Sixth in a series

This is the latest in my series about understanding what is happening in the 2015 Washington State Legislative session and how to predict the business implications of what comes out of it.This is not a piece intended to comment on the content of the bills. This series has been written to guide you through the process and help you identify the important points to focus upon.

As predicted SESS HB 2136 passed both houses, was signed by Gov. Jay Inslee, and was filed by the Chief Clerk of the House of Representatives on June 30, 2015. This bill was the companion bill of 5052 and deals mainly with fixes to the licensed 502 (recreational) system. As predicted, little changed since my last article.

As with 5052, HB 2136 now is going through the process known as rule-making. If there are provisions of the bill that matter to you this is your time to be influential in the interpretation that will be memorialized in the Washington Administrative Code (WAC).

I am offering my rule-making notes to help you understand what is in the bill, and, to help you to be effective in the rule-making process. As you can see from my notes, I am not asking for anything in particular in the 2136 rule-making process. This is simply my take. The bill, to me, seems to be fairly straightforward. Also, my big questions are in 2SSB 5052

My notes are also intended to be a companion to the bill so that you may more easily reference it. You can fairly simply find what section you need to reference so that you can climb more deeply into the verbiage. I have included page numbers of the sections along with what the section deals with so that you can quickly reference relevant verbiage.

Just because I don’t have specific questions in rule-making does not mean that you will not. It depends on your perspective and what you are interested in. For example, let’s take a look at Part V Transportation of Marijuana Products. As a retailer, I am just happy that they are going to license Common Carriers. If you are a business that would like to explore getting a common carrier license, now is the time to care about rule-making. This is a brand new license and therefore a business opportunity for someone.

Common Carrier (CC) is but one of the opportunities that presents itself to an entrepreneur this legislative cycle. The Washington State Liquor and Cannabis Board (that is right; the name is official as of July 24) has been tasked with:

• Establishing methods used for approval or denial of licenses;
• Establishing minimum qualifications for employees of Common Carriers;
• Addressing safety concerns, including the carrying of firearms;
• Addressing security concerns for products including electronic tracking;
• Establishing possessory limits;
• Establishing fees.

An entrepreneur that is pursuing a CC license should be concerned about the outcome of the rules associated in this instance.

Again, to be effective, your best bet is to lobby the various agencies that may be handling aspects of the rule-making that you would like influenced before the agencies have had a chance to really digest them. You will need to speak to the intent of the law and why your interpretation of the rules meets that intent.

It must be well researched, well written, and sane. Write something that helps the employees of the agency do their job, or at least brings up interesting and salient points. You want your work to be read by the guy that is doing the dirty work and putting the rules document together. If you asking for pie in the sky rules and are not making an argument as to why they meet the legislative intent of the law, there is a high likelihood that your input will be ignored.

Since my last article, the City of Seattle has passed two ordinances and a referendum. The intent of these is to allow for medical cannabis businesses that can be licensed under 2SSB 5052 Section 6 in priority 1 or 2 to continue to do business and to close the businesses that can’t. Similarly, King County Prosecutor Dan Satterberg is cracking down on unlicensed businesses in unincorporated King County. It is clear for commercial medical establishments that they are going to need to become licensed by the state Liquor and Cannabis Board by July 1, 2016 or else life is going to be tougher for them.

The world of cannabis is certainly changing. This is what I predicted would happen when I started this series.

If you are someone who wants to be in the Cannabis Industry, and ultimately survive, you must constantly be anticipating the future, otherwise you are relegating yourself to a life of constant surprise and reaction.

Rule Making Notes
Second Engrossed Second Substitute House Bill 2136

John Davis Version 1

 

Part 1 Intent and Tax Preference Performance Statement (Page 1)

Section 101- Legislative Intent (Page 1)

New Section Effective July 1, 2015

Intent- The intent of this section is to provide the intent statement of the law

Rule-making Notes- None

Part 2 Marijuana Excise Tax, Exemptions, and Distribution of Revenues (Page 3)

Section 201- Liquor and Cannabis Board Administrative Actions and Hearings (Page 3)

Amended Section RCW 69.50.334 Effective July 1, 2015

Intent- The intent of this section is to make changes to LCB actions and hearings due to change in cannabis taxation

Rule-making Notes- Some process changes may need to be done

Section 202- Unpaid tax liabilities (Page 4)

New Section added to RCW 69.50 Effective July 1 2015

Intent- The intent of this section is to ensure that unremitted tax liability follows responsible individuals

Rule-making Notes- None

Section 203- Retail Rules (Page 7)

Amended Section RCW 69.50.357 Effective July 1, 2016

Intent- The intent of the changes in this section is to clean up language especially concerning retail signage

Rule-making Notes- None

Section 204- Marijuana Advertising (Page 8)

Amended Section RCW 69.50.369 Effective July 1, 2015

Intent- The intent of the changes of this section is to do some minor language clean-up

Rule-making Notes- None

Section 205- Marijuana Taxes (Page 9)

Amended Section RCW 69.50.535 Effective July 1, 2015

Intent- The intent of the changes of this section is to change the tax rate to 37% and restructure it and add some reporting requirements.

Rule-making Notes- Reporting requirements change

Section 206- Appropriations (Page 11)

Amended Section RCW 69.50.540 Effective July 1, 2015

Intent- The intent of this section is to appropriate the tax revenue generated by marijuana sales including to localities

Implied Rule-making- None

Section 207- Marijuana Sales Tax Exemptions (Page 207)

New Section added to RCW 82.08 Effective July 1, 2015

Intent- The intent of this section is to provide an exemption for sales of medical cannabis to qualifying patients

Rule-making Notes- None

Section 208- Marijuana Use Tax Exemptions (Page 18)

New Section added to RCW 82.12 Effective July 1, 2015

Intent- The intent of this section is to provide and exemption for use tax on medical cannabis sold to qualifying patients

Rule-making Notes- None

Section 209- Tax Preference Exemptions (Page 19)

New Section Effective July 1, 2015

Intent- The intent of this section is to exempt sections 207 and 208 from Tax Preference provisions.

Rule-making Notes- None

Section 210- Bundled Transactions (Page 19)

New Section added to 69.50 Effective July 1,2015

Intent- The intent of this section is to eliminate “bundled transactions” as a means to evade taxes

Rule-making Notes- None

Section 211- Contingent Sales (Page 21)

New Section added to 69.50 Effective July 1, 2015

Intent- The intent of this section is to eliminate “contingent sales” as a means to evade taxes

Rule-making Notes- None

Part III Marijuana Business: Buffers and License Residency (Page 21)

Section 301- Buffers (Page 21)

Amended RCW 69.50.331 Effective July 1, 2015

Intent- The intent of the changes in this section is to allow for localities to lessen the distance requirements for a cannabis business and research facilities when those entities are not in violation of USC Title 19 §860

Rule-making Notes- None

**Section 302- Referenced but does not exist!!!** Effective date would be July 24, 2015

Part IV Consumption of Marijuana in a Public Place

Section 401- Public Display (Page 27)

Amended RCW 69.50.445 Effective July 1, 2015

Intent- The intent of this section is to clarify the meaning of public display

Rule-making Notes- None

Part V Transportation of Marijuana Products

Section 501- Common Carrier (Page 28)

New Section Added to RCW 69.50 Effective October 1, 2015

Intent- The intent of this section is to allow for third party common carrier transport

Rule-making Notes- None

Section 502- Common Carrier Licensing (Page 29)

New Section added to RCW 69.50 Effective October 1, 2015

Intent- The intent of this section is to establish a licensing procedure for common carriers

Rule-making Notes- The LCB “must adopt rules providing for” licensing of common carriers. The rules must:

1. Establish methods used for approval or denial of license
2. Provide licensed common carrier employee minimum qualifications
3. Address safety concerns including carrying of firearms
4. Address the security of the products being transported including electronic tracking
5. Set fees for licensing

The LCB may adopt maximum possession limits for common carriers