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Getting Ahead of the Curve for Compliance in California

Cannabis businesses in California are starting to experience more and more regulatory hurdles. With cities and counties continuing to develop and publish new regulatory code and marijuana statutes, the landscape for compliance in California is emerging. The number of regulatory agencies a cannabis business will need to contend with is overwhelming.

Operational marijuana business licenses in California will face:

Federal Compliance

  • Internal Revenue Service (IRS)
  • Occupational Safety and Health Administration (OSHA)
  • Department of Agriculture
  • Department of Labor
  • Environmental Protection Agency (EPA)
  • Consumer Protection Act

State Compliance

MMRSA and BMMR, includes six regulatory agencies:

  • California Department of Food and Agriculture
  • California Department of Pesticide Regulation
  • California State Department of Public Health
  • Department of Fish and Wildlife
  • State Water Resources Control Board
  • California Medical Board

County/City Compliance

Each city and county will control licensing at the local level, which will allow local agencies to ban and/or restrict licensing at the local level. City and county ordinances, rules, and requirements will need to be taken into consideration in terms of overall compliance and standard operating procedures in addition to federal and state regulations.

Regulator’s Perspective

MGO CPA and Advisors is working directly with city and county regulatory authorities in California to help manage the state’s Medical Marijuana Tax (MMT) initiatives. They will perform financial assessments and audits on cannabis operations.

“As cities and countries across the State of California face increasing cost pressure, many government executives are planning to turn to Medical Marijuana businesses as a source of additional tax revenue. At a minimum, this strategy is the logical choice for meeting the unique cost burden driven directly by the marijuana industry. At a maximum, taxation has the potential to ease cost pressures in other areas of the budget,” said Scott P. Johnson, the State and Local Government Advisory Services Partner at MGO CPA and Advisors.

“Creating a regulatory tax system is critical not only to promote fiscal strategies but it can also be helpful to provide marijuana businesses to comply with safety and control policies related to the product and its distribution,” said Johnson.

As more agencies get involved, the risk increases to cannabis businesses for fines, penalties, and administrative actions. If state and local municipalities share a compliance notification process, the state or local infraction could lead to multiple agencies levying fines and penalties. Unfortunately, this is already a common occurrence in Colorado. When the State of Colorado Marijuana Enforcement Division levies fines and penalties, many local city/county agencies will often duplicate the violation at the local level. This ‘waterfall’ penalty effect can be extremely detrimental to an upstart business.

How to Prepare for Compliance in California

How do cannabis businesses in California get ready? Know in advance the regulatory impacts for your business license types and various ownership rules. Limits or restrictions on types of vertical integration will have an impact on most cannabis business license types. Get ahead of the regulatory curve and start with a compliance-centric, standard operating procedure-driven business model. Success in California will start with regulatory and financial compliance.

Steve OwensSteve Owens

Steve Owens

About the Author:
Steve Owens, MBA, is the CEO and Founder of Adherence Compliance and is considered a thought leader in regulatory and financial marijuana compliance. He has written extensively in the areas of operational compliance and has more than four (4) years of marijuana regulatory and financial compliance expertise. Contact 720-616-3900 or visit www.adherence-corp.com for more information.

This Post Has 3 Comments
  1. Good article Steve. We are on the forefront of this emerging industry and are here to help regulators and businesses in leveling the cannabis business field with clear and fair regulations and modeling best business practices” in the industry.

  2. There are Actually 11 agencies involved at the California State Level, not 6.
    The 11 agencies involved are as follows:
    1. Department of Food and Agriculture -Medical Cannabis Cultivation program
    2. Department of Public Health
    3. Department of Consumer Affairs- Bureau of Medical marijuana Regulations
    4. State Water Resources Control Board & the Regional Water Quality Control Boards
    5. Department of Pesticide Regulation
    6. The Medical Board of California
    7. Department of Fish and Wildlife
    8. State Board of Equalization
    9. Department of Industrial Relations- Division of Occupational Safety and Health
    10. Department of Justice
    11. State Board of Forestry and Fire Protection (“Cal Fire”)

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