to fall into the category that requires CCPA compliance.

Some companies began taking steps to implement these changes more than a year ago, even before the law first went into effect. This is in stark contrast with protests from a number of tech industry giants in the Golden state, as well as advertisers and the U.S. Chamber of Commerce. Several power players in these sectors argue that federal law preempts the CCPA because the costs of compliance are too high and the rules are too ambiguous.

But marijuana consumers have been more vocal than most that privacy is a top priority for them. Some are concerned about what type of data is being collected about them and the impact it could have if that information gets into the wrong hands. Thus far, there hasn’t been any noteworthy number of privacy complaints from cannabis consumers, but that could change as awareness raises and especially if there any cases arise where the sale of customer data adversely affects consumers on a broad scale.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

California Pot Firms Aim to Deliver Privacy Weed Users Want, Feb. 28, 2020, Bloomberg Law

The growing legal marijuana market is driving demand for warehousing, retail and land space across the country. One analysis of some 600 commercial brokers last fall by the National Association of Realtors revealed that in states where marijuana was legalized prior to 2016, the demand for these properties was markedly higher than in those states where cannabis use remained against the law.

As our Los Angeles cannabis business attorneys have noted that real estate investors have been especially active in areas where marijuana and CBD trade is thriving. Many more investment firms have been scouring opportunities in states where legalization seems likely in the near future.

Warehousing in particular appears to have piqued the interest of high-profile investors, as it can be used for both growth and storage of cannabis. As for retail, the demand has reportedly increased nearly 30 percent in markets that have long been friendly to recreational marijuana sale (Colorado, Washington, etc.) as opposed to about 20 percent for those that only recently legalized in those markets and about 18 percent in those that only allow marijuana dispensing via prescription.

In some markets, there is concern that cannabis investors have inflated real estate market pricing, particularly with regard to spaces used to cultivate commercial cannabis. Investors know these kinds of operations require substantial space, and must meet stringent zoning requirements and other regulatory restrictions.

Cannabis companies are still not able to do business with traditional banks, thanks to the fact that marijuana is still considered a Schedule I narcotic at the federal level. Neither are they typically able to secure insurance. That means buying or leasing property can be difficult as well. To obtain financing, most must realistically turn to private real estate investors, specialized venture capitalists and publicly-traded corporations.

This turns out to be quite profitable for investors because they can charge high interest loan rates and impose heavy restrictions. Part of that is because they are taking a risk by welcoming a business that is technically illegal at the federal level. But marijuana businesses need a strong advocate in their corner to make sure they are not being taken advantage of in contract negotiations. Our marijuana business lawyers can help.

The fact is that marijuana businesses are profitable, but many are being squeezed right now, thanks to significant taxation and regulation as well as unfair competition from the black market – an especially major problem in California. That makes securing a lease with reasonable terms to grow, manufacture, test and sell marijuana all the more important.

One thing that could ease some of the burdens on cannabis companies is the SAFE Banking Act. This would open the doors to traditional banking for marijuana companies, which in turn could bring real estate lease rates more in line with traditional market values. The U.S. House passed the measure last year, but the bill is still pending in the U.S. Senate.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Commercial real estate booms in cannabis-friendly states, Feb. 12, 2020, By Sarah Paynter, Yahoo! Finance

California voted to legalize cannabis use in adults aged 21 and older, three years ago now. And in that time, the legal marijuana industry has grown rapidly. Cannabis market research firm, BDS Analytics, predicts legal cannabis sales will exceed $3.1 billion this year alone, and forecasts sales will continue to grow to an estimated $7.2 billion by 2024.

Growth of this kind has come to fruition despite California’s complex legal structure, which incorporates in excess of twenty different cannabis license types, four varying regulatory agencies, and exorbitant taxes that industry insiders say are driving customers to the illicit market for cheaper alternatives.

Regulating Nimble Markets By current standards, our Southern California marijuana lawyers believe achieving effective regulation of the cannabis marketplace has been a challenge. Perhaps because government agencies are typically rigid institutions, that can struggle to keep pace with the more nimble new industries. Most young marketplaces experience rapid innovation in their early days, with technological updates coming in quick succession, and as those changes roll out, policy updates tend to accompany them. The pace at which those policy updates can be enacted is often the sticking point. And this has certainly been the case for California’s licensed cannabis industry, long crying out for tax reforms to better help legal businesses complete with unregulated sellers.

So Many Regulating Bodies Cannabis in the state of California is currently regulated by no less than three different bureaus. Retailers, distributors, mirco-businesses, delivery services, lab testing and events are overseen by the Bureau of Cannabis Control. While growers and cultivators are regulated by the Department of Agriculture, and manufacturers report to the Department of Public Health.

A Complicated Tax System California’s existing cannabis taxation system is also complicated. Business operators pay local and state taxes, cultivators pay distributors a cultivation tax, which distributors then pay to the state, and on top of that, an excise tax is also in effect.

Consumers ultimately pay the excise taxes, as they are built into retail prices, but they are collected by distributors. Most complicated within the current policy, is the part requiring the state’s tax department to twice a year estimate a wholesale tax rate that will ensure distributors pay taxes equal to 15 percent of gross recipients at retail. The governor’s new proposal instead aims to simplify things dramatically, by calling on retailers to collect tax directly from consumers, before paying it onward to the state.

Implications By streamlining agency efforts and establishing a central Department of Cannabis Control, the industry hope is that feedback can be collected, reforms promoting industry growth enacted, and everyday regulating responsibilities carried out far more efficiently and effectively. Combining regulator efforts will also enable regulators to limit possible contradictions between agencies. While industry insiders are skeptical, after such a long haul on their part to reach this point, they are also hopeful policy changes of this nature will encourage continued innovation, and facilitate a smoother running of business throughout the entire industry.

And while updating the cannabis tax policies will streamline matters, it will also place a greater onus on retailers. With the proposed tax structure, retailers must ensure their account keeping is accurate. If not, and if they fall behind with their monthly taxes, businesses may be forcibly shut down and properties may incur liens.

As California is the nation’s largest cannabis market, statewide industry changes are expected to cause a flow-on affect to other markets that look to California to learn from, and to try to avoid any missteps.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: 2020-2021 Governor’s Budget – Proposed Budget Summary (All Chapters)

Gov. Gavin Newsom has shown his support for the bill, as he now takes aim at updating California’s cannabis regulations.

Assembly Bill 1948, introduced by Assembly Members Rob Bonta, Ken Cooley, Reggie Jones-Sawyer, Tom Lackey, and co-authored by Assembly Member Mark Stone, seeks for three years to:

1. lower marijuana retail sales state tax from 15 percent to 11 percent; and
2. eliminate the cultivation tax altogether.

According to the state’s recent budget summary, these updates are intended to “simplify the system and to support a stronger, safer legal cannabis market.”

If you need legal assistance for your cannabis business, our Los Angeles marijuana lawyers can help.

What Took so Long? Over the last two years, similar proposed legislation updates have been pushed aside, with Gov. Newsom believing it too early to make legislative changes right after establishing legalized cannabis use.

Governor Now Ready to Update Laws The governor more recently, however, has hinted at now being more open to such an update. His new spending plan for the state not only includes a shuffle of agencies regulating the sale of marijuana, but also a streamlined approach for tax collection.

As it stands, the Department of Food and Agriculture currently licenses and regulates marijuana farms, while the state Bureau of Cannabis Control issues licenses and enforces the rules relating to retailers, distributors and delivery firms. Separately again, the state Department of Public Health oversees all marijuana manufacturers, including those who yield edible cannabis products.

Additionally, Gov. Newsom has also displayed a willingness to consider further measures intended to help strengthen the legal cannabis marketplace.

Pot Industry’s Stunted Growth Some industry insiders predicted that Proposition 64 would see a legal cannabis market in California generate $1 billion in state tax revenue each year. But last week’s budget estimate shared by the governor showed just $479 million is expected this fiscal year, followed by $550 million in the 2020-2021 budget year.

Contrary to expectations, the legal marijuana market has not grown as quickly as anticipated. Its slow growth is routinely attributed to high taxes, excessive bureaucracy, and market limitations resulting from three of out four Californian cities banning marijuana stores within their city limits.

Josh Drayton from the California Cannabis Industry Association (CCIA) has said changes like these proposed, are critical to the regulated marijuana industry’s survival. Furthermore, they’re necessary for licensed business operations to stand a chance at competing with the thriving illegal market, which “evades the financial obligations which drive up the cost of tested and regulated products.”

So when lawmakers re-introduce a bill of this nature, it demonstrates they understand the challenges legal cannabis business owners face, and the dire need for legislative assistance. The proposed bill seeks not only to simplify tax collection, but also to ease licensing and ultimately broaden access to the regulated marketplace.

Legal Implications These proposed tax cuts are vital to the survival of California’s legal cannabis industry. Measures such as these must be activated to give licensed operators a chance of competing with the illicit market, which shows little sign of retreating.

Setting up an independent department to oversee the many moving parts making up California’s regulated cannabis industry, will certainly help improve current conditions. Not only unifying the necessary regulatory functions, but also establishing a central contact point for cannabis licensees and local governments.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: Assembly Bill 1948 Proposition 64

In December, California investigators also raided unregulated storefronts throughout Los Angeles and confiscated illegal vape products. According to state testing results, many of those products showed as far less potent than labeling suggested.

In some cases, the oil cartridges THC contents showed to be only a portion of that claimed and were diluted more than one-third by undisclosed but likely dangerous additives.

Los Angeles officials tested a sample comprising more than 10,000 randomly selected illegal vape pens confiscated in those raids. Results showed three in four vapes contained the thickening agent vitamin E acetate, which federal regulators blame for the majority of lung illnesses linked to the national vaping health crisis.

“The prevalence of dirty and dangerous vape pens at unlicensed cannabis stores demonstrate how important it is for consumers to purchase cannabis goods from licensed retailers, which are required to sell products that meet state testing and labeling standards,” said Lori Ajax, head of California’s Bureau of Cannabis Control (CBCC).

Regulated Vape Products Are Safe According to the CBBC, to date, not a single vape disease case in California has been linked to a state-regulated source. Our Orange County marijuana lawyers believe test results show the source of the vaping health crisis stems from illegal manufacturers contaminating unregulated products on the illicit market.

Some confusion may exist among consumers, however, as the Centers for Disease Control and Prevention (CDC) fell short of evaluating the safety of regulated vape products. Instead, 16 percent of vape lung illness cases were linked by the agency to “commercial” sources which it deemed to include all “dispensaries, vape and smoke shops, stores and pop-up shops” without making the clear distinction between state legal and regulated outfits from unlicensed, illicit operations.

The licensed cannabis industry responded promptly and responsibly to the vape health crisis by quickly calling for tighter vape product regulation.

Federal Laws Restrict Research Efforts Because federal laws dating back to the 1970’s restrict researchers from studying the medicinal benefits of cannabis — still classified as a Schedule 1 drug, which by definition possesses no currently accepted medical use, plus poses a high risk for abuse — should a researcher in California wish to conduct investigations on cannabis use, those researchers would be at risk of federal charges, even though the state of California permits the legal use of cannabis.

Scientists widely believe this stance prevents the research community from conducting the high level of research required to secure an FDA approval for cannabis, even though early research indicates marijuana might even serve as a favorable alternative to opioids and other medicines.

Legal Implications If the United States were to legally regulate marijuana vaping products, as do countries like the United Kingdom, then the vaping health crisis may well disappear.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: California’s Bureau for Cannabis Control U.S. Controlled Substances Act (Title 21 U.S. Code)