You can now get a license to grow and sell cannabis from the State of California
That doesn’t mean it’s easy, or that most people will apply. For those that want to, here’s (much of) what you need to know.
The Meadow team stays close to the legislative and regulatory processes, and ever since the State started to work seriously towards some form of legalized cannabis, we knew the eventual outcome would be complicated. Not many would have expected it to be quite as byzantine as it turned out.
Even those of our community who have been advocates or entrepreneurs in the cannabis space for decades often find themselves digging into some point of the new laws that may have seemed insignificant to the authors but has profound consequences for thousands of patients and livelihoods. Our only remedy is to come together, share what we know, and then get organized to create positive change where it is needed. We hope our licensing workshops can be a place to help facilitate those goals, and hope that you can find a little clarity here on the issues our whole community is struggling with right now.
Audio and a transcript of the first part of this licensing workshop are now posted below, covering the State’s retail licensing requirements. Later parts of the workshop will follow in the near future.
Last not least: thank you to our generous sponsors for making this event possible!
Transcript of Workshop, Part 1 (Max Mikalonis and David Kaufman)
2.485">Ryan Bush [00:00:02] All right one more time, Mr David Kaufman and Max Mikalonas everybody.
16.633">David Kaufman [00:00:16] Hi, David Kaufman, I worked on partnerships and fundraising. Hello, okay David Kaufman, I did partnerships and fundraising for Prop 64, now a partner at 64 Solutions, we do licensing.
32.62">Max Mikalonas [00:00:32] Max Mikalonas, legislative advocate, aka lobbyist with K Street Consulting. As previously mentioned I was a staffer on MRSA and MCRSA, worked for Rob Bonta in the Assembly who represents Oakland if anyone from Oakland is here, worked there for four years. So happy to be part of the sector and helping work on helping businesses get through this.
54.46">David Kaufman [00:00:54] So I’m going to go first, I’m handling retail. Clicker works, hopefully. So I’m going to start off with the overview. First things first, nothing has changed that dramatically on the local side of this, you still need your local license before you’re doing anything on the state level. So if you look at the retail landscape, I’d guess at least 50% of the existing retailers… There we go, not going to touch that any more. So the existing retailers that we go to, on the delivery side, on the retail side, are not licensed for the most part. You go down to LA, it’s the majority of the folks you go to. So the biggest change is going to be that these folks are not going to get their temporary licenses. And so the larger question of what happens to these businesses, do they stop operating? Are they worried about fines from the state or from their local government? Or do they continue to operate. I don’t really know, as Hezekiah was alluding to on the collective question, people have to have their come-to-Jesus moment. Okay. So just going overview here, temporary events, that’s the big thing that people have been talking about on the retail side. A lot of us are going to Emerald Cup this weekend, a lot of us have been at High Times. Those retail sales have not been licensed in the way that you would be licensed on a local level, and so the question of how those are going to continue was dealt with in SB94 and now we’re seeing in these regulations an actual framework for how these events will be licensed next year, God forbid.
180.88">David Kaufman [00:03:00] And so we see two sets of licenses to apply for. We see the event organizer license, which the hope would be in the long term would allow you to do potentially local licenses as well. But in the short term, it only really makes you eligible to apply for a temporary event permit, or license. And those licenses, you’re only able to apply for them if your address is at a state fairground or an agricultural district, which to be honest I still can’t really tell you what an agricultural district is, I’ve been told it’s like a small fairground. But basically, next year the temporary event side of this, we’re only going to be seeing them at the fairgrounds. And the retail side of that, in order to do sales you have to be a retailer. So we might see local government issue retailer licenses to folks, but most likely we’re just going to be seeing the existing retailers coming to these events, along with the distributors. Next thing we have here is that there is no regulation on onsite consumption at a retailer. We do see mention of it in this temporary events provision, but we don’t really see it on the retailer level, which here in San Francisco is something we’re used to. In LA and San Diego, Sacramento, doesn’t exist. And so while the state knows it’s something they need to deal with, for whatever reason, they’re very vague as to what this is going to look like, and they leave a lot of latitude to the existing jurisdictions, like San Francisco. And in particular West Hollywood, who’s really taken the next step on this,
289.04">David Kaufman [00:04:49] and issuing licenses next year for two types of licenses I personally have not seen in any other jurisdictions. One a consumption retail license that would allow for edible products only. There’s been some buzz about a hotel that is potentially going to apply for one of these licenses and host edible-only types of services there. And then you see the consumption version of that, where folks would be sold a small amount of cannabis or concentrate that they could use on site. It looks like they’ll be able to take it with them as well, but the difference being at a retail location the focus is mostly on selling folks product they’re going to consume privately. And in West Hollywood in particular they’re going to allow for those retailers to also have onsite consumption. So West Hollywood is really putting itself in a place where they’re kind of a laboratory for the rest of the state to see how these processes work, while the state is figuring out for the permanent regulations what onsite consumption regulations they feel comfortable with, what they think makes sense, et cetera. And so lastly, or not lastly, but in a very dramatic part of this, what’s going to happen to medical? And so, this isn’t necessarily only on the retail side, but we see it most prominently at the retail, if you want to go buy medical product, you got to have your medical card. But what is medical product? For most of us, medical and adult use seems to be similar types of products. There’s a few on the fringe with tinctures an topicals where we see more specialized products,
393.698">David Kaufman [00:06:33] but for the most part you put a plant on the ground and you harvest it, there’s not an M or an A attached to it, it does similar things. And so cultivators and even retailers are going to have to make a decision of whether they want to sell to both markets. And on the retail level, the only real incentive to be a medical patient is if you have one of those county-issued cards. Does anybody here have a county-issued medical card? Oh, one, three. We’ve got three people in this entire room. I assume most of the rest of the folks here have a Meadow MD type of version of this or something else. Those are not going to get you your tax break. And so the question comes down to, if you’re a cultivator and you can only sell to a group of folks that is getting smaller and smaller every year, are you going to continue to do that? Are you going to have that additional license, are you going to continue to keep inventory of medical-only products? So Hezekiah touched on the transition period. Technical difficulties. Paging Ryan. Okay, there we go. So we’ve got this transition period for about six months. And while I was talking about those two different products, medical and adult use, in the short term we’re not going to see that. We’re going to see folks being able to stock both of them. And that’s because at this moment there’s not a lot of adult-use licensed folks, there’s even less product, and so the system just wouldn’t work. And so we’re seeing this unified supply, meaning that both adult use folks can buy for medical, medical can buy from adult use,
540.4">David Kaufman [00:09:00] but that’s only for the next six months. After that we’re going to see pretty dramatic changes. We also see that unpackaged products are going to be allowed in the first six months if they’re already in inventory. But they have to be sold in childproof exit bags. So I went to Colorado a few years ago, I’m familiar with it, I don’t know if anybody went to Vegas, they’re like these very fancy plastic bags that zip up in a very complicated way, I can barely open them. But for six months we’re going to see a lot of those. For the non-edible products. So we’re talking tinctures, we’re talking topicals, those types of products, we’re not going to see a TCH cap in those first six months. I’m thinking just for the inventory, but there’s some questions around whether people will be able to distribute after that January 1st deadline. We’re also going to see, for the medical folks, if it’s in 10-milligram doses, we’re going to be able to still sell those for a limited amount of total THC. On the state level going forward we’re going to see a 10-milligram and 100-milligram cap both for medical and adult use. On the adult use market, you’re not going to have this grandfathering, you’re going to have to sell products that are 10 milligrams with the 100-milligram cap. Move the next one. So product and inventory that doesn’t have the right labeling. So we’ve got a lot of product that’s in existing inventory that because the regulations just came out, a variety of reasons, it’s not going to be tested, not going to be labeled correctly,
645.246">David Kaufman [00:10:45] so we’re going to have a sticker that everyone’s going to have on these products. And then another question of okay, so you’re a retailer, you’ve got flour in your inventory, what are you going to do with it if it’s not packaged? And so as most retailers do currently, they package it themselves, they’re going to be able to do that with what’s in their inventory currently. We’re also seeing that 6am to 10pm hours, you know San Francisco, I’ve gotten delivery later than that, I assume there’s going to be some changes on the local level, but on the state level, they’re really sticking with that 10pm timeframe. And then lastly just this adult use versus medical, that card thing I was talking about, really important on the tax side. There was some talk of folks being able to use non-card, have their regulation recommendation to be able to get that tax break, doesn’t look like that’s going to happen. I’m going to turn it over to the delivery expert here.
708.81">Max Mikalonas [00:11:48] Well thank you for that, David. Okay great. So I’m going to focus mostly on non-storefront retailers or delivery services in this segment. This is Meadow, that’s a big part, so I wanted to just go into detail on some of the parts here. First and foremost the biggest news in emergency regs on delivery was there is actually a new delivery license. They finally actually filled in the hole in the license numbers and made delivery be a Type 9 license, as opposed to just a variation on a Type 10 or some modification like that. So that is a new development in the regulations that we’re very happy about. For the first time in SB94, that’s when the state recognized delivery or non-storefront dispensaries as a type of business. Essentially, with MRSA and MCRSA, and Adult Use Act, all of them went and said that delivery must be done from a licensed dispensary or retailer. And what this clarification said is delivery can be done from a group that only does delivery, is not open to the public. While there were some changes from the draft MCRSA regulations that came out in April, a lot of the language stayed the same between April and November for delivery language. So I just want to go and talk on the big picture a little bit, cover a couple items, just so we’re all on the same page. First and foremost, to be state-approved, to be state-licensed, you’ve got to be locally licensed. You’ve got to have that local license permit or other authorization from your city or county that you’re located in. Secondly, you’ve got to have a premises. A premises being the licensed physical location
825.476">Max Mikalonas [00:13:45] that you’re operating out of. Then go and apply for that local license for, that state license for, that facility. Any facility that you do business out of, and my understanding is that even if you just store records in, has to be locally licensed. That is a premises where you’re doing your business, and business has to be confined to these premises. Additionally, all orders for delivery for example must be prepared and dispatched from a premises. Now we can touch on this a bit more later, but that means the end of doing order fulfillment from the road, where a vehicle is dispatched with enough orders for say 50 different customers who have not yet placed those orders, and then from the road they go and package them and drop them off. That’s not going to be a state legal business model come January 2018. Additionally, you have to be paying your state, sales and use tax. Go file with the Department Tax and Fee Administration for a seller’s permit. And then there’s going to be more people talking later about the other taxes, the excise tax, the cultivation tax, and I’ll leave that to them. Once you’re temporarily licensed, and that means you’ve got your local permit and you’ve gone to the state website, sometime this month even, if you’ve got your local permit, you can fill out this free application online for a temporary license. And actually it’s a fairly simple application compared to the full one. Once you get that, you have to play by all of the rules with the exception of the transition period as mentioned.
925.1">Max Mikalonas [00:15:25] And one of the big impacts of playing by all those rules is you can only do business with other licensees. So before you go and apply for your temporary license, ask yourself, is your cultivator licensed? Is your manufacturer licensed? Do you have a distributor lined up? What is your relationship with the testing lab? Because you want to have the full supply chain to be able to be temporarily licensed when you pull the trigger on that. Now as Hezekiah mentioned, track and trace does not kick in on Jan 1. And I have heard mentioned that there could be some flexibility on this requirement. But formally, in regulations in statute, once you’re temporarily licensed you can only do business with other temporary or full licensees. So make sure that your supply chain is in order. Lastly, and this I talked about previously. Your collective defense, if you’re staying medical, your collective defense can help keep you out of jail for 2018. However, come January 1 2018, the state regulations kick in, and you’re under the civil jurisdiction of the state regulations for engaging in commercial cannabis activity, whether it’s buying, or it’s selling, processing, growing, manufacturing, cultivating, distributing, dispensing, what have you. That’s all commercial cannabis activity if done for business, that all falls under the regulations if you’ve not applied for a license. The fines are significant. I haven’t looked at those numbers as much, but I think David, do you want to …
1034.68">David Kaufman [00:17:14] Close to ten thou. So there’s the collective defense for the criminal side of things, but on the civil side you’re prone to, I want to say it’s some multiple of the license fee. And so somebody was telling me it was over 10 grand. Depending on the type of license.
1054.332">Max Mikalonas [00:17:34] Per instance.
1055.165">David Kaufman [00:17:35] Yeah, per day, per day. And in LA it’s like 20 grand day?
1060.23">Max Mikalonas [00:17:40] Something like that.
1062.37">David Kaufman [00:17:42] In Humboldt they’re doing similar things. So I mean this is kind of the rule now.
1066.5">Max Mikalonas [00:17:46] Yeah, Humboldt’s doing $10,000 a day, and then they’ll try to seize your property after 90 days. San Jose is 50 grand a day, it sounds like. So there are big fines. If you’ve criminal prosecution, there are big fines. And one other thing. Even putting aside those fines, even going and saying I’m a collective, I don’t have a local license, my jurisdiction isn’t friendly, but I’m going to keep on doing what I’m doing. You’re still required by the state to pay your taxes. As a collective, you still have to pay your taxes. And those, the penalty on that is a baseline of 50% if you do not pay those taxes. And say you’re collecting the gross and retails, that’s 50% on your 148 a pound for growing, and 50% on your 15% excise tax for retail sales. So those will add fast, and there could be other implications there. If you get hit with those, you may not be eligible for a license in the future. So even if you stay as a collective, there’s reasons to be paying attention to these and at the very least to be paying your taxes as if you were a licensee come January 1. All right. Back to more delivery stuff. Looking at changes from MCRSA to MAUCRSA, as mentioned there’s explicit creation of the Type 9. One part of the Type 9 creation that’s important is it’s exempt from the public access provisions. So the concern about having limited access areas, or areas that are only open to employees versus the general public, with Type 9 there’s less of that concern because you’re not open to the general public. On the flip side of that,
1176.53">Max Mikalonas [00:19:36] you cannot throw special events or do onsite consumption or anything at your premises because you’re not open to the public. So you can’t have it both ways where you’re closed most of the time and open a bit. Also, in quotation marks I’ve got four-digit numbers next to some of the points. Those are the citations for the different bureau regulatory sections. So that’s 5414 for the Type 9 license. One change that we did get is you’re able to use a phone-based GPS system in section 5417. Previously that regulation explicitly said you could not use a cell phone GPS, it had to be a dedicated non-phone GPS. When we spoke with the Bureau about that, they said the reason was, among other reasons, they didn’t want to be looking into individual’s phones and emails and this and that. So it can be a phone system, but it has to be owned by the employer, so they’re not looking into your personal phone or something like that, because of privacy concerns. Additionally, the prohibition on delivering to government property was expanded to land in Indian Country, to tribal land, unless the Indian Country and the tribe asserts to allow that. That’s specifically land held in trust, and I don’t want to get into the difference between fee land and trust land, so when in doubt don’t deliver to a tribal casino unless you know explicitly that it’s allowed there. Then last but not least, mention that the operating hours are 6am to 10pm, it was 9pm in the medical regs, now it’s 10pm. That’s an improvement, for delivery though a lot of the activity happens
1282.13">Max Mikalonas [00:21:22] between six and midnight frankly, when people get off of work, so they were hoping to have it be later, but they’re hoping for either a midnight cap or no cap and leave it up to local governments. But 10pm is where we’re at right now. To go back over some of the original requirements that have not changed. First and foremost, and this is reiterated in SB94, you’ve got to be a direct employee, W2 employee of delivery services that are doing these deliveries. A lot of delivery companies currently are using 1099 independent contractors. There’s issues with that for two reasons. First and foremost for the state. There’s a security interest and an employee training, and wanting to know who these employees are in case something happens. But also, from the business side, and I’ve talked to a number of delivery services, and as a side note the reason why I know and work on delivery issues is I’m working with a group called the California Cannabis Delivery Association, they have a local Bay Area Courier’s Alliance here in the Bay Area, Los Angeles Delivery Alliance and other chapters as well, and I’m working with them on these delivery regulations. What I have found is many delivery services and other companies that use 1099 employees are truly misclassifying their workers. And they’re setting the hours, the working conditions, and shifts, they’re doing things that would define them as employees under the state labor law, but just claiming they’re 1099 instead of W2. That’s a common misclassification, that’s setting yourself up for a lawsuit
1383.75">Max Mikalonas [00:23:03] and a filing by the Labor Department. And so it’s a more expensive change, but it’s probably one that most companies have to have done already, they’re just not doing it correctly yet. The employees must be 21 plus, you have to do an in-person delivery, you cannot use a drone or unmanned aerial vehicle, UAV. I know people are very hip about drone delivery when Amazon’s going to deliver via drone in SF for packages, but you won’t be getting your cannabis like that, not any time soon. Delivery technically begins when the employee leaves the building and ends when they come back there. We’re trying to get clarification on this, my read for that would be, every employee must return by 10pm, as opposed to being able to dispatch people at 10pm. I’d like it to be able to be dispatched at 10pm, but I’m not optimistic that’s going to be the case. You have to have a copy of your retailer license, if they get stopped by law enforcement or the Bureau, they have to have a copy of their license, their government ID, their employee badge issued by the business. You can only deliver to a physical address, you cannot deliver to a corner or a park or something like that. Now that’s probably best practice in terms of not having your drivers get robbed, is to go either deliver just to a physical address or to deliver to the address on the ID that’s supplied by patient for a first-time patient or customer. You cannot deliver publicly on land, you cannot leave California, and then lastly there’s a $3,000 cap
1481.68">Max Mikalonas [00:24:41] on the goods that can be carried during delivery. This is an issue for state-wide delivery services who have a broader infrastructure. I know some that deliver, send out shipments of 10 to $20,000 a day of delivery and have a state-wide network. So there is a need to go and change this rule and push back against it. Thanks David. All right, further changes carried over from MCRSA to MAUCRSA. One, you can only use an enclosed motor vehicle. This is an area that we are pushing back on and want to work further on. In dense urban areas where bicycles or mopeds or motorcycles are the only time-efficient way to get around, we think that having to use an enclosed motor vehicle, while there may be some greater safety benefits, the idea of double parking or logistically makes it much less viable, so we’re trying to push back on that. The product cannot be visible to the public from inside the vehicle, you can’t leave the product unattended in the vehicle unless the car is locked with a car alarm. The GPS requirement that now can be a phone. And you must be able to go and tell the Bureau where your drivers are at all times. So if there’s someone out, you have to be able to go pull up on a map and say they’re in these places. The Bureau has to have all the vehicle information on there. My read of that is, some folks were asking, does that mean that the employer has to own the vehicle? I don’t necessarily think that’s the case, but the employer is still responsible, it still can’t be a 1099. Subject to stop and inspection without notice. This might be stating the obvious,
1600.37">Max Mikalonas [00:26:40] but you can’t smoke pot or consume pot while delivering cannabis, on the job. I’m sorry, you can’t do that. And then last but not least, the delivery route can only be from the delivery location to a consumer, to another or several other consumers, and then back to a licensed premises. This is an issue for those that do state-wide delivery, because they often use more of a hub and spoke model, I’ll touch on it in a minute. Yeah, we’re on that one. Okay, this is a detailed checklist, this is the receipt. This is what you give, we believe you can give it electronically or paper, to the customer when you’re doing a delivery. First, you have to have the business name and address on there. Previously the address requirement was in statute. I looked back up today, it’s no longer in statute. We’re going to try and push for at least business name and license number, because delivery-only operations are very sensitive about their address, that’s obviously a concern. Then the receipt also has to have the first name, employee number, you can just generate an employee number for an employee who delivers it, the employee that prepares it, everyone that touches it in case something happens between when it got to the retailer and when it got to the patient. You also have to have a unique identifier for the consumer. This is in part because there are caps on how much you sell a consumer in a given day. Date and time, address where you delivered to, what the goods were, what it cost, what taxes, fees et cetera there was.
1703.63">Max Mikalonas [00:28:23] And then you have to get a signature from the consumer and provide them with a copy of that and keep a copy for your own records. We believe that an electronic signature should be sufficient, with an email record of that signature. However we’re seeking further clarification. Additionally, clarification on how you can obtain a signature for someone, maybe someone that’s disabled, if they’re a patient with a caregiver, trying to look at what it means for that. Thank you. All right. And then here is, the last slide I’ve got here, what is still not allowed, or what are we working to allow? So not allowed: mobile delivery, filling up a vehicle that, filling a vehicle full of product and bringing it back full of cash at the end of the day and filling orders from the road is not allowed. I don’t see that ever being allowed, it’s simply too far removed, or not allowed in the next decade, it’s just too far removed from the licensed premises. Can’t have independent contractors, you can’t have a courier service deliver on your behalf. What we’re working on, again the motorcycles, scooters, bicycles, or other forms of transportation. The hub and spoke model, which essentially we’re wishing to allow and some places currently do is essentially saying I have one delivery vehicle that has $10,000 of product and then it goes to a location, it meets with five other delivery vehicles, each take $2000 to then go to the final destination for 10 patients each. And sort of do a dispatch from the road or other premises by having different tiers.
1812.42">Max Mikalonas [00:30:12] And that goes on to the tiers of how much you can carry. Perhaps it could be, if I’m delivering by bicycle or moped, then maybe I can only carry $1,000 or $500 of product. While if I’m delivering in an armored car to go and do a re-up for someone else maybe it could be a higher limit. And so those are the last things. I think that’s all I’ve got here. Want to take questions, on either of this, on the retail side, on the special events, on the delivery, questions for both of us.
1852.834">David Kaufman [00:30:52] We did have one question come in online, it was is there a minimum retail space required to apply for a license? Apparently they were told it was 10 by 10.
1866.929">Audience [00:31:06] Well I mean, yeah, it kind of needs to be 10 by 10.
1871.918">David Kaufman [00:31:11] I mean do you have space for all of the requirements? For the security system, for inventory and storage, and this and that?
1885.17">Audience [00:31:25] 500 square feet minimum, I mean it’s hard to —
1888.02">David Kaufman [00:31:28] Whatever’s practical, but 10 by 10 is not practical.
1894.21">Audience [00:31:34] I was wondering if you all have any insight into the excessive concentration provisions, it seems like that’s something that could potentially be used in a way that shuts down a lot of retail businesses.
1904.564">Max Mikalonas [00:31:44] I’ll let Mr Prop 64 take that one.
1909.66">David Kaufman [00:31:49] We don’t know how, I mean it could equally be used in Monterey or other places where you have excessive cultivation. So I mean it’s up to the state. We wrote it the way we did hoping to protect communities that have been harmed by the drug war, or who didn’t want to have 10 dispensaries on the same block. There’s a lot of maneuverability for the local governments. We’ve had this debate here in San Francisco about what does over-concentration look like. And in a very concentrated city I think that looks a lot different. And I think, to be honest, I would have thought San Francisco would be leading on this issue. So I mean in LA they’re looking at what, 400 dispensaries altogether. I want to say it’s one dispensary for every 10,000 people. Sure. So I think it’s up to the localities. I think the big thing is, if a jurisdiction or a neighborhood had a problem with it, they would have recourse from the state to say hey, you should take a look at this and fix this. It’s less so about hurting the retailers, but there’s so much discretion.
1987.626">Max Mikalonas [00:33:07] And I’d say that’s probably a bigger impact for storefronts versus non-storefronts in terms of where there’s just a public impact, and the perception of blight. And furthermore, looking at the regs, there is language about, essentially saying that limiting something, or limiting a licensee from established due to undue concentration, if you can demonstrate that it would help perpetuate the black market by virtue of not allowing them to go in there and compete, that is a way to argue against, and provide evidence against getting your license denied because of over-concentration. If you can say look, there’s still black market activity happening here. I look on weed maps and there’s all these unlicensed people over here, then I should be able to granted a license to compete with them.
2040.864">Audience [00:34:00] Yeah hi, I have one question on the storefront, basically, or delivery services as well. My question is, going into the next year, there’s a lot of people in the licensed space, or even the 215 space that are selling to dispensaries, what does a dispensary have to do to differentiate their product between maybe stuff that they have that’s from 215 versus stuff that’s from licensed farmers, and if there’s a testing responsibility on the 215 stuff, and if it’s even possible to have that there?
2071.62">Max Mikalonas [00:34:31] Come Jan 1 they won’t be able to acquire any product that’s not —
2076.46">Audience [00:34:36] Let’s say now.
2077.47">David Kaufman [00:34:37] That’s in the inventory, there’s a sticker they’re going to put on there, it’s got that six-month window to sell it. Well I guess technically it’s as long as it’s in there. Six months. Yeah. Yeah, it’s got to be in the inventory, and not on consignment, like money.
2104.399">Max Mikalonas [00:35:04] So track and trace isn’t on line yet, so the reporting is not required. But what’s going to happen is, when you’re applying for a temporary license, at some point the state’s going to kick on its full license process, which will be a bigger deal. But once a business gets that full license, then they have to go and get training in track and trace, and I believe it’s within 30 days of being trained in track and trace, they have to log all existing inventory through track and trace. Now furthermore, even though they don’t have to log it, they still should be maintaining records of who they’re buying from for what amount. They don’t have to log this retroactively, but the Bureau could go and say to the retailer, where did you get this 50 pounds from, or where did you get this quantity from? We don’t see it from any of your temporary licensees. So there are concerns there.
2159.883">Audience [00:35:59] Hi this is about delivery. I’m operating in Oakland and delivering to Berkeley. Where do I pay the tax, in Oakland or Berkeley?
2169.356">Max Mikalonas [00:36:09] Gosh. Is Tim Moreland here? No, but he used to work with BoE. I believe the tax, do you know where the tax? I believe the tax is where the business is located, but I feel like I’ve seen a law saying that the tax is where the sale occurs for the sales and use tax. But I don’t know exactly. All right, we’ll leave that one to Tim. Be sure to ask that one again. If I’m in one jurisdiction delivering to another. That’s another thing we didn’t touch on. Many jurisdictions have delivery bans. I’d say majority of the state right now has a ban on delivery. Those bans are not being enforced, really. San Diego County did a couple of sting operations, where they went and called I think a dozen delivery services or so and asked them to deliver to a country club in a banned city that they went and provided law enforcement for. And arrested a number of the drivers and tried to get them to say where the retail operations were. So there are some of those operations happening trying to crack down on delivery into banned jurisdictions. The state’s perspective has been, with regards to local ordinances in general, is it’s up to locals to enforce their ordinances. It’s under 26 200 of the BMP code. So even though the state’s going to be tracking and has the right to know where every vehicle is if they’re asking, there is still an open question of, is it the responsibility, of will they actually enforce you delivering into a banned jurisdiction. But the banned jurisdictions really don’t have the resources to do it themselves.
2273.05">Audience [00:37:53] What’s going to be the status of current medical cards that aren’t county-issued, and will employees be required to have medical cards moving forward in the new year?
2281.44">David Kaufman [00:38:01] Employees of what?
2285.607">Max Mikalonas [00:38:05] No.
2287.49">David Kaufman [00:38:07] No, right? I mean if it’s a medical dispensary, no I still don’t think so. The medical card, I mean as we were saying, if you want the tax break you got to go get that card. If you want to just go buy a product from a medical dispensary, your current thing should be fine, assuming it’s legitimate. Yes, yes. Yeah the tax is really the criteria that you need the card for, otherwise a recommendation is a recommendation. I can hear you.
2333.545">Max Mikalonas [00:38:53] Correct. For the first six months. But it still has to be 10-milligram doses. That’s across the board, 10-milligram doses. So a Korova Black Bar of 1000 milligrams, if they don’t break that into 10-millgram doses, that has to be off the shelves for temporary licensees come Jan 1. Now if you’re not a temporary licensee, if you don’t have a path to licensure, then the rules don’t necessarily, you don’t necessarily have to play by them, but if you’re trying to get a license, or someone came to inspect you, then that would be in violation of the emergency regulations. Ultimately though, when you look at what the state’s doing, what the state’s priorities are, priority number one is get people in the system, get them compliant within the system, and then go after people that are not in the system. But the first is trying to get people, bring them in. So worrying about that type of enforcement isn’t necessarily the case, but yes. Even for above 100-millgram medical edibles, they still need to be 10-milligram doses come Jan 1. We’ll talk more.
2406.64">Audience [00:40:06] We’ve been hearing that at some point packaging for cannabis flowers will be required to either have an M or an A on the package, depending on whether it’s adult use or medical. Can you talk a little bit about that?
2422.207">David Kaufman [00:40:22] Yeah, that was that supply thing. For the first six months, not really a big deal. After that six months you’re going to have cultivators making a very conscious decision of, okay I have this much square feet I’m doing for medical, this much square feet I’m doing for adult use. And if you do the math, you’ve got so many folks in the medical market right now, that’s declining at a pretty steady rate, what’s the incentive for somebody to cultivate medical?
2449.01">Audience [00:40:49] Just one quick follow-up question, do you know if there’s going to be any specific special instructions around the representation of the M or the A on the package? Sizes, or little circles or squares?
2462.14">Max Mikalonas [00:41:02] I don’t recall seeing anything in the regs saying there has to be an M or an A. I think for medical it says for medical use only. I think there’s maybe different labeling requirements, so slightly different labeling requirements, medical versus adult use, but as much like an actual state symbol. As opposed to the new pot leaf exclamation point CA that has to be on all —
2484.2">David Kaufman [00:41:24] In transit.
2484.2">Max Mikalonas [00:41:24] In transit. Come up to the microphone, Kyle.
2503.918">David Kaufman [00:41:43] The track and trace manifests will indicate whether it’s an M or an A license, are you moving A or M product. So in a roadside stop or in transit, absolutely. On the actual packaging itself, I don’t think there’s any requirement there.
2517.873">Max Mikalonas [00:41:57] And that comes down to the fact that we’re going to have to have these parallel supply chains. Again the first six months, as David mentioned, it’s a unitary supply chain. If you’re a temp licensee, they don’t care if you’re medicinal or adult use, which means that an adult use retailer can buy from medicinal manufacturers or cultivators during that first six months. But after July 1 it’ll be stuck with, you’re either in an A market or M market depending on what your businesses are. You can co-locate the same business, with the same business name, same DBAs, can apply for and receive both A and M licenses. But if you’re a retailer you’re going to have to have separate A and M inventory. And if you’re a cultivator you’re going to have to decide, as David said, which square feet is A versus M.
2563.129">David Kaufman [00:42:43] It was not the intent of 64, by the way.
2565.69">Max Mikalonas [00:42:45] Yeah I mean a unitary supply chain would be great. We were hearing things about the Feds, but a working farm might be gone on Friday, so who knows?
2577.381">Audience [00:42:57] I had a question about insurance for delivery. Is there a requirement? I know before there was 1099, you could contract a worker and they could use their own insurance. But now they’re a W2, are we required to have additional insurance?
2595.74">Max Mikalonas [00:43:15] Well there’s definitely workers’ compensation insurance. Well it’s not in statute. And I’d probably want to ask an attorney more directly. There’s not a state requirement, but there may be a general business, non-cannabis-specific requirement about vehicles used while someone is on the job. So I’m not fully sure on that answer, actually.
2622.91">Audience [00:43:42] Thank you. Just a quick question, you said the products that we get from distributors that can’t be sold below cost. So moving forward from January 1st with the incentives that the dispenser give to people, and the compassion programs, does that go completely away? And what about with demos from vendors and stuff when they come in to the shop, would they be able to give away products, or how would they go about that?
2650.622">David Kaufman [00:44:10] You’re saying that dispensaries can’t sell product at below cost.
2655.451">Max Mikalonas [00:44:15] Do you know where that was, because I don’t remember seeing that?
2660.46">Audience [00:44:20] I read it somewhere online, but I’m not sure it was 100% on the bill.
2664.298">David Kaufman [00:44:24] You can’t give things away any more. You got to pay the taxes at minimum.
2669.499">Max Mikalonas [00:44:29] Yeah, you can’t give it away, but you can go and offer it for a penny.
2674.817">David Kaufman [00:44:34] Yeah, a penny plus taxes. In medical you can still give it to people, right?
2684.796">Max Mikalonas [00:44:44] Medical can give it to indigent patients under certain requirements. But also, it’s got to be the retailer giving it away. You can’t have manufacturers giving it away. You can’t have these sublets or popups that have been happening. If you’re in a retailer, it’s only retailer employees that are authorized to be there, you can’t have a popup or a demo thing the way it’s been done before.
2706.71">David Kaufman [00:45:06] All right, we’ve got rapid-fire back-to-back questions and then we’re going to close it down from retail here, these are all from online. Can a cannabis delivery operate out of a residential home? No, I will answer that for you.
2722.789">Max Mikalonas [00:45:22] I mean if you’re mixed-use zoning, but probably not.
2726.872">David Kaufman [00:45:26] Not going to happen. I’m licensed for delivery in SF, can I technically deliver to my patients in Los Angeles? In LA County, maybe?
2739.09">Max Mikalonas [00:45:39] So I think City of LA only allows, at least when I looked last they were only allowing delivery from within the city to the city. So that would be in violation of the local ordinance to deliver if they’ve got a ban there. Logistically, if it’s one, if it’s multiple vehicles, so the product’s changing hands several times, you’ve probably got a problem with the state regs. If it’s just one vehicle going down there, you might be able to do it if you make the trip all in one day. There really isn’t an overnight, if you’re still out after 10pm.
2775.545">Audience [00:46:15] Cool, similar question from Sacramento to South Lake Tahoe, basically same rules apply.
2780.86">David Kaufman [00:46:20] It’s just like, what’s the economics of that?
2783.184">Audience [00:46:23] Yeah, that doesn’t make a ton of sense.
2788.34">David Kaufman [00:46:28] No I was just going to say, you could deliver 100 boxes, I can imagine I think state-wide delivery that they just need to expand a little more into on the regs.
2798.045">Max Mikalonas [00:46:38] Right, and we’ve got some clients, and we’re trying to go work to make that more viable. But also, remember even with state-wide delivery, you’ve got to deliver it to a person, you can’t just leave it at their doorstep, you’ve got to get a signature, that type of thing.
2811.75">Ryan Bush [00:46:51] Yeah, if you guys aren’t part of the California Delivery Association, you need to be. They’ve hired Max as their state lobbyist, he’s doing a wonderful job for them. Talk to Max on how you can, he’s not a representative of the Association, but I’m sure he could put you in touch with the right people, so can I. So let us know if you guys aren’t a part of that group. Can you elaborate a little bit on the no independent contractors? Would that extend to marketing people, et cetera?
2844.857">Max Mikalonas [00:47:24] So it was more specifically to delivery, to those employees that were doing the actual delivering. Now if you contracted with an outside firm to do your marketing and branding, that would probably be okay, as long as they actually weren’t in your office. Because of limited access areas and concerns about security and product getting stolen and this and that. So you probably could have branding not be in-house, under different ways.
2878.57">Ryan Bush [00:47:58] Okay, and then last one. If we send a driver out to fulfill an order, they have back-to-back orders their whole shift, do they still need to return to the warehouse after each order?
2890.553">Max Mikalonas [00:48:10] They can only pick up orders from the warehouse, they cannot be resupplied in the field. But if they pick up 10 orders from the warehouse and do 10 deliveries, they can then go back at the end of that. But if they only started with five orders, and they get five orders when they’re on the road, they have to go back to pick up that second five, they can’t have someone resupply them.
2915.608">Ryan Bush [00:48:35] Awesome. All right gentlemen, thank you very much.
Transcript of Workshop, Part 2 (Aaron Flynn and Hezekiah Allen)
4.44 Audience [00:00:04 — All right we’re going to keep it moving here. We’re going to get into cultivation now. We’re bringing back up Executive Director of the California Growers Association, Mr. Hezekiah Allen. And making his way with a mouthful of food my local co-chair here and all around swell guy, local cultivator here in San Francisco, Mr. Aaron Flynn everybody.
35.81 Aaron Flynn [00:00:35 — Thanks Ryan. Do we want to go state or local? Do we want to just?
45.24 Hezekiah Allen [00:00:45 — I want to tell you how amazing I think you guys are here in San Francisco and how great a job you guys did the other day. And how happy and proud and excited you made me the other day at city hall. You, Nina especially, but I mean really everyone else. You all crushed it. So that’s my update on local. You can probably get into a bit more useful details than that.
65.65 Aaron Flynn [00:01:05 — Thank you. It means a lot and to really bring the equity component together with a lot of the non-retail folks and the delivery folks here in San Francisco, it was a special day. For those of you who don’t know what Hezekiah’s referring to, last Tuesday we had a historic vote, the San Francisco Board of Supervisors, gave us the local licensing that we’ve been really working very hard towards, for about a year and a half now. And we held a rally beforehand. That was really a unified show of, of folks from the equity side of the industry, from the non-retail side, from the delivery side. Had a couple of retailers in there. You know we’ve been getting a lot of grief here in San Francisco for, from the city for really being a disjointed industry. And the board of supervisors and city officials in general say that there are so many different lobbies and so many different people coming and trying to catch their ear. We thought that it was really important to have a rally to just show that in fact we are all capable of coming together and unifying under a common message. Which frankly was just that we really need this to move forward. We need local regulations and we need these local licenses and this local authorization so that we are not left out in the cold like so many other of our peers and friends, are throughout the state in cities and counties that aren’t doing that for them. And it would have been really just sad and unfortunate for San Francisco where much of the medical marijuana movement started back with Dennis Peron and the AIDS epidemic, to then fall behind.
175.97 Aaron Flynn [00:02:55 — And leave the producers and the non-retail side kind of out in the cold and to not move forward with adult use right away. One of the statistics that we brought up time and time again is that 73% of San Francisco voters, voted for Prop 64 and a big portion of that was they wanted to be able to go into a dispensary if they’re over 21 and purchase cannabis, and end that prohibition. And we came very close to having that delayed in San Francisco. And that would have been really just a travesty. And fortunately I think through a lot of excellent leadership on the local level through a variety of different groups, we were able to really rally and get behind and get the supervisors behind moving forward with that. We had a very vocal, local opposition. It was a little tough to overcome, but we have adult use provisionally with a lot of provisions, coming on January 7th if the mayor signed it today. Which actually I don’t know, I need to get an update on that. We know the board of supervisors had a second vote yesterday, no new amendments. If the mayor signed today we get temporary adult use on November 7th, which is exciting. I’m sorry, January 7th, thank you. The 7th of the first of the year. You know a couple other highlights to what happened last Tuesday. The equity program was expanded to be significantly more inclusive, we can get into more detail on that if we’d like. We were able to get a 600 foot buffer distance from sensitive use from schools, as opposed to the 1,000 foot distance that was originally proposed. There was originally a clustering clause
284.54 Aaron Flynn [00:04:44 — that was put in that really now is still relatively vague and it does look like, you know, depending on the area you can have three to four dispensaries close to each other. Some of that still needs to get hashed out. And pre-schools and daycare centers were going to be included in adult use and there’s a lot of daycares in this city. And fortunately that was not included as well. San Francisco definitely made a historic step forward in licensing non-retail for the first time. In creating and expanding the green zone, and really focusing on an equity program that is doable and it is reasonable, unlike some of the equity programs we’ve seen other places in the state. And allowing for adult use to open up. But at the same time I think the theme of this evening, is you know, learning as much as we can about the regs that are coming down, but understanding that implementation is going to take years. This first six months is going to be very rocky. I feel like the first two years are going to be a major learning curve and there are going to be a lot of instances where both on the local and the state level. As Hezekiah said earlier, each individual business is going to have to do some serious risk assessment and make decisions that you don’t have a clear cut answer to. There’s no book on this. This has never been done before and we all know that. And so we can give you as much information as we can. And you can read as much as possible in the regs. But at the end of the day this is going to be about individual decisions and being good operators.
384.42 Aaron Flynn [00:06:24 — You know this is all, as someone said to me today about good faith. And if you can show in good faith, if there wasn’t a clear cut direction for you to go, you pick a direction that you can show in good faith that you were trying to do the right thing. And you were trying to follow the intent and the letter of the regs. What you don’t want to find yourself in is a position where, okay you’re being scrutinized now and yeah, technically what you were doing wasn’t illegal or it wasn’t written into the regs, so it was vague, but you’re obviously circumventing what the lawmakers intended. If that’s obvious, don’t do it. You’re going to have to individually on a case by case basis defend your actions. And I can say that for certainty here in San Francisco, the Office of Cannabis was formed four months ago. And they have a lot of work to do. Right now, Nicole Elliot, the Director of Office of Cannabis is working through 200 plus business applications just from the registrations from the non-retail side, much less the retail side. And every single one of those looks different, the way people structure their entities looks different, the way they were trying to move forward with their businesses, the types of businesses they’re registering for. It all looks different and it’s really about the intent of the law. And one of her chief concerns is that people aren’t trying to quote game the system. What does that mean? I can’t say specifically. But if you’re faced with a decision about a direction to go, and it’s obvious that going this direction,
476.53 Aaron Flynn [00:07:56 — maybe it’ll make you a little more money, maybe it’ll make things easier right now. But if anything even pops into your head and says, “Man, that’s going to be hard to defend later on down the line.” That’s going to look a little shady. My advice, don’t take that road. You might get away with it, but it’s not a good plan. And a lot of discretion is going to be left up to people in these, whether or not it’s the AG commissioner, whether or not it’s the director of the Office of Cannabis, these localities. Develop good relationships with them. And the way that you develop good relationships with them is by being good operators. And so, that’s a very sort of long winded, conversation about that. But this is the way we have to move forward. We’re not going to be able to sit up here and give you a roadmap. We’re going to try to give you an idea and a mindset with which to move forward and as much guidance as we can.
530.05 Hezekiah Allen [00:08:50 — Yeah no, I think that’s actually really, really good advice. Go figure, Aaron being on my board of directors, it should be no surprise that I think he’s amazing. No road map. That’s just not here. But thankfully there is a bit more certainty than there has been historically. Things are still panning out at the local level. We’re going to see what the specifics look like. Los Angeles City Council just voted about an hour ago to approve their ordinance. Interesting developments down that way. The local stuff is happening all over the state. Where we do have a tad bit more certainty though is on the state regs. Of course you know I talked a little bit in the opening comments, we now have emergency regulations. I assume if you stayed in the room you’re probably a cultivator. I know we’re in San Francisco, not traditional AG lands, so some folks stepped in the other room. I want to say for those of you still here, San Francisco Grown is on par with anything Humbolt, Mendo, anywhere produces, you all got the craft and the quality here too. And celebrate that, I’m looking forward to San Francisco Grown. Frankly already some of my, wait no I don’t, never mind. We’re going to get into some emergency regs. So you know we talked a little bit on the big concepts, the temporary versus annual licensing. That of course is sort of the big immediate challenge. Or not immediate challenge. You got two different paths ahead of you. If you have a local permit and you’re locally authorized there’s a good chance you’re going to put
624.01 Hezekiah Allen [00:10:24 — your name in for a free, very streamlined temporary license that you should get very quickly that gives you that first step into the marketplace. The annual licenses, the more permanent licenses are going to be a bit more of a robust application process. Couple of things I’m just going to run through. If you’re looking at the regs or you have them these things are all there. But I’m just going to run through a couple high level things that you’re going to need to have in your applications. And I’m talking about the annual application here for the more permanent license. The temporary license is going to be quite streamlined. You’re going to disclose all of your owners and financial interest holders. Anyone that owns 20% or more in your business is actually going to have to interact with the licensing software on their own. So if you’ve got a lender who owns 30%, you’re going to add them to your application and the software’s going to automatically ping them and ask them for things as you move through the process. Folks that are less than 20%, are still going to have to be disclosed, but aren’t going to get those pings and interactions. There’s a lower threshold of scrutiny. You know what are they going to look at there? They’re going to want to see, for the folks over 20%, you know some background check type of things. Cannabis crimes, thankfully are not going to be a big deal we’re hoping. Crimes of moral turpitude likely will be an issue. You know they’re likely going to look at the potential for cross ownership to potentially
718.58 Hezekiah Allen [00:11:58 — lead to anti-competitive practices. It’s very strong language in the MAUCRSA, the combined adult use medical framework preventing anti-competitive practices. So they’re going to look at who owns what and who’s owning the marketplace pretty carefully. You’re going to have to disclose all of that. You’re going to have to give them a legal right to occupy. If your landlord doesn’t know they’re in your building you’re in a tough spot. Start to address that quickly. Ideally you’d be owning or working directly with the owner. We found in some localities that being the outright owner with no notes against the building is actually a very important thing. We’ve had a lot of great businesses get pretty far through the process before realizing that such and such bank still held a note on the building and such and such bank wasn’t willing to go down that road. So deal, if you don’t have a great relationship with your landlord, get it together now and make sure you know everything. I mean honestly three months ago would have been better, but if you’re still there figure it out. Property diagram, what does the property look like where are the doors, entryways from the street. I mean, you guys know what a property diagram looks like, pretty straight forward. Cultivation plan goes into a lot of, bit of detail about what’s in there. You are going to have to have that. Water. You know we’ve talked a bit about water before in the past. Here in San Francisco you guys are in a bit of a unique situation, you’re on municipal water, but you have a municipal water system
803.12 Hezekiah Allen [00:13:23 — that’s owned by your municipality. So you’re going to avoid some of the issues that other municipalities are going to get into. If a municipality is purchasing water from the Bureau of Reclamation, a federal agency, there’s a very good chance that that federal water will be prohibited for use to irrigate cannabis. So San Francisco, a lot of East Bay MUD in a pretty good situation here, but a lot of municipalities definitely probably, definitely probably, that’s really strong language isn’t it? — No.
830.27 Audience [00:13:50 — No.
832.06 Hezekiah Allen [00:13:52 — Definitely probably going to have some trouble with their water there. But you will need to submit various different information about where your water’s coming from, how much you’re using depending if it’s rain water, spring water, ground water, municipal water. So get to know where your water is coming from as quickly as possible. Waste management, this is one of the sticking points on the last regs. We are very thankful they’ve added more language about how to do onsite composting. We thought it was pretty absurd that we would have essentially have had to treated cannabis waste as a hazardous waste. Especially when we found out that the people who are licensed to carry that waste were actually prohibited by federal law from carrying cannabis, leaving us in a pretty tricky situation. They have had added a bit of guidelines about how to deal with waste on site and how the waste carriers can interact with us. Never in my wildest dreams imagined that I would learn all about California’s waste management regulations when I moved to Sacramento to work on cannabis policy. But low and behold. You will have to sign up for that track and trace training. My recollection is it’s within five days of your application. We’re not exactly sure how that’s going to work with track and trace not quite being ready on January 1st. You know clearly that temporary license, if there’s nothing to train you on, what’s the point? I do expect some good faith there. Know that it needs to be an urgent priority to complete that track and trace training quickly after
924.3 Hezekiah Allen [00:15:24 — you complete your application. You do need a local permit license for other authorization at least for the temporary licenses. If you don’t have that yet, that is probably your biggest barrier, your biggest road block. And if you’re thinking about anything other than a local permit, stop thinking and get your eyes on the prize. You need a local permit, that’s really your next step forward in my humble opinion. You know collective we talked a bit about that. Collective defense from criminal penalties, still leaves you exposed to civil penalties. Again that’s for you and your deities to solve. It’s not my, me to advise you on. Best case scenario you get a local permit as soon as possible. You know of course you’re going to be paying a fee. There’s a non, for the annual licenses, not the temporary licenses. There’s an application fee as well as an annual fee. The application fee is nonrefundable. When you decide to give them the paperwork you give them that money and they keep it just to look at your paperwork. The larger fee is due when you’re granted your license. That’s to cover the costs of monitoring throughout the course of the year. You know that’s an overview of the application process and the general requirements. If anything on that list made you squirm, deal with it. Go solve it. I don’t have a lot else to say, like go fix it if it made you uncomfortable, ’cause that’s going to be the thing that catches you up. And things are about to get very real in California cannabis. We may not end up in jail cells anymore,
1015.96 Hezekiah Allen [00:16:55 — but there’s a decent chance we end up bankrupt and broken. So the stakes are very real. Legalization is, a mixed bag, perhaps. It’s better than the alternative, I guess. But know that this is not a risk free endeavor. We didn’t just suddenly lift things. On the cultivation operation side, obviously everyone is aware there are very stringent pesticide regulations. The most robust pesticide regulations in the world. There is a very good chance that if you are using any pesticides, they are not allowed to be used on cannabis. The way that pesticide regulations work are that the federal government maintains a, not quite sole jurisdiction, but preeminent jurisdiction over the regulation of pesticides. And they have to say specifically, this chemical is allowed for use on this crop under these circumstances. Until they say that, you can’t use it. So it doesn’t matter if nobody has studied what daminozide does on cannabis. You can’t use daminozide on cannabis. These regulations are very stringent in this regard. I’m, indigo child of hippies from Humboldt, I think it’s great. I think less pesticides are a good thing for our world. You don’t have to agree with me on that, but the rules do reflect a hyper-consciousness of pesticides and reducing those pesticides in this type of agriculture. So you know do want to be very sure that you are being mindful of that. Beyond that the energy requirements got a bit looser. We were supportive of a more phased approach on energy requirements for indoor growers. We think there are a lot of amazing folks
1131.13 Hezekiah Allen [00:18:51 — who are growing indoors, only because they really didn’t have another alternative. And to sort of put an immediate higher barrier in the way would prevent those folks from maybe getting to a farm, getting to a place where they could reduce their, you know. It takes times to invest in some of those technologies, bring your footprint down, et cetera. So I believe 2022 will be the new sort of kick in date, it could be 2023, I don’t remember. We got 22? Yeah it is 2022, there’s a lot of numbers thank you for the confirmation there. A lot of numbers floating around. We get a couple years where you can ease into these conservation requirements. You know, we talked a little bit about the issue of the acreage cap at the beginning, so I’m not going to get back into it. That’s sort of the one big, you know I loved Max’s presentation where he had what’s allowed and what we’re working on allowing. You know there are a few things that are still in process. Generally speaking I’ll say that the cannabis cultivation regulations we think moved in a good direction. The testing regulations, while being very stringent on pesticides, we do think they took a science-based and improved approach to microbial sampling over the Berkeley regs. That was a very big issue that we worked on, aerobic activity is not the same as a public health concern. Just because there’s a bacteria on a bud it does not mean it’s going to make me sick if I smoke it. That’s a very important distinction to make. We think the state has made it in a very positive way. I mean, I know we were running a bit behind
1221.934 Hezekiah Allen [00:20:21 — coming out of retail, so I’m going to pause and take questions. Oh, that wasn’t actually a question. All right, I’m good there, Aaron do you have anything?
1229.8 Aaron Flynn [00:20:29 — I mean I’ll just touch real briefly on the pest management side of things and the testing criteria that’s going to be pretty stringent. And this is one of the things that it’s going to take a year or two to really suss out. And we have to acknowledge and move into this recognizing that we’re going to get hit with some really stringent requirements right off the bat. And I can’t think of anything more devastating to a cultivator than having to take a whole crop and destroy it. Now hopefully insurance is going to cover that and that’s a whole nother conversation about getting into insurance. And that’s a great segway because there are some great insurers out there who will actually give you a policy that will cover if you fail a test. But once track and trace is implemented if these tests are failed it could be devastating. It could be business ending for a lot of cultivators. And so what I encourage folks to do, the California Department of Pesticide Regulation does have a list of approved pesticides. California Department of Pesticide Regulation. And if you search cannabis there’s a list of zero threshold things that you can use that there’s no, parts per billion threshold that you will fail on. Now it’s basically neem and sulfur and some basic stuff, but there are quite a few good products out there on the shelves that meet those requirements. And I would encourage everybody to get used to using those products now. They’re very different than using some of the more synthetic pesticides that are out there, but if you start implementing those practices now,
1324.55 Aaron Flynn [00:22:04 — getting used to those products now, learning how to use them, it could literally save your business. Biological pest management is also something that we’ve seen Colorado roll over to very heavily. It’s more complicated, it’s tricky, but I know we’re all starting to have laundry lists of things that we need to start doing, but I think that failing on these tests is something that, you know could just be absolutely devastating. We might not have thought about it that much because we’ve always been able to sort of lab shop or do whatever it is that you need to do in order to get the test results you need. And that’s all going to change. And I really want to see everybody here in this room and everybody here in this space succeed. And this is something that’s really important to start implementing awhile a go, but now if you haven’t started.
1369.7 Hezekiah Allen [00:22:49 — Yup and I just you know I want to piggy back on that and say organic does not mean okay. There are lots of organic substances that have thresholds, no threshold substances means you’re allowed to use it, it’s not going to be harmful. Pyrethrins are a very common one. They’re literally extract of Chrysanthemum. If you wanted to make a Chrysanthemum dab, that would be a pyrethrin. And now of course we make them synthetic, but nonetheless. Organic, it comes from a flower, no big deal. Cannabis naturally produces pyrethrins at sometimes parts per million that will fail. That’s going to be an interesting one to figure out. But it’s a great example of something that when combusted, causes neurological and brain damage. It’s not the cannabis, but it does cause some significant and severe damages. And we do need to be mindful of that. So organic doesn’t mean okay in this case, from an operational perspective, from a public health perspective and certainly not from a regulatory perspective. The other thing I want to urge extreme caution on this topic is, you using a pesticide is not the only vector. We are finding pesticides in crops where the user is not applying them. The operator is not applying them. There are some that are systemic. You could buy clones that the mother was treated and the cuts will have the poisons in them. They will persist in some cases through multiple generations. Know that your nursery, if you’re working with a nursery has clean products, know that, test it. Get those leaf samples done. Worse than losing a crop because you used something
1476.03 Hezekiah Allen [00:24:36 — out of ignorance, is losing a crop because your plants were contaminated coming in. Secondly we are seeing soils, composts, serving as vectors for pesticides. These are the most stringent pesticide regulations in the world that I know of. As such, clippings from the grape industry, a very common food stock for California compost operations, are at levels that will fail. Be very, very cautious about anything that you’re bringing into your grow. Get it tested, get it cleaned. We’re working with a number of nutrient, soil companies, providers, et cetera to work with them on getting their products up to snuff, but there will be products in our marketplace that you could unknowingly use them and trigger fails. Be very, very cautious about this. I don’t know, I still want to take questions.
1532.52 Aaron Flynn [00:25:32 — Definitely.
1532.52 Hezekiah Allen [00:25:32 — Now that we —
1533.66 Aaron Flynn [00:25:33 — I just super quickly want to know how many people here are operating inside of San Francisco as cultivators? Yeah, a couple, okay. Well then I don’t need to go into any more detail and we can just shift over to questions.
1556.31 Audience [00:25:56 — Come to the mic. With the pesticides it’s also neighbors. Harborside lost their whole first crop down in Monterey because their neighbors were blueberry farmers and they had put on special filtration things on their greenhouse.
1571.551 Aaron Flynn [00:26:11 — So true.
1571.551 Hezekiah Allen [00:26:11 — Yeah absolutely, drift. Drift, aerial drift, you know a lot of the central valley we still apply poisons from an airplane. I know it sounds sort of barbaric, but it still does happen. That’s going to drift over and touch different crops, soil contamination, water contamination. There are a lot of different vectors for these poisons to get into crops. I think it was perhaps a groundwater issue in Monterey that the specific crop. There’s a lot of different ways that a good grower being very responsible can still trigger a fail. And so be very, very cautious and clean and careful about what you bring in to your grow.
1613.47 Audience [00:26:53 — This might have been a better question for the last panel, but could you guys maybe talk about why the state is requiring the cultivator to identify why they’re adult use or medical versus like a distribution company or something?
1624.03 Hezekiah Allen [00:27:04 — You know I never, ever want to be the person that makes sense of why the state is doing anything, just to put that on the table. You know the concern here comes down to what is now the Rohrabacher/Blumenauer amendment to the budget resolution. Attorney General Sessions, provided that resolution continues to pass, does not have funding to enforce and prosecute medical sales. If there was a one size fits all business license here in California it would potentially increase the risk and exposure of all California businesses significantly if the federal government were to choose to crack down on adult use. Which as far as I can tell they have still have funding and legal authority to do. So the goal there was to give businesses the option to stay medical only. Also I think it is generating a bit more progress at the local level. We’re seeing a lot of locales that are moving forward with commercial medical, holding back on commercial adult use. So there’s going to be a bit of a phase in. But the ultimate, you know it wasn’t in Prop 64, David mentioned that, it wasn’t the intent of Prop 64. This is something that came out of the legislative process of combining the two. And the concern was for businesses who wanted to be medical only, to manage their risk at the federal level.
1708.07 Aaron Flynn [00:28:28 — I will say real briefly that San Francisco on the production side, actually does not plan to have that delineation at all. If you’re a producer in San Francisco you can sell to both adult use and medical. Although on the state level you will still have to have that separation.
1725.51 Audience [00:28:45 — And then one question online fees. Have the fees been released and what are they?
1730.07 Hezekiah Allen [00:28:50 — Yeah give me one second I’ll get to that page.
1732.24 Aaron Flynn [00:28:52 — If you’re indoor they’re expensive.
1735.43 Hezekiah Allen [00:28:55 — Um, so. We’ve got our annual license fee. So again this is not the temporary license, those are at no cost. I mean goodness, there’s like 12 of them. I guess I’ll just run through them. Specialty, cottage outdoor is $1,200 per year. Cottage indoor is $1,800 per year. Cottage mixed light one, is $3,000 per year. Cottage mixed light two is $5,000 per year. I’m rounding these numbers to the nearest thousand. Specialty outdoor is $2,000 per year. Specialty indoor is $20,000 per year. Specialty mixed light is either five or 10. Small outdoor is $5,000 per year. Small indoor is $35,000 per year. Small mixed light is either 11, er excuse me, 12 or 20. Medium outdoor is 13, 14. Medium indoor is 78. Medium mixed light is 26 or 45, depending on Tier 1 or 2. Nursery is 45, processor is $9,300. Ranging from $1,200 for 2,500 square feet of outdoor, or 25 plants, all the way up to about $80,000 for 22,000 square feet of indoor. The license fees are tiered based on scale that was again our doing. We insisted that there be different sizes and shapes of licenses and that the fees be reduced for smaller businesses. We are thankful that stayed in the legislation. They figured out how to determine the specifics and that’s what they are.
1843.14 Aaron Flynn [00:30:43 — And I hate to insert this and keep piling on, but remember as you’re preparing for this inside of your financial models, that there will also be local licensing fees. So there’ll be local application fees and there will be local annual fees as well. So it doesn’t just stop here. You need to prepare for this. But I would go ahead and say as a general rule of thumb add an additional 25% on, if not more, for what the local governments are charging.
1871.911 Hezekiah Allen [00:31:11 — We’re tracking in Mendocino County we’ve been tracking. While the specialty cottage outdoor license is only $1,200 from the state, the average cost of compliance to get to eligibility to apply for that license is running about $150,000. With the low being around $70,000 and the high actually being upwards of one million. They’ve decided not to move forward with their license given that cost. But it is costing a lot for folks to get to ready to pay this fee.
1913.23 Audience [00:31:53 — In some of the changes that you just mentioned, ranging from $70,000 to one million, can you mention some of the changes that cultivators were making to get to that?
1920.9 Aaron Flynn [00:32:00 — Yeah you know the primary cost here and particularly, you know as we start to look into the seven figures, million dollar projects, those are for folks that live out long dirt roads. The number one impairment to California’s waterways is actually just dirt. Before we cut roads through our hills, sediment was managed very differently in our rivers. And the sediment in the water chokes out all the fish, et cetera. So huge impact in the literally just dirt in the rivers. And so those long dirt roads, when the timber companies put them in, those were seasonal roads. They weren’t intended to have traffic in the winter. Driving on those roads in the winter creates a really unique water quality problem. You know the one project, the most expensive project that I’ve looked at within our membership, they had 30 culverts that were about this big. They needed to be big enough for me to walk through in order to meet the requirements of the potential flood. Each one of those was a $30,000 culvert upgrade. And so really the further away from a publicly maintained road you are, the higher the costs are going. And then building permits and fees have been the other major one, compliance with building code. A lot of folks don’t have a permit for their barn. Goodness, maybe not even their house. For folks growing in the urban areas with a building that’s plumbed in, has street access, a lot of these more extreme costs are reduced. But then you have things like fire safety. You have mechanical, electrical issues and so
2007.21 Aaron Flynn [00:33:27 — oftentimes what the rural folks deal with from dirt roads, the urban folks are dealing with on fire safety and electrical issues.
2017.72 Audience [00:33:37 — Thank you.
2018.553 Hezekiah Allen [00:33:38 — That’s that? Ta-da we did it.
Transcript of Workshop, Part 3 (Joanna Hossack)
3.252 Audience [00:00:03 — So what we’re going to get started with now is manufacturing so I’ll round some folks up out there, I know some folks are waiting for manufacturing stuff. We’re bringing up from the law offices of Clark Neubert, who are phenomenal, phenomenal attorneys that can help with all of your licensing needs, and a phenomenal, phenomenal person Joanna Hossack, everybody, to discuss manufacturing.
53.935 Joanna Hossack [00:00:53 — Hello everyone. Nina, Michelle, can you hear me okay back there? Great, great. Well my name is Joanna Hossack, I am an attorney, I work for Clark Neubert. We have offices here in San Francisco, in Sacramento, and LA. I’m going to be talking about the manufacturing regulations. Those came out of the Department of Public Health, so let me just get my slides here, organized. Okay. We’ll start with the license types. See if this is working. Okay, so we have Type 6, which is non-volatile manufacturing. The good news about this one is you can also do infusions and packaging and labeling within this license, so it’s kind of all of those items can be done with the Type 6, and the other good news is that, well for some people, is that Type 6 now includes ethanol for extraction, that is a recent development. We have the Type 7, which is volatile solvents, so that’s for any kind of butane, hexane, those types of volatile solvents and that will also allow you to do Type 6 manufacturing and infusions and packaging and labeling. So with that one you can do basically everything. Type N is for infusions, you’re not allowed to do any type of extraction with this, it is just for infusions. You can also do packaging and labeling on the premises. And finally, the new license type is Type P which is just strictly for packaging and labeling and repackaging and relabeling. Okay, so now we’re going to go into fees, and we’ve kind of gone over this in multiple other people’s talks but we’re just going to reiterate these points.
175.962 Joanna Hossack [00:02:55 — Fees, there’s no application fee for the temporary state license, that one is free, but if you’re going to be applying for your annual license, it’s $1,000, that’s for any of those license types. And then the annual license fee is going to be due 30 days after you receive notification that your license has been approved. So those fees range from $2,000 to $75,000 a year depending on the tier that you’re in. There’s seven tiers as you could see there. Starting at 100 grand ending at 10 million. So those are the fees, and like I said, those apply to Type 6, Type 7, Type N, oh and yeah, Type P. So those are the fees, okay, annual license. So the annual license application is, there’s a lot of detail, I’m not going to go into every single bullet point, but we’ll do a summary. You obviously need an address, you need to designate whether it’s going to be an A license or an M license, the type of activities, so is it infusion, is it extraction, is it packaging? Type of product, so we’re talking about edibles, topicals, tinctures, vape pens, what’s the deal? Who is the onsite manager and what is their contact information, they want to know their email, phone, address, and then they want a backup contact info for a second person. They want your annual gross revenue for both A and M, designated which sales are going to be for each. Premises diagram, pretty straightforward what that would entail. Inventory control procedures, quality control procedures, transportation process, security plans, security procedures, waste disposal plan, and of course,
287.753 Joanna Hossack [00:04:47 — last but not least, property owner consent, you have to have property owner consent. Okay, so now shared facilities, this is a fun one. Right there you can see the definition of premises, and the situation is that only one licensee can be on that premises and it has to be a contiguous area, so what that essentially means is that you can’t have, right now, a commercial kitchen with a bunch of edible makers in it, ’cause obviously you’re spaces are going to overlap, you’re going to share a fridge, you’re going to share an oven, you’re going to share some space there and you’re going to have to cross over each other’s premises. So right now, with that definition, that’s not going to fly. Big problem because a lot of small manufacturers don’t have the money to get their own space and they want to share space. The regs basically have left a bunch of sections carved out for shared facilities and they basically, sometime in 2018, they’ll release this new license type, Type S, which will allow for shared facilities. Don’t really have any other information for you about what that will look like or any other specifics, just hold tight. Also, not really sure how that’s going to work, given that it’s a license type, so those are some fun things to keep an eye out for next year. Okay, what’s next? Okay, got to find this one, alright. So these are things that are applicable to every manufacturer regardless of type. You can’t have an ownership in a Type 8 which is a lab, that applies to all the licenses, but just a good thing to note.
387.663 Joanna Hossack [00:06:27 — You cannot produce non-cannabis products on site, so if you’re making cannabis edibles, that’s all you’re doing, you’re not working on other food. However, you are allowed to make non-infused samples like giveaway to people to show what it’s like when it’s not infused, that’s okay. All your employees have to be 21, this has already been discussed, but of course, once you have an M license, you can only work with people who have an M license. If you have an A license, you can only work with people who have an A license. You do have to have video surveillance, security plan. There’s going to be robust packaging and labeling requirements that go on and on and on. Employee training, employee training on track and trace software, waste management procedures, record keeping, and as I mentioned, track and trace, there’ll be a lot of track and trace requirements. So this is the Type N infusion, so as a I discussed, this is for infusions and you can also do packaging and labeling and can you also do non-mechanical extractions, basically. So these are the prohibited products list, so these are things that just cannot exist anymore. Alcoholic beverages, no infused alcoholic beverages, no additives that would increase potency, toxicity, or addictive potential, so nicotine and caffeine, but this doesn’t apply to coffee, tea, or chocolate, that was a big question with the last regs. You can’t have products that have to be below 41 degrees, low acid products with a certain pH level, juice that’s not shelf stable, dairy products. You can use butter if you’re buying it
503.368 Joanna Hossack [00:08:23 — from a commercial butter manufacturer, but you can’t make your own butter is the point here. No meat products, you can have dried meat, so that’s a new one that’s interesting. No seafood, uh, okay. And then no commercially available candy or snack foods, so what that means is you can’t just take a candy and throw some cannabis on it, you can’t take something that already exists and just infuse cannabis into it. You have to basically start from scratch. No products that are attractive to children, nothing that’s easily confused with commercially available food, and then this one, this last one, I really am not quite sure about it, but apparently nothing in the shape of a human being. I just, like, I’m not, I don’t know what the policy is behind that but don’t do it. So then Type 7, this is the volatile extraction. Any hydrocarbons have to be at least 99% purity and you need to use a closed loop system. The close looped system, there’s various requirements about manufacture rules and regulations upkeep of the system. You can’t do volatile extraction in a residential area. With this license, as I mentioned, you can do non-volatile extraction, infusions, packaging, and labeling, so it really gives you basically ability to do everything that manufacturer is allowed to do. There are a lot of different requirements at the local level for these types of businesses ’cause of the fire risk. Next should be Type 6, which is non-volatile extraction, like I said you can have ethanol now. Ethanol has to be food grade, everything has to be
614.909 Joanna Hossack [00:10:14 — approved by the local fire official, and be in accordance with Cal/OSHA, you have to have CO2 needs to be in a closed looped extraction system. You can also do infusions, packaging, and labeling. Okay, THC content, we have kind of gone over this a little bit as well earlier, but edibles, it has to be 10 milligrams per serving and 100 milligrams per package. That’s it. If the entire package contains more than 1 serving, each serving has to be scored, delineated, or otherwise marked to indicate one’s serving. Or if it’s packaging, the packaging has to demonstrate what one serving is, and they have to be homogenized. Of course, during the transitional period the per serving 10 milligram requirement will be applicable but not the 100 milligram requirement if it’s already in inventory. And then for concentrates and topicals, for adult use, it’s 1,000 milligrams, and for medical, it’s 2,000 milligrams, so you get more under medical. So there’s the transition period, that’s going to be Jan 1 to July 1, and during that time, you cannot transport any edibles that have more than 10 milligrams per serving. If the goods are held in inventory by a retailer, and they’re not child-resistant, they’re not in child-resistant packaging, the retailer can put them in child-resistant packaging at the point-of-sale, and that will be acceptable for this first six month period. Non-edible products that don’t meet the THC limit can be sold and transported. Edible products that are more than 100 milligrams
731.591 Joanna Hossack [00:12:11 — can be transported and sold but only by medical licensees, that’s the important distinction. And then the temporary license, so this actually is the temporary license application form, it was in the last page of the regs. As you can see, it’s literally one page and at the top here it’s asking for your license type, A or M; the applicant information, name, address, phone number; business information; premises address; and then, you go to this next section where you basically check the boxes as to which product type, activity, and method you’re using and then you just attach a copy of the local authorization, whether that be a permit or a letter of whatever it may be, and you sign it under penalty of perjury and you submit, and that’s it. And it’s free. So that is the summary, I will now move on to questions. Yep?
796.51 Audience [00:13:16 — Hello, I’m curious about packaging. We know that it has to be child-proof as defined by the special packaging definition in the Poison Control Act of 1970 whatever, but that definition is actually relatively vague as well, and doesn’t talk about any of the certifications that are req, the costly certifications around child-resistant and child-proof packaging. Any thoughts on that or?
828.221 Joanna Hossack [00:13:48 — Um, in terms of what the child packaging requirements will be, like more specifics?
832.769 Audience [00:13:52 — Right, so obviously we know resealable, but is it resealable without a tear notch versus a tear notch, none of that’s really been defined.
843.761 Joanna Hossack [00:14:03 — Yeah, I don’t have an answer to that at this time. Sweet, any other questions? Great, okay, so I believe you are next. We are, we’re going to take a ten minute break?
867.593 Audience [00:14:27 — I do have a couple of mine I had to go grab them really quick. One question I did have around the dairy. So what about a product like clarified butter that’s had all of the, it’s like a shelf stable butter, it’s had all the water and milk solids removed from it.
887.377 Joanna Hossack [00:14:47 — You’re buying that or you’re?
888.914 Audience [00:14:48 — Selling it, like as a manufacturer. Is that allowed in the?
893.006 Joanna Hossack [00:14:53 — You’re allowed to, if you buy the butter, the butter has to bought from a commercial.
900.389 Audience [00:15:00 — You buy the butter.
901.642 Joanna Hossack [00:15:01 — And then you can.
902.475 Audience [00:15:02 — And infuse it. You can sell that as a stand alone product or that has to be infused into another like a cookie or a brownie?
909.779 Joanna Hossack [00:15:09 — That’s a good question, I don’t know the answer to that. I will find out.
913.598 Audience [00:15:13 — Okay, uh, some other stuff than came online. Uh. Let’s see, are dissolvable strips considered edibles, concentrates, or infused drink mix?
929.845 Joanna Hossack [00:15:29 — Oh my goodness, dissolvable strips. I really don’t know that one either, that one, it’s not written out, it’s a good question.
940.176 Audience [00:15:40 — Okay, well yet to be determined. And then, can a, well maybe, you could maybe answer this one, it wasn’t particularly pertained to this session, but, can you hold a distribution license and a manufacturing license at the same location?
953.41 Joanna Hossack [00:15:53 — Yes.
953.41 Audience [00:15:53 — Yes. Okay, excellent.
Transcript of Workshop, Part 4 (Liz Kost)
We’re going to jump right into packaging. All right everyone, following up on the manufacturing there, this rolls right into labeling and packaging requirements. Everybody’s going to have to change pretty much everything that you have, so this is a very, very important session. Everybody, Mrs. Elizabeth Kost from Purple Line Media, round of applause please.
87.581" — Liz Kost [00:01:27 Oh, okay, great. I’m thinking about how to work this. Okay, we’ll see how tech savvy I am. So that’s us, Purple Line Media. I’m CEO, and we’re a branding and packaging company that specializes in cannabis. Been in operation for about four years, so we’ve seen it all. It’s quite interesting time right now in packaging. There’s a lot of regulations as you can see. So much regulation. So I will try to answer all your questions today. Unfortunately, the regulations that are out there, there’s still a lot of gray area. So I’m in contact with the lawmakers on a daily basis pretty much, trying to get them to field different questions. What constitutes a concentrate? Is a dissolvable strip, is that a concentrate? Is it an edible? I mean those types of questions that they really haven’t outlined yet. And the lawmakers, you have to realize, a lot of them don’t even consume cannabis themselves. So there’s an educational process that needs to happen. As you can see, I’m battling a cold, forgive me. So the more that we can reach out and educate the regulators and have dialogue with them about these gray areas or things that they might have issued a regulation for that doesn’t really make sense in our world, the more that we have that dialogue with them, it can reshape and reform these regulations in our favor. So it’s in our best interest to reach out to our regulators and network and have these dialogues with them. Okay, that being said… The scrolling is a little interesting. So, I’m sort of half and half here, but,
208.863" — Liz Kost [00:03:28 I’ve created a one pager. The regulations are fairly thick, if any of you’ve fallen asleep reading them. So I’ve actually created a one pager that you guys can go onto our website, <a href=”http://purplelinemedia.com" target=”_blank”>purplelinemedia.com</a>, under the announcements section, and you can download the one pager that sort of abbreviates the basics of what has to go onto your package or your label. And just to let you know, there’s an interim phase, right, that we’ve all been talking about. So starting January 1 to July 1, you don’t have to have any of this stuff on your packaging. But come July 1, all of these regulations have to be met in order for your product to be distributed. So, even the one pager is a bit of an eye chart. But I’m going to kind of run through it a little bit. The general requirements, so basically, the last woman talked a little bit about it, that if it contains more than one serving of cannabis, if it’s an edible, it has to be delineated, there’s a hundred milligram cap, ten milligrams per serving, and all that good stuff for edibles. For concentrates and topicals, the THC contents is a little bit higher. Now again, there’s a gray area. If you have an olive oil, is an olive oil a concentrate? Or is it an edible, right? There’s different processes and ways to make it. So just because there’s a hundred milligram cap for edible, your product may not even be considered an edible. So if you guys have any products like that, reach out to me, I can talk to the regulators, and we can see about what exactly it would be classified as.
315.651" — Liz Kost [00:05:15 So there’s different types of panels to a package, in case you guys didn’t know. There’s the primary label package, which is the front of your package. And then there’s the information panel, which is the back of your package. And in case you guys didn’t know this, in the new regulations, all of your packaging has to be child resistant. So whether it’s a vape cartridge, flower, edible, everything has to be child resistant. If there’s more than one serving it has to be child resistant resealable. Again, I know there’s lots of questions around that because, well what about flower? You know, if I buy an eighth of flower, is that constitute as more than one serving? We don’t know, it’s gray. So I would say, when you buy packaging, and not even that, there’s this state regulation, and then there’s going to be municipality regulation and local laws, right? So just because the state says one thing, the local government might end up saying something else. So with that being said, buying packaging is an expensive investment. A lot of times things like child, resealable, re-closable packaging, they have really high minimum order quantities, right? So you want to make sure, number one, that you have all the compliance on there that you need to have on there. Cause Lord knows you don’t want to print ten thousand bags and then have to sticker something ten thousand times. You also, if the law changes, you have to be able to pivot. So I would suggest packaging to the extreme. So if you’re a flower producer, I would suggest you put your flower
420.469" — Liz Kost [00:07:00 in a resealable, child resistant package. It might not be what’s required by the state, it might be required by San Diego, who knows. So you don’t want that barrier to entry. You don’t want your product turned down by one location or one dispensary because they don’t understand the law and because they’re frightened and scared to get fined. So I would just say, sort of package to the max if there’s a doubt at all. So, I’m not going to go through all of this cause it’s a little tedious and boring. I have some visuals to show you, because as a design studio I work better with visuals. But we’re going to move on, cause it’s, you know, an eye chart. So this is an example of a product that we’re currently working with to get our client into 2018 compliance. It’s a cookie, and this is an example of the primary label panel. So the primary panel, you have to have, if it’s an edible, you have to have the THC content per serving. If it’s a non edible, you can just have the THC content per package. If it’s an edible you also have to have it per serving on the primary panel. You have to have, if it’s an edible, a statement that says cannabis infused. And the cannabis infused statement has to be just as large as the product identifier. So in this case, the product identifier, it’s not chocolate chip, it’s mini cookies. That’s your identifier. And this is all in that one pager, it’s just easier with pictures, you know. So we’ve got our cannabis infused statement. It has to show up in basically the same eye level or the same plane as the product identifier.
535.702" — Liz Kost [00:08:55 So you can’t have cannabis infused up in the right hand corner, and then mini cookies all the way at the bottom left hand corner. It has to be the same field of vision, right? And just as prominent. We also have our beautiful universal symbol. Thank God they changed it to one color, because the previous regulations had it three color and I wanted to blow my mind because when you’re trying to save cost on printing, it’s like, really? So they made it one color which is great. But they also made a rule that it has to be a half inch by a half inch big. Which is freaking huge, it’s like the size of my thumb. Unfortunately, those are the size restrictions. I have reached out to the rule makers and law makers to say hey, if I have a really small package, are there going to be abbreviated rules or regulations that I could put on there? Cause that’s how it works with everything else that the FDA controls. And basically they came back and said no. That there will be no abbreviated government warnings, there will be no allowances for smaller THC symbols, and basically, all of the regulations have to be to size and they have to be on the package. It has to be on the product that the consumer picks up and takes home with them. So the consumer facing, right? So let’s say you do have a really small vial, or jar, or whatever, then they said you can have a box, and you can have all of your compliance information on the box or the exterior package. Just so long as it’s on there and it’s on the piece of packing
644.957" — Liz Kost [00:10:44 that the person’s going to take home with them. So maybe you have it on a box, maybe you have it on a hang tag, maybe you have it in a leaflet, but it has to accompany the package itself in some way. And then the net weight, which is also at the very bottom. And the compliance information has to be a minimum of six point font. I know that looks rather tiny, but it’s actually pretty big. So six point font for all your compliance information. So then we go into the lovely information panel. Oh wait, don’t, don’t give that one… Okay, so, the lovely information panel that has all the, this is like the good stuff, right? So you’ve got your supplement facts if you’re an edible, and do not call them nutrition facts. If you call them nutrition facts you are not in compliance. They have to be called supplement facts because cannabis is not a food item. You also need your dosage instructions, obviously. You need your ingredients, your manufacture date, your government warning. If there’s allergens in your ingredients, you need a food allergy warning. Prop 65 is an interesting one. It’s not in the regulations anywhere that you need to put Prop 65 on your packaging. That’s the lead warning, in case all of you don’t know, it’s the California lead warning. But, for some reason, there’s a requirement that smokeables have to have Prop 65 on there. So flower, vape cartridges, anything that you could smoke has to have the lead warning on there. Now do you have to put it on food? Maybe, it hasn’t really been instituted, and we’re unsure, but again, we’re talking about packaging
759.007" — Liz Kost [00:12:39 to the highest level of restrictions. So if I were you, I had an edible, I’d put it on there anyway because you don’t want any barriered entry for a dispensary who’s scared because they’ve been fined for not having Prop 65 posted on their place of work or whatever. Anyway, you just want to make sure you have it on there, just in case. And then you have to have… There’s the track ID number, track and trace ID number, the batch number, but that can be applied, on these bags we’re applying them via the heat seal machine so it’s sort of like a born on date. The expiration date and the batch number can all be applied afterwards with stickers or heat seals and stuff like that. Your lab testing information, you’re going to want to put all your lab testing information on there. Some people just say visit our website for our lab test results so that they don’t have to put it on their package every single time and they can just update their website, which is a little bit easier than stickering your lab testing results every single time. So that’s sort of what has to go on there. And again, the one pager kind of talks about the difference between edibles and non edibles because obviously for flower and vape cartridges and stuff like that you don’t have to have supplement facts and food allergen stuff. So let’s talk about child resistant packaging for one second. So child resistant packaging, there was a woman that had a question earlier. Everything has to be tamper evident and child resistant. So that means that if it’s a single dose, right,
865.98" — Liz Kost [00:14:25 child resistant means there’s no tear notch, you have to cut to open it. There’s also different Mylar packets where you can turn the corner over and pull them off, and it’s sort of a single use opening, right? That’s difficult, and what the regulations define it as difficult for a child under the age of five to get in to. So that’s that certification level, right? If you are going to buy child resistant packaging from a vendor, I suggest that you ask to see the certification paperwork from that vendor. A lot of people are going to be coming out of the woodwork trying to sell you packaging and they’re going to say, “Yeah, yeah, yeah, it’s child resistant.” Ask the see the paperwork. They should have an official document that’s gone through all the certifications and testing and it’ll tell you at what age of child that was tested for. Whether it was age 10, five, two, and there’s different costs and levels of that testing. So just make sure that the packaging that you buy is certified for children under the age of five is what the current regulations are. Child resistant resealable, again, it has to be certified child resistant resealable. And those are normally bags that come with dual zippers and you have to put your fingers in weird places and pull them apart, but they end up sealing back together and they’re just as child resistant the second, third, fourth time you open them. So they’re child resistant every single time you open the package. That’s if you have a multiple dose item, an edible. Then, I guess before we get into questions,
971.107" — Liz Kost [00:16:11 because I’m sure you guys have a lot of them, I’m not going to spend too much time talking, I know we’re behind, but I wanted to show you this lovely graphic, ah ah ah! It’s Moses and the Ten Commandments for those of you that are streaming. I just wanted to show you this to talk a little bit about how, and Hezekiah touched a little bit on it, these regulations are not written in stone. So if there’s something that’s confusing, if there’s something you don’t agree with, talk to your lawmakers, talk to your regulators, the Marijuana Bureau of Control, talk to all those people. Go to these events, talk to people. And the other thing is, they’re going to change. The regulations will change. I’m not going to come up here and say oh no this is it, this is what you have to live with forever. It will change. So as a business owner, you have to be ready to pivot. I suggest not buying a hundred thousand bags of anything unless you think that you can sell through a hundred thousand pounds of weed in three months. So just be ready to pivot, be conservative, be over judicious when it comes to putting things on your packaging and trying to be in regulation, and then you should be in pretty good shape. Thanks, do you guys have any questions?
1069.491">Audience [00:17:49 This may be a little vague, but sort of in the transition period, it’s still not clear to me if the onus on child resistant is going to be on the cultivator manufacturer, or if it’s going to be on dispensaries or other retailers.
1088.136" — Liz Kost [00:18:08 So January 1 to July 1, the child resistant onus is on the dispensary and the retailer. So everything that’s on their shelf and in their inventory that’s not child resistant, they are responsible for putting into a child resistant exit bag until July 1. After July 1, it’s the onus of the producer itself, and it has to leave your production facility in child resistant packaging.
1122.932">Audience [00:18:42 Regarding the universal symbol for cannabis, does that have to be on packaging for flower as well?
1129.429" — Liz Kost [00:18:49 The universal symbol has to be on everything. Everything. Um, everything, even if it’s… So we’re doing some projects right now for some hemp derived CBD products. THC free, it’s hemp derived CBD. These products, our customer wants to carry them in dispensaries, and I’ve advised this customer that if you are going to put anything into a dispensary, that it be child resistant, and that you follow the same laws that cannabis is following. Again, it’s mandatory, especially since the product doesn’t contain any THC and you can sell it online, you can nationally distribute it, you can do a number of things with it, but if you want it sold in a dispensary setting, you want to over package to make sure there’s no barrier to entry because the last thing you want to do is go try to sell your product to a dispensary, and even though it’s not THC and it doesn’t have any THC in it, and it’s hemp derived and all that kind of stuff, they’re going to say, oh well it’s not child resistant, it’s a tincture, I can’t have this on my shelf. So you want to make sure you give yourself the best foot in the door and that you’re over packaging, over regulating for all of your products.
1214.476">Audience [00:20:14 So I think I heard you say that test results don’t have to be on the package and you can link to the website. Did I hear you right?
1222.586" — Liz Kost [00:20:22 Yes, you can put please see our website for test results and put them on your website. Right? Yes.
1232.665">Audience [00:20:32 Thank God.
1234.185" — Liz Kost [00:20:34 They don’t have to be on the actual package.
1236.398">Audience [00:20:36 And then can you also clarify, I think I read that tinctures are considered concentrates?
1241.325" — Liz Kost [00:20:41 Tinctures are considered concentrates.
1243.502">Audience [00:20:43 Does that include alcohol and vegetable glycerin tinctures?
1247.925" — Liz Kost [00:20:47 Yes, all tinctures, and I’ve been going back and forth with the regulator on this because she was a little ignorant as to how most tinctures are made, and they’re made in a variety of different ways. And so we sort of went back and forth, and I educated her a little bit more about the tincture making process and how they’re made and all that kind of stuff. And she basically said okay, so tinctures are considered concentrates. And I know that the Marijuana Board of Control, Marijuana Bureau of Control, um, yeah, the bureau. The bureau is currently working to define categories and sectors for everything. So what defines a tincture, what defines an edible, what defines a concentrate, a topical. They’re working through those definitions right now because it is very gray.
1305.312">Audience [00:21:45 So for time being, if I have a tincture that has a thousand milligrams in it, I’m good for adult use?
1310.402" — Liz Kost [00:21:50 Yes, concentrate, yes. It’s a concentrate, its’ a concentrate, not a tincture.
1318.426">Audience [00:21:58 We did have a question come in online asking if you could elaborate by what the regs mean about supplemental labeling when everything won’t fit on the informational panel?
1329.744" — Liz Kost [00:22:09 Sure, so the information panel, as you guys learned here today, I’ll turn off Moses, he’s a little distracting. Sorry Moses. Oh I can’t, he won’t let me. Anyway, the information panel, since you guys are all very well educated now, is the back panel, okay? Information panel. So the question is what if all the information doesn’t fit on the information panel? It goes back to that there’s no abbreviated version of the compliance mandatory. So if it doesn’t all fit, you either need to get a bigger box or a bigger bag so that you could fit it all on there, or you need to get an external box. So if you’ve got a really small, sort of roll on stick, and all the verbiage isn’t all fitting on there, then you have to put it in a box. And all that information has to go on the box. But basically, all the information, all the compliance information has to accompany your product.
1403.331">Audience [00:23:23 How do we get our hands on your nifty one pager again?
1407.262" — Liz Kost [00:23:27 The one pager is on our website, <a href=”http://purplelinemedia.com" target=”_blank”>purplelinemedia.com</a>, under the announcement section. There’s a link to download the one pager. It’s basically a quick guide, a checklist that you guys can go through and make sure everything’s on your package.
1422.036">Audience [00:23:42 But what about those information panels that you get, like on make up, where it’s got the information panel and then it peels off…
1428.301" — Liz Kost [00:23:48 An extendable label, oh yes. We’re actually working on several extendable labels for customers at the moment. Extendable labels are really great cause you can peel them and then they fold out to like a mile long pamphlet. Yes, they do exist. They’re extendable labels. We do them all the time, so if you guys want one, let me know and we can help you with those. I was just going to say, if you guys think of anything after you leave, driving home in the car, smoking a joint, whatever, and you’re like, oh shoot, what about this? My email address is liz@purplelinemedia.com. L-I-Z, just my first name. And just email me your question, and if I don’t know the answer, I can try to find it out for you.
1480.178">Audience [00:24:40 Liz Kost everybody, thank you very much.
Transcript of Workshop, Part 5 (Lauren Fraser)
Lauren Fraser is the Executive Director of the California Distributors Association. She’s an overall powerhouse. She’s going to talk to us about distribution. Everybody, Miss Lauren Fraser please.
102.044 — Lauren Fraser — I’ll just do some brief introduction. So the Cannabis Distribution Association. We started a year and a half ago as a committee within California Growers Association. Let’s see, where do I want to go with that? So we branched off in January of this year as an independent association. We now have nearly 100 members who are either independent distributors, self-distributing producers, manufacturers, cultivators that distribute themselves, and then online wholesale marketplaces, service providers, and other people that kind of interact with distributors, but may not be pursuing a Type 11 license themselves. So that’s a little bit about the Association. As we get this set up, we’ll dive into it. So there’s a document being passed around which has the exact same information that I’ll be presenting tonight, so you can take that away or you can also email me at the address that I’ll provide and we can send you the PowerPoint deck from tonight as well. There we go. Thank you.
172.800:02:52You’re welcome.
174.516 — Lauren Fraser [00:02:54Do I just use this or should I just use the arrow?
177.43300:02:57You should just use the arrow, I think. There we go. Whoops. Found it. Sorry.
194.637 — Lauren Fraser [00:03:14It’s okay.
198.51300:03:18There we go.
201.998 — Lauren Fraser [00:03:21Just kind of scroll?
203.23800:03:23It’s a PDF. Yeah, just scroll with it.
206.019 — Lauren Fraser [00:03:26That’s fine. That should be fine. Thank you, Ryan.
209.91600:03:29You’re welcome. Yeah, just scroll with it.
211.985 — Lauren Fraser [00:03:31Okay. Am I not seeing it? I’m just scrolling with my hand, right? Okay. That’s fine. Thank you. Alright, so I’ll just dive right into it and a lot of what we talked about has already been covered. I’m going to pull up mine so I can actually see it without turning around. So I’ll go through this. Temporary licenses: One good, important thing to know is starting January 1st, all cannabis sales are subject to tax even if you don’t have your temporary license or your annual license applied for. So the same cultivation and excise taxes are going to be due essentially like starting the beginning of the year. Okay, so we talked about this. All people that have a local authorization are eligible for a temporary license in the beginning of the year, but you’re not obligated to apply for it right away. Temporary license holders can only do business with other temporary license holders. We’ve talked about that. Then, a really important note is that track and trace, the actual track and trace platform, is not going to be in use during the temporary license process. So if you have a temp license, you still have to use paper invoices and manifests and follow the same procedures, but you won’t be entering it into or integrating with the actual track and trace platform until you’re in the full-on annual license application process. Okay. Whoops. I think we’ve covered this already on the premise side, but you can have multiple premises on a parcel or in a building so long as your local jurisdiction allows for it,
328.952 — Lauren Fraser [00:05:28but each premise can only have one license associated to it. The premise is defined as the designated area of the building for which the activity is taking place. There’s a slight window of time during the temporary license process where you can have medical and adult use happening in the same premise so long as all the application and license information is the same and that those designations are marked clearly on the product. Each location where cannabis goods are stored must be separately licensed. Oh, okay. So this is an interesting point. We initially thought that distributors were going to be able to apply for one state license and then register multiple facilities. That is not the case. You actually have to apply for a state license for every single location even if you’re operating under one business. Scroll up here. Sorry, that’s the last point there. Let’s see. So this is regulatory role of the distributor. I’ll try to make it visible for everybody. There’s basically four main functions from a regulatory perspective that the distributor is responsible for. All product transportation must be conducted by a licensed distributor. So whether that’s on the upstream side between cultivation to a manufacturing facility, that has to be conducted by someone who has a distribution license. Or downstream from distribution facility to a retail facility. The other important responsibility that a distributor has is in the quality verification process. Distributors have an obligation and responsibility to the state to ensure that product that makes it
441.697 — Lauren Fraser [00:07:21onto retail shelves or into the retail market has first been tested and gone through all of the required activities and tests. So product will have to be onsite at a distribution facility or that licensed premise for an agent from the testing lab to come pull the sample and go through the testing process. That product is then held in quarantine by the distributor until the results come back as passing. It’s important to note that product that is not going to retail, for example, products sold from a cultivator to a manufacturer, does not require testing by the state. It’s probably recommended to be tested, but it is not required by the state until it’s ready to go to retail. Another responsibility of distributors is the tax collection and remittance, both from cultivators for the cultivation tax as well as from retailers for the excise tax. We’ll dive into taxes on a later slide. Just want to make sure you can still see this. Okay. Okay, so when flower or trim is sold to a manufacturer by a cultivator, technically the manufacturer must collect the tax from the cultivator and remit that tax to the distributor. So if you provide X number of pounds to a manufacturer and that manufacturer yields Y number of products from that base raw material and everything’s tracked in the track and trace platform, they’re going to calculate essentially how much initial product and therefore how much tax would be applied to the manufactured goods that they then send through distribution for sale to retail. I’ll dive into that a little bit deeper when we get on the tax slide.
555.876 — Lauren Fraser [00:09:15Then, the last regulatory function of a distributor is packaging verification. So it’s the distributor’s responsibility to ensure that products are properly labeled and packaged before they enter the retail environment. This section’s title versus custody as well as payment terms. I’m going to scroll up so you can see it all. So the title versus custody discussion is really interesting because product… Not all distributors have the same business model and not all distributors are going to buy product, mark it up, and resell it. Cultivators and manufacturers can actually have a direct contract with a dispensary or retailer to purchase their product. Then, they just use a distributor as a service provider. I want to pause for a second and also say that we know that producers can also have distributions licenses, so when I say a distributor, it doesn’t necessarily have to be an arms-length agreement. It can be a related party or the same party, but I’m just referring to the license type itself. So this is interesting. We have distributors who will buy product, mark it up, resell it and we have distributors who will simply do transportation. Others who will aggregate product and do the quality assurance testing, but may not transport it. There’s all sorts of business models that are emerging and allowable within the framework of the law. When we think about the actual functions of what a distributor does, they take custody, hold that product in quarantine, and at some point they might take title. They might purchase it, but they might not. They might actually just execute a contract
667.447 — Lauren Fraser [00:11:07between a producer and a retailer. Again, I’ll share these slides too. Feel free to take pictures, but I want to let you know that this is available on the one sheet as well as in the…
678.16200:11:18Is it all the same information on the one sheet?
679.877 — Lauren Fraser [00:11:19Same information on the one sheet, yeah.
681.76300:11:21Okay.
682.596 — Lauren Fraser [00:11:22Yep. Okay. It’s just in a different order. Then, payment terms. So nothing can be on consignment which is kind of related to this title versus custody concept because technically if I am a distributor and I never take title, then I’m taking custody and it could appear to be on consignment, but really I’m not planning to purchase it. Or maybe I do down the road. So no product on consignment. What this means is that when product moves from a distributor, exchanges hands from a distributor to a retailer, at that point it is considered sold. That’s important when we talk about the tax implication and the timing of when taxes are due. Sales to a retailer are not required to be paid on delivery so sellers may extend credit terms to a retailer. There’s not really any restrictions on those credit terms. Could be 15 days, could be 30 days, could be 90 days. Our response from the Bureau was that you can determine whatever terms you want to establish with the retailer. A distributor is not required to take title of product. We’ve talked about that. In which case the distributor would solely be taking custody and facilitating their related quality assurance, tax collection, transportation responsibilities on behalf of the producer. So these are all services that will likely have a cost associated to them that can be provided by any one distributor that any manufacturer or cultivator chooses to work with. Okay, so this. We’ll dive into the tax stuff now. Cultivation tax: Cultivators are subject to a state tax of $9.25 per ounce for dried flower,
793.208 — Lauren Fraser [00:13:13$2.25 per ounce for trim or leaves. Excise tax: Retailers are subject to a state excise tax of 15%. How that is calculated is really interesting. Every six months the state will come out with a estimated annual… I think, what is? The average market price markup. So they just came out with this a couple weeks ago. They determined that the starting rate will be 60%. What that means is they are saying that on average products are going to be marked up from wholesale to retail 60%. This is in our favor ’cause that’s not the way the market is today. It’s in our favor in terms of lowering the tax implication, or in the retailer’s favor. 15% of the estimated retail price. So if a producer or distributor sells the product to a retailer at $100, they’re going to assume there’s a 60% markup from wholesale to retail. Then, they’ll say 15% of that value is the estimated tax. At that time of the sale, the distributor would actually charge the retailer that amount, or the producer if they have the direct contract. So basically at the time that the retailer purchases the product, they’re also seeing that estimated tax. That way the state doesn’t have to worry about reconciling anything down the road. They’re just saying we’re going to assume it’s this and then six months later, we’ll reevaluate. We’ll look at the actual sales and we’ll make a determination of if we want to increase or decrease. So another important note related to taxes is that distributor to distributor transactions are allowable. This could mean that one distributor
903.387 — Lauren Fraser [00:15:03initially buys the product or receives the product and holds it in custody, but then it ends up going to another distributor before it ultimately goes to the retail. So the important note here is really relative to the responsibilities of a distributor in terms of the collection and remittance of the tax. The first distributor who initiates the quality assurance verification when the producer says, “I’m ready for this product to be considered sellable and I want it to go through the quality process.” That is the distributor who’s responsible for collecting the cultivation tax and remitting the cultivation tax. If they then share it with another distributor who shares it with another distributor and it goes down the chain, the very last distributor who holds it in custody and exchanges it or provides it to the retailer is the one who’s responsible for collecting and remitting that retail excise tax. So that’s just a timing thing. I might have misstated just slightly by saying it’s the last one who gives it to them. It’s actually the last one who facilitates the transaction itself ’cause it’s the payment of the tax that the state really cares about, not so much the physical movement of the goods. Hope that makes sense. Retail restrictions: These are just some things I wanted to include in here ’cause it’s very relevant to distributors. Okay. Retailers cannot make any cannabis goods available for sale or delivery to a customer unless the cannabis goods are received from a licensed distributor. I think we understand that already. Let’s see.
1002.986 — Lauren Fraser [00:16:42Retailers are not allowed to package or label cannabis on premises. So this is obviously a huge change from the way things are today. There’s the transition period stuff which we’ve already talked about. So during this time where say a retailer gets a temporary license in February. Any product that they have in their custody up until the day they get that temporary license, they are allowed to go ahead and break down and put in packaging. Once we’re in this kind of regulated environment, all product that comes to a retailer does have to come to them in their final retail-ready form, meaning this is the package, this is the unit that the customer is going to purchase. All cannabis products must be packed and labeled before arriving except during transition period. Okay. At the retail location, cannabis goods may be removed from their packaging and placed in containers to allow for customer inspection. So this would be like creating a sample jar, but the containers shall not be readily accessible to customers without the assistance of the retailer personnel and the container must be provided to the customer by the retailer or their employees. It shall not remain with the customer without the retailer holding that product. It also has to then be destroyed. We can’t resell or give it away. There’s no compassion programs in place for this product unfortunately, so it has to be destroyed if you open it up and you use it for sampling. Okay, this one’s a short one. Distributor’s role in packaging. Just think it’s important to note. Distributors may package, repackage, label,
1114.78 — Lauren Fraser [00:18:34and relabel cannabis flower, but may not do that for non-flower products like filling vape cartridges or something or repackaging extracts. You would need a processing license or a manufacturing license right now in order to do that. So just an important note. I think it’s going to be very important for distributors to have in-house packaging services in order to be able to take that product from bulk into pre-packaged form because there’s going to be a lot of product in custody awaiting those passing lab results while in custody. We know that there could be a lot of waste of labor and materials if product for some reason is packaged and then ultimately doesn’t pass that test. I think we’ve covered most of the transition period points already, but I’ll run through them really, really briefly. Okay, yeah. So just during the transition period from January 1st to July 1st, licensees may conduct businesses with A versus M without any kind of distinction between the two supply chains, medical or adult use. That then changes after July 1st. Cannabis goods held in inventory by the retailer at the time of licensure that are not already in child-resistant packaging may be sold if they are placed in child-resistant packaging by the retailer at the time of sale. So those exit packaging, you’ve probably seen the bags, that they leave the dispensary with. That will suffice. Cannabis goods that do not meet the labeling requirements may be transported or sold if a sticker is applied to the package by the retailer. Again, this is just during the transition period.
1225.272 — Lauren Fraser [00:20:25Same thing goes for lab testing. Product that hasn’t gone through the proper lab testing, as long as there’s a sticker applied to it that has the appropriate label warning notifying the consumer that hey, this has not gone through the required testing, the retailer can apply that sticker and sell anything that they currently have in their custody at the time that they get licensed up until July 1st. So really want to be getting rid of that inventory by that deadline to make sure you’re compliant. Dried flower held in inventory by a retailer at the time of licensure that’s not packaged may be packaged by the retailer into individual packages at the time of sale. So we talked about that. That’s just during the transition period for product that’s already in inventory at the time the retailer gets licensed. So if they get licensed in January, then only the product that they had up until that point, not any time that they purchase it throughout the transition period. It’s once they get that temporary license that that trigger point hits. I don’t think I need to dive in too much on the edibles transition things ’cause we’ve really hit it home on a couple of the previous presentations. So I’ll just skip ahead. Oh yeah. So I’m pretty much done. I just wanted to give you guys the regulation text in case you haven’t seen these fact sheets or the full text of all the different agencies. If you want more information or you’d like us to email you this presentation, you can visit our website <a href=”http://distributeca.org" target=”_blank — distributeca.org</a>
1321.236 — Lauren Fraser [00:22:01and you can email us at info@distributeca.org and I’ll happily share this presentation with you. Thank you. Oh yeah, questions. Thanks.
1335.91600:22:15Hi.
1337.082 — Lauren Fraser [00:22:17I’m like hang on, hang on.
1339.35400:22:19So I know we touched on this earlier, but I’d like some more clarification. So we can sell products that exceed the THC limit in the gray period, the transition period, but do they have to be individually dosed after January 1st in 10 milligrams maximum ’cause if we have jellies that are 20 milligrams?
1355.694 — Lauren Fraser [00:22:35Yes. Let’s see. What does this one say?
1362.69500:22:42It says trans or sell, okay.
1364.796 — Lauren Fraser [00:22:44Cannot transfer or sell edibles that product that exceeds 10 milligrams per serving after January 1st.
1369.65200:22:49That’s really big for a lot of dispensaries that have a lot of these products that are not. So could we go in and cut them? How does that work? We just can’t sell them if they’re not dosed into 10 milligram doses?
1382.163 — Lauren Fraser [00:23:02That’s my understanding, but I see there’s a significant challenge with that.
1385.84800:23:05Yeah, a tough-ee.
1387.507 — Lauren Fraser [00:23:07I’m not an expert on the edibles side of things, but probably a good question for Emily or the woman from Purple Line Media.
1396.01800:23:16Okay.
1396.851 — Lauren Fraser [00:23:16Yeah. Sorry about that.
1398.51700:23:18That’s okay. Thanks. Hi. Do you know how they’re going to measure if I’m selling my flower in a whole plant extractor, how is that going to be weighed ’cause it’s going to be much heavier than dried flower?
1412.861 — Lauren Fraser [00:23:32Oh, in terms of the tax?
1414.42100:23:34Yeah.
1415.256 — Lauren Fraser [00:23:35So the tax is a cultivation tax, so however much raw material whether it was raw material in the form of full plant. So if it’s full plant, if it goes into your extract, then you’re going to be taxed on that full plant weight the $9.25 an ounce, I believe, because it’s the actual raw material that they’re basing the tax on. So you would say how much of that yielded whatever outcome of the manufactured product, you’d be basing it off of the raw material inputs.
1451.70700:24:11So plants lose about 90% of their weight —
1455.332 — Lauren Fraser [00:24:15Hey guys, could you be quieter so we can hear?
1459.50100:24:19When they’re wet to they’re dry. So if I do a whole plant extract when they’re wet, I’m going to be paying a much heavier tax?
1468.774 — Lauren Fraser [00:24:28That’s a really good question. That’s a really good question. It seems that way, but I think that’s a good point we should bring up.
1477.03800:24:37Thank you.
1477.871 — Lauren Fraser [00:24:37Yeah. I’ll note that one. Thank you.
1481.61100:24:41Can you repeat the website and the email address?
1483.657 — Lauren Fraser [00:24:43Oh, yeah, yeah, yeah. Website’s <a href=”http://distributeca.org" target=”_blank — distributeca.org</a> and just info@distributeca.org Sorry, I’m doing the wrong laptop. Okay thanks, everybody.
1497.00300:24:57One more.
1498.073 — Lauren Fraser [00:24:58Okay, sorry.
1498.93300:24:58He won’t mind. One, I understand that the CDTFA requires that we pay taxes via electronic fund transfer. We can apply for a no cash exception, however, if we get it, there is a 10% penalty that may apply to all cash tax payments. Is this correct? If so, how is this feasible given the state of banking?
1519.542 — Lauren Fraser [00:25:19This was brought up in a meeting with CDTFA. I believe they were working on refinements to that penalty. I’m not sure if that’s taken place yet, so I don’t want to misspeak, but Hezekiah might be the right person to ask that to.
1534.23300:25:34Okay.
1535.826 — Lauren Fraser [00:25:35So they are accepting cash payments. They are planning to accept electronic payments. I would think they would have to waive that penalty, but I’m not sure if that’s happened yet.
1546.87900:25:46Okay. Then, one other. If I have a micro-business license that includes distribution, can I test my own product and deliver it to the retailer and/or my own retail location?
1558.711 — Lauren Fraser [00:25:58That is my understanding.
1560.0900:26:00Yes? Okay.
1561.826 — Lauren Fraser [00:26:01Yes.
1562.65900:26:02Cool.
1563.753 — Lauren Fraser [00:26:03Okay.
1564.58600:26:04Can we get a round of applause for Lauren Fraser everybody?
1566.252 — Lauren Fraser [00:26:06Thank you.
