California Vertically Integrated Micro-Businesses – Have your cake and eat it too!


Brett Furst of Central Coast Cannabis explains how a California microbusiness is a cultivator, dispensary, and consumption site packed into one. It has legal limitations, of course, but if you ever wanted to “do it all,” this is your opportunity.


Brett Furst with his daughter.

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California Micro-Businesses – Have your cake and eat it too!


Marijuana micro-businesses are hybrid cultivation sites and retail operations. Both the MCRSA and the AUMA task the California Department of Food and Agriculture with regulating and licensing cultivators. Nonetheless, people seeking to obtain a micro-business will need to apply for their license with the Bureau of Cannabis Control, an agency under the umbrella of the Department of Consumer Affairs that handles retail licenses for marijuana retailers and distributors.

MICROBUSINESSES: A new category of Type 12 microbusiness licenses is established for small retailers with farms not exceeding 10,000 sq. ft. ( 26067 (e) 2).Adult Use of Marijuana Act

Legal Side Note: The licenses created by MCRSA and AUMA are relatively consistent, but the micro-business license is an exception. Under AUMA, the micro-business license will be called Type 12 – but under MCRSA, this is a transporter’s license. To clarify this inconsistency, AUMA mandates that recreational marijuana business licenses specify that they are non-medical. Thus, the micro-business license will be called Type 12 non-medical, or NM.

With a Type 12 NM license, you can:

  1. Operate a hybrid retail/cannabis farm
  2. Grow up to 10,000 square feet of canopy
  3. Manufacture, distribute, and wholesale your cannabis on-site
  4. Welcome your customers to consume on site

Specifically, the license prohibits:

  1. On-site product testing (this must be handled by a third-party laboratory)
  2. Operating as a retailer of tobacco or alcoholic beverages


How Do I Get a Cannabis Micro-Business License?


The Bureau of Cannabis Control (BCC) is still developing the licensing process and regulations that will apply to prospective cannabis micro-businesses. Nonetheless, AUMA provides some insight into the license application process, which requires:

  1. Proof that you are legally occupying the property where you intend to grow
  2. A detailed description of your business’s operating procedures
  3. Submitting fingerprints to the Department of Justice for a background check
  4. Not having a prior conviction for a felony involving drug trafficking, violence, fraud, or deceit, or any other offense that could affect your ability to operate a cannabis business

The BCR may deny your application if your business:

  1. Will restrict competition or turn into an unfair monopoly
  2. Contribute to the illegal marijuana market, either within or out of the State of California
  3. Encourage underage use or the adult abuse of cannabis
  4. Result in too many marijuana businesses being present in one area
  5. Result in violations of environmental protection laws

The BCR will give priority to your license application if you demonstrate that your business was operating in compliance with the Compassionate Use Act and other relevant laws before September 1, 2016. The application fees for this year-to-year license have yet to be determined.


Cannabis Micro-Business Regulations


The BCR is developing more regulations for cannabis micro-businesses. For now, the following regulations are in place:

  1. Taxes
    1. In addition to any local government taxes, the state will collect $9.25 per ounce of cannabis buds that you cultivate. In addition, the state will levy a 15 percent tax on your sales.
  2. Track and Trace Program
    1. Your cannabis products will need to be marked with unique identifiers so that the government can track them as they move through the market.
  3. Testing
      You will need to send samples of your products to a licensed testing facility
  4. Labor Relations
    1. If your micro-business has more than 20 employees, then you will need to make a labor peace agreement with the relevant union.
  5. Environmental Regulations
    1. You will need to follow all Department of Fish and Wildlife and State Water Board regulations concerning the protection of riparian areas, waterways, and other environmentally sensitive areas.
  6. Pesticide Standards
    1. You will need to comply with the pesticide regulations put in place by the Departments of Food and Agriculture and Pesticide Regulation.
  7. Organic Certification
    1. Assuming the cooperation of federal agencies, your micro-business may be able to obtain organic certification from the Department of Food and Agriculture sometime before 2020.
  8. Appellation of Origin
    1. Under future regulations, your cannabis may get certified as coming from a distinct geographical area, just like fine wine.
  9. Local Laws
    1. You do not need to prove that you have a local permit to operate your micro-business before applying for a state license issued under AUMA. But your business will still need to comply with local laws to keep its doors open.


Legal Protections for Cannabis Micro-Businesses


As the holder of a marijuana micro-business license authorized by AUMA, you will be safe from adverse criminal and administrative legal action by the state authorities, so long as you strictly comply with both local and state laws. When it comes to the federal authorities, on the other hand, your micro-business may be vulnerable to raids, property confiscations, and criminal prosecution. The Department of Justice generally allows medical marijuana businesses to operate without interference, but with a license authorized by California’s recreational cannabis law, your micro-business may be targeted.



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Resources:

  1. Want to learn more about subjects touched upon in this article? Check out our articles on subjects such as:
    1. Raw Pounds of Cannabis Produced in the US Per Annum – A 2017 Estimate
    2. Contractual Propagations
    3. Selecting an Environmental Control System
  2. Want to get in touch with person? They can be reached via the following methods:
    1. Website: https://www.ccc831.com/
    2. Email: [email protected]
    3. Phone: (831)521-2855

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About the Author

Brett Furst has over 10 years of experience covering all aspects of the industry, including cultivation, manufacturing, consumables, retail, and more. He has also worked as a teacher for 5 years allowing him to educate prospective clients in a way that helps them retain the information.