Being part of the cannabis business can pose many questions regarding its legality, especially since every state has its own posture. These are some crucial facts and data you can’t miss regarding federal cannabis legalization if you are a vendor in the cannabis business.
What Is Legal Where
If you are part or want to be part of the cannabis business, it is vital that you know what is legal where.
Currently, eighteen states, two territories, and the District of Columbia have legalized small amounts of cannabis (marijuana) for adult recreational use. To have a clearer perspective of what programs have been put in place in the United States, here is a map we created with the state of cannabis legalization state by state:
The history of cannabis legalization started in 2012 when Colorado and Washington approved adult-use recreational marijuana measures. Two years later, in 2014, Alaska, Oregon, and the District of Columbia followed suit. In 2015, Ohio eliminated a ballot measure that addressed the commercial production and sale of recreational marijuana. On November 8, 2016, voters approved adult-use recreational marijuana in California, Maine, Massachusetts, and Nevada.
In 2018, Michigan voters approved “Proposal 1” to legalize, regulate, and tax marijuana. That same year, Vermont became the first state to legalize marijuana for adult use through the legislative process.
In May 2019, the Illinois General Assembly passed the Cannabis Regulation and Tax Act, and the Governor signed the legislation in June. New Jersey (AB 21) recently legalized specific personal use while removing marijuana as a schedule I drug.
Bills to repeal voter initiatives approving adult-use legal marijuana were introduced in 2018 but did not pass in Washington. On February 8, 2021, Circuit Judge Christina Klinger ruled that South Dakota’s Constitutional Amendment A was unconstitutional.
In total, twenty-seven states and the District of Columbia have decriminalized small amounts of marijuana, meaning that when someone possesses small, personal-consumption amounts, he or she can be charged with a civil or local infraction, but not with a state crime (or lower misdemeanor with no jail time).
Here is a chronological list of the decriminalization enactments from 2016 till 2020:
- In 2016, the Maryland General Assembly overrode the Governor’s veto of a 2015 measure that decriminalized marijuana paraphernalia and imposed civil fines of $500 for public cannabis use.
- Also, in 2016, the Illinois General Assembly enacted, and the Governor signed legislation that decriminalized 10 grams or less of marijuana.
- In 2017, New Hampshire became the last state to decriminalize small amounts of marijuana.
- In 2019, New York enacted Senate Bill 6589, which made possession of less than one ounce a violation punishable by a $200.00 fine.
- In 2019, North Dakota passed House Bill 1050. August 1, 2019, the bill goes into effect and reclassifies possession of up to half an ounce of marijuana as an infraction that carries a maximum fine of $1000.
- In 2019, Hawaii passed House Bill 1383, which authorized that possession of three grams or less of marijuana will be punishable by a $130 fine.
- New Mexico also passed HB 323 in 2019, and it went into effect on July 1, 2019. The penalty for possessing up to half an ounce of marijuana is a $50 civil fine instead of potential jail time.
- In 2020, Delaware (S 45) made the possession, use, or consumption of a personal-use quantity of marijuana a civil violation for juveniles.
- New Jersey revised consequences for underage possession or consumption of various forms of cannabis in 2020.
- Also, in 2020, Virginia decriminalized simple marijuana possession. It provided a civil penalty if such a person is smoking, consuming, or otherwise ingesting marijuana in a public place at the time of the violation.
How to Get a Cannabis License
Many businesses need various licensing, permits, and registrations to function. Since the cannabis industry has several regulations, licensing canna-businesses can be particularly difficult.
The fact is compliance requirements vary from state to state, and they can also change depending on every business category (cultivation vs. retail, for example) and which city or county you’re planning to operate in.
To have a fully legal operation, it is essential to meet all necessary business licenses, permits, registration, and other requirements. Here are some licensing basics:
Legal Requirements Every Vendor Must Meet
No matter the type of business, there are basic legal requirements you will need to follow. They may vary depending on your location and industry, but here are some standard conditions.
Business formation: Forming an LLC with the state is vital because it will protect your assets from any debts and liabilities that could arise from your company.
Tax ID number: This number is your federal tax identification number, also called an EIN or employer identification number. The IRS or Internal Revenue Service uses it to identify your business for anything related to taxes.
General Business License: This license, which must be renewed annually, allows you to legally operate in your city or county.
DBA Filing: Your DBA or Doing Business As allows you to conduct business using a different name from the name you include in any of your incorporation papers.
Sales Tax Permit: This is for physical or digital products or services or online retailers. If you are required to collect state and local sales taxes, this permit is required.
Permits: Different businesses need different types of licenses. For example, you’ll need one from the health department if your business requires food preparation or manipulation. Companies may also need permits for signage, zoning, and land use.
It is essential to consider that a home-based or online business will demand the same level of compliance as a traditional one.
How to Get a Cannabis Business License
Business license requirements for cannabis vary significantly from state to state. For example, some states hold an open application period and give out many licenses; others are more restrictive and limit the number of permits.
Restrictions related to residency and background are also in place. A good example is that any citizen with previous convictions may not be eligible for a license.
Which Department Issues Licenses
The Secretary of State office is, in some states, the entity in charge of receiving each organization’s paperwork; in others, you will need to work with local licensing agencies in many cases. Getting to know what specific department, bureau, or agency you will have to approach to get a license is critical. A good example is California, where business owners can apply in one of three ways:
The Bureau of Cannabis Control: This bureau is in charge of regulating commercial cannabis licenses for medical and adult-use cannabis in California. Their licensing is specific to certain businesses like retailers, distributors, testing labs, micro-businesses, among others.
CalCannabis Cultivation Licensing: It is a division of the California Department of Food and Agriculture (CDFA) and is responsible for licensing businesses
Manufactured Cannabis Safety Branch: The California Department of Public Health (CDPH) division regulates the cannabis manufacturing business.
Business Categories and How Licensing Differs for Each
Any cannabis business is regulated based on various factors. One of them is the business category: cultivator, seller, manufacturer, or investor. Here are some examples of how licensing differs for each type:
Cultivation: Growing cannabis is heavily regulated. That’s why a cannabis business will require a significant initial investment, horticultural knowledge, and a solid site plan review.
Retail: For retailers, some states require that you provide good products, build security in place, and they can also limit the amount of product sold to one individual, and put in place restrictions on your pricing.
Edibles: When manufacturing edibles, some states will require that you cook and maintain your product in a commercial kitchen. You may need to produce the cannabis butter and oils used in your product on-site.
Investors: For those who want to invest in cannabis businesses, it is essential to consider that they may need to follow specific regulatory and statutory provisions.
Employees and Licensing
Employees working for a cannabis business also have licensing requirements. Some states demand that any employee must be authorized to work for a cannabis-related company, in addition to complying with standard state requirements concerning employees that work in any business.
An example of specific requirements in Colorado where there are two types of licenses which, as explained by Colorado.gov, are:
Key employee: This license is necessary for any employee making operational or management decisions directly impacting a business.
Support employee: This type of license is required for any employee who works within the business but is not making operational decisions.
Knowing Your Cannabis Licensing Regulations is Key
Starting a cannabis business can be challenging because the industry is highly regulated. It requires planning, knowledge, and preparation to understand legal requirements. Get acquainted with the rules, regulations, and conditions at every level.
After your business is established, you can expect ongoing legal obligations, such as licensing renewals and changes to existing rules and regulations, so be prepared to keep updated with every new enactment or vote passed by the state every year. This is, without a doubt, the only way to keep your business running without ever having to worry about a legal predicament.