SALES AND USE TAX DOES NOT APPLY TO MEDICINAL CANNABIS WITH COUNTY ID CARD AND GOVERNMENT IDENTIFICATION


The amendment to Section 34011 of the Revenue and Taxation Code provides that the sales and use tax taxes imposed under SB 94, Trailer Bill which enacted the “Medicinal and Adult-Use Cannabis Regulation and Safety Act” does not apply to retail sales of medicinal cannabis, medicinal cannabis concentrate, edible medicinal cannabis products, or topical cannabis when a qualified patient or primary caregiver for a qualified patient provides their: (1) County Identification Card issued under Section 11362.71 of the Health and Safety Code; and (2) a valid government-issued identification card.

STATEWIDE 600-FOOT RADIUS RESTRICTION FROM SENSITIVE USES

SB 94, Trailer Bill enacting the “Medicinal and Adult-Use Cannabis Regulation and Safety Act” (MAUCRSA) amends Business and Professions Code § 26054 providing that a premises licensed under MAUCRSA shall not be located within a 600-foot radius of a school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center that is in existence at the time the license is issued.

The MAUCRSA defines “Youth Center” to mean the same meaning as in Health and Safety Code Section 11353.1, which defines “Youth Center” as any public or private facility that is primarily used as opposed to recreational or social activities for minors, including, but not limited to, private youth of membership organizations or clubs, social service teenage club facilities, video arcades, or similar of amusement park facilities.

STATEWIDE CULTIVATION TAX ON FLOWERS AND LEAVES EFFECTIVE JANUARY 1, 2018

SB 94, Trailer Bill the “Medicinal and Adult-Use Cannabis Regulation and Safety Act” amended Revenue and Taxation Code Section 34012 so that effective January 1, 2018, there is a cultivation tax imposed on the cultivators on all harvested cannabis that enters the commercial market.

The tax shall be due after the marijuana cannabis is harvested and enters the commercial market.

(1)       The tax for cannabis flowers shall be nine dollars and twenty-five cents ($9.25) per dry-weight ounce.

(2)       The tax for cannabis leaves shall be set at two dollars and seventy-five cents ($2.75) per dry-weight ounce.

The State Board of Equalization may adjust the tax rate for cannabis leaves annually to reflect fluctuations in the relative price of cannabis flowers to cannabis leaves.

The cultivator is responsible for the payment of the cultivation tax.  The distributor will collect the cultivation tax from the cultivator upon entry of the cannabis into the commercial market. This does not apply when harvested cannabis is sent directly to a manufacturer.  In that case, the manufacturer will collect the cultivation tax from the cultivator on the first sale or transfer of unprocessed cannabis by the cultivator to the manufacturer.  The manufacturer is responsible for remittance of the cultivation tax collected on the cannabis product sold or transferred to a Distributor for quality assurance, inspection, and testing.  All cultivation tax applicable to a unique identifier shall be paid upon the first sale or transfer of cannabis or cannabis product with an associated unique identifier.

ON-SITE CONSUMPTION OF CANNABIS ALLOWED WITH LOCAL JURISDICTION APPROVAL

Business and Professions Code 26200 of the “Medicinal and Adult-Use Cannabis Regulation and Safety Act” (MAUCRSA) provides that a local jurisdiction may allow for the smoking, vaporizing, and ingesting of marijuana cannabis or marijuana cannabis products on the premises of a retailer or microbusiness licensed by the state if all of the following are met:

(1)        Access to the area where marijuana cannabis consumption is allowed is restricted to persons 21 years of age and older; older.

(2)        Marijuana Cannabis consumption is not visible from any public place or non-age restricted area; and nonage-restricted area.

(3)        Sale or consumption of alcohol or tobacco is not allowed on the premises.

SB-94 CANNABIS MEDICINAL AND ADULT USE TRAILER BILL PASSES SENATE

SB-94, the Cannabis Trailer Bill attached to the Budget passed the Senate with a Super-Majority Vote on June 15, 2017.  The Trailer Bill merges the “The Medical Cannabis Regulation and Safety Act” (MCRSA) and “The Control, Regulate and Tax Adult Use of Marijuana Act” (AUMA) into one set of comprehensive regulations known as the:

MEDICINAL AND ADULT-USE CANNABIS REGULATION AND SAFETY ACT (MAUCRSA).

The purpose and intent of the Trailer Bill is to establish a comprehensive system to control and regulate the cultivation, distribution, transport, storage, manufacturing, processing and sale of both Medicinal cannabis and Medicinal cannabis products for patients with a valid physicians recommendation and Adult-use Cannabis and Adult-use Cannabis products for adults 21 years of age and over.

SB 94 takes effect immediately as a bill providing for appropriations related to the California Budget Bill.

CITY OF LOS ANGELES TO ISSUE CERTIFICATES OF COMPLIANCE IN FOUR PHASES

The City of Los Angeles proposes to issue Certificates of Compliance as to the Operational Requirements set forth in the City of Los Angeles proposed Limited Immunity Ordinance to be used for submission by an Applicant for a State of California Commercial Cannabis Activity License.

The City of Los Angeles Cannabis Department will issue Certificates of Compliance in four phases: (1) Proposition M Priority eligible applicants, (2) Non-Retail Registry eligible applicants, (3) a restricted phase in which the number of Certificates of Compliance issued to General Public applicants may not exceed the number of Certificates of Compliance issued to Social Equity Program applicants, and (4) an unrestricted phase that commences after the Social Equity Program has been fully funded and implemented as determined by the City Council. In determining the issuance of Certificates of Compliance after Proposition M Priority and Non-Retail Registry processing, the Department will consider the equitable dispersion of Businesses throughout the City of Los Angeles prior to the issuance of a Certificate of Compliance to the extent practicable.

CITY OF LOS ANGELES PRE-ICO DISPENSARY PRIORITY LICENSING

PROPOSED ORDINANCE “PROPOSITION M PRIORITY PROCESSING”

The proposed City of Los Angeles Commercial Cannabis Activity Ordinance defines “EMMD” to mean an Existing Medical Marijuana Dispensary, as defined by Proposition M, for the purposes of Proposition M Priority processing.

Applications will be accepted by the City of Los Angeles Cannabis Department for the first 60 days from when applications are first made available to the public. After 5 p.m. Pacific Time on the 60th day, the Department will close the Proposition M Priority Processing window permanently. Applications under the Proposition M Priority Processing will only be allowed to apply for Retailer Commercial Cannabis Activity, which may include on-site cultivation as allowable under Proposition D. The size of the canopy for on-site cultivation may not exceed the size of the EMMD’s existing canopy or square footage of building space as documented by a lease or Certificate of Occupancy prior to January 1, 2017. All on-site cultivation will be required to end operations by Dec. 31, 2024 if the EMMD’s premises is within a land use designation that does not allow for Indoor Cultivation Commercial Cannabis Activity as defined by the City of Los Angeles. Any applications received after 60 days will be deemed new applications and require eligibility under a separate processing, subject to all requirements for new Commercial Cannabis Activity

CITY OF LOS ANGELES PROPOSES COMMERCIAL CANNABIS ACTIVITY ORDINANCE

Proposed “Medical” and “Adult Use” Commercial Cannabis Activity in the City of Los Angeles 

The proposed City of Los Angeles Commercial Cannabis Location Restriction Ordinance, drafted by the Department of City Planning, would establish location restrictions and a limited immunity from enforcement of specified City prohibitions relating to various types of medical and nonmedical commercial cannabis activities. The location restrictions address zoning and distancing requirements to protect sensitive sites and avoid over-concentration of commercial cannabis activity.

Kev Provisions of the City’s Commercial Cannabis Location Restriction Ordinance

The Commercial Cannabis Location Restriction Ordinance is only one component of a broader legislative approach to commercial cannabis in the City. This proposed ordinance, drafted by the Department of City Planning (DCP), is limited in scope to restricting the location of various types of commercial cannabis activity. Additional legislation is being developed by the City to, among other matters, establish a Cannabis Commission and operating and additional public safety restrictions for commercial cannabis activity.

Key elements of the ordinance:

  1. Identifies zones and required distances from sensitive sites for specified commercial cannabis activity.
  2. Provides for limited specified commercial cannabis activity to assert limited immunity from enforcement of specified City prohibitions so long as the activity is conducted by persons operating under a State license and Certificate of Compliance issued by the City’s Cannabis Commission, and meets the location restrictions in the ordinance and additional regulations.

Indoor Cultivation will require 42 percent renewable energy source.

Proposed regulations for the Medical Cannabis Cultivation Program require that indoor cultivators adhere to environmental protection standards which mandate the use of renewable energy.

California Code of Regulations Section 8315

Additional Environmental Protection Measure for Indoor Licenses.

Indoor license types of all sizes shall ensure that electrical power used for commercial cannabis activity shall be provided by any combination of the following:

(a) On-grid power with 42 percent renewable

(b) Onsite zero net energy renewable source providing 42 percent of

(c) Purchase of carbon offsets for any portion of power above 58 percent not from renewable

(d) Demonstration that the equipment to be used would be 42 percent more energy efficient than standard          equipment, using 2014 as the baseline year for such standard

Definitions under the “Medicinal and Adult-Use Cannabis Regulation and Safety Act”

Proposed Cannabis Regulation Trailer Bill, April 4, 2017

Definitions under the “Medicinal and Adult-Use Cannabis Regulation and Safety Act”

Business and Professions Code § 26001

(a)       “A-license” means a state license issued under this division for cannabis or cannabis products that are intended for adults 21 years of age and over who do not possess a physician’s recommendation.

(b)        “A-licensee” means any person or entity holding a license under this division for cannabis or cannabis products that are intended for adults 21 years of age and over who do not possess a physician’s recommendation.

(c)        “Applicant” means: an owner applying for a state license pursuant to this division.

(d)       “Batch” means a specific quantity of homogeneous medicinal cannabis or medicinal cannabis product and is one of the following types:

(1)        “Harvest batch” means a specifically identified quantity of dried flower or trim, leaves, and other cannabis plant matter that is uniform in strain, harvested at the same time, and, if applicable, cultivated using the same pesticides and other agricultural chemicals, and harvested at the same time.

(2)        “Manufactured cannabis batch” means either:

(A)       An amount of cannabis concentrate or extract produced in one production cycle using the same extraction methods and standard operating procedures, and is from the same harvest batch.

(B)       An amount of a type of manufactured cannabis produced in one production cycle using the same formulation and standard operating procedures.

(e)        “Bureau” means the Bureau of Cannabis Control within the Department of Consumer Affairs, formerly named the Bureau of Medical Cannabis Regulation and Bureau of Medical  Regulation.

(f)        “Cannabis” means all parts of the plant Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. “Cannabis” also means the separated resin, whether crude or purified, obtained from cannabis. “Cannabis” also means  as defined by Section 11018 of the Health and Safety Code as enacted by Chapter 1407 of the Statutes of 1972.

“Cannabis” does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination. For the purpose of this chapter, “cannabis” does not mean “industrial hemp” as defined by Section 81000 of the Food and Agricultural Code or Section 11018.5 of the Health and Safety Code.

(g)        “Cannabis accessories” has the same meaning as  accessories in Section 11018.2 of the Health and Safety Code.

(h)        Cannabis concentrate means manufactured cannabis that has undergone a process to concentrate one or more active cannabinoids, thereby increasing the product’s potency. Resin from granular trichomes, used in manufacturing, is a concentrate for purposes of this chapter. Residue from a cannabis plant that is collected as a byproduct of the cultivation or cleaning process that contains granular trichomes is not a concentrate for purposes of this chapter. A cannabis concentrate is not considered food, as defined by Section 109935 of the Health and Safety Code, or a drug, as defined by Section 109925 of the Health and Safety Code.

(i)         “Cannabis products” has the same meaning as products in Section 11018.1 of the Health and Safety Code.

(j)         “Child resistant” means designed or constructed to be significantly difficult for children under five years of age to open, and not difficult for normal adults to use properly.

(k)        “Commercial  cannabis activity” includes the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, labeling, transportation, distribution, delivery or sale of  cannabis and cannabis products as provided for in this division.

(l)         “Cultivation” means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis.

(m)       “Cultivation site” means a location where cannabis is planted, grown, harvested, dried, cured, graded, or trimmed, or that does all or any combination of those activities.

(n)        “Customer” means a natural person 21 years of age or over.

(o)        “Day care center” shall have the same meaning as in Section 1596. 76 of the Health and Safety Code.

(p)        “Delivery” means the commercial transfer of  cannabis or  cannabis products to a customer. “Delivery” also includes the use by a retailer of any technology platform owned and controlled by the retailer.

(q)        “Director” means the Director of the Department of Consumer Affair.

(r)        “Distribution” means the procurement, sale, and transport of  cannabis and  cannabis products between entities licensed pursuant to this division.

(s)        “Dried flower” means all dead cannabis that has been harvested, dried, cured, or otherwise processed, excluding leaves and stems.

(t)        “Edible cannabis product” means manufactured cannabis that is intended to be used, in whole or in part, for human consumption, including, but not limited to, chewing gum, but excluding products set forth in Division 15 (commencing with Section 32501) of the Food and Agricultural Code. An edible medical cannabis product is not considered food as defined by Section 109935 of the Health and Safety Code or a drug as defined by Section 109925 of the Health and Safety Code.

(u)        “Fund” means the Cannabis Control Fund established pursuant to Section 26210 of the Business & Professions Code.

(v)        “Kind” means applicable type or designation regarding a particular  cannabis variant or  cannabis product type, including, but not limited to, strain name or other grower trademark, or growing area designation.

(w)       “Labeling” means any label or other written, printed, or graphic matter upon a medical cannabis product, or upon its container or wrapper, or that accompanies any medical cannabis product.

(x)        “License” means a state license issued under this division and includes both an A-license and an M-license.

(y)        “Licensee” means any person or entity holding a license under this division, regardless it is an A-license and an M-license.

(z)        “Licensing authority” means the state agency responsible for the issuance, renewal, or reinstatement of the license, or the state agency authorized to take disciplinary action against the Licensee.

(aa)      “Live plants” means living cannabis flowers and plants, including seeds, immature plants, and vegetative stage plants.

(bb)      “Local jurisdiction” means a city, county, or city and county.

(cc)      “Lot” means a batch or a specifically identified portion of a batch.

(dd)     “M-license” means a state license issued under this division for cannabis or cannabis products that are intended for use solely by an individual who possesses a physician’s recommendation.

(ee)      “M-licensee” means any person or entity holding a license under this division for cannabis or cannabis products that are intended for use solely by an individual who possesses a physician’s recommendation.

(ff)       “Manufacture” means to compound, blend, extract, infuse, or otherwise make or prepare a  cannabis product.

(gg)      “Manufacturer” means a person that conducts the production, preparation, propagation, or compounding of  cannabis or  cannabis products either directly or indirectly or by extraction methods, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis at a fixed location that packages or repackages  cannabis or  cannabis products or labels or re-labels its container, that holds a state license pursuant to this division.

(hh)      Deleted.

(ii)        Deleted.

(jj)        Deleted.

(kk)      “Medicinal cannabis,” “medicinal cannabis product,” means a product containing cannabis, including, but not limited to, concentrates and extractions, intended to be sold for use by medical cannabis patients in California pursuant to the Compassionate Use Act of 1996 (Proposition 215), found at Section 11362.5 of the Health and Safety Code. For the purposes of this chapter, “medical cannabis” does not include “industrial hemp” as defined by Section 81000 of the Food and Agricultural Code or Section 11018.5 of the Health and Safety Code.

(ll)        “Nursery” means a licensee that produces only clones, immature plants, seeds, and other agricultural products used specifically for the planting, propagation, and cultivation of  cannabis.

(mm)    “Operation” means any act for which licensure is required under the provisions of this division, or any commercial transfer of  cannabis or  cannabis products.

(nn)      “Owner” means any of the following:

(1)        All persons with an aggregate ownership interest of 20 percent or more in the person applying for a license, unless such interest is solely a security, lien, or encumbrance;

(2)        The chief executive officer of an entity or nonprofit;

(3)        All members of the board of directors of a nonprofit; or

(4)        An individual that will be participating in the direction, control, or management of the licensed commercial cannabis business.

(oo)      “Package” means any container or receptacle used for holding  cannabis or  cannabis products.

(pp)      “Person” includes any individual, firm, co-partnership, joint venture, association, corporation, Limited Liability Company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, and the plural as well as the singular.

(qq)      “Physician’s recommendation” means a recommendation that a patient use cannabis provided in accordance with Section 11362.5 of the Health and Safety Code.

(rr)       “Purchaser” means the customer who is engaged in a transaction with a licensee for purposes of obtaining  cannabis or  cannabis products.

(ss)       “Sell,” “sale,” and “to sell” include any transaction whereby, for any consideration, title to  cannabis is transferred from one person to another, and includes the delivery of  cannabis or  cannabis products pursuant to an order placed for the purchase of the same and soliciting or receiving an order for the same, but does not include the return of  cannabis or  cannabis products by a licensee to the licensee from whom such  cannabis or  cannabis product was purchased.

(tt)       “Testing laboratory” means a laboratory, facility, or entity in the state, that offers or performs tests of cannabis or cannabis products, and that is both of the following:

(1)        Accredited by an accrediting body that is independent from all other persons involved in commercial cannabis activity in the state.

(2)        Licensed by the Bureau of Cannabis Control.

(uu)      “Topical cannabis” means a product intended for external use. A topical cannabis product is not considered a drug as defined by Section 109925 of the Health and Safety Code.

(vv)      “Unique identifier” means an alphanumeric code or designation used for reference to cannabis associated with a license.

(ww)      “Youth center” shall have the same meaning as in Section 11353.1 of the Health and Safety Code.