The webinar will be starting soon... How to Get Your Annual State - - PowerPoint PPT Presentation

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How to Get Your Annual State Cannabis Manufacturing License

With Jim Breese CMO of GreenGrowth CPAs

About Us

• 1200+ Prepared Annual Tax Returns for cannabis operators spread across all verticals:
• dispensary, distribution, cultivation, manufacturing, delivery and testing
• 350+ Cannabis Business Clients
• 12+ States that our clients are spread across (CA, OR, WA, CO, MI, OH, OK, DC, HI, AZ, FL, MT)
• 12+ Audit-related and valuation projects in 2018
• Thorough and deep understanding of tax, compliance and assurance related requirements for the cannabis

industry

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Disclaimer

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Agenda

• Key Definitions
• Types of Manufacturing Licenses
• Identify the governing agencies in the Application Process for Cannabis Manufacturing

Businesses

• Licensing Fees
• Outlining the application requirements

○ For applicants engaging in manufacturing activities ○ For all applicants

• Product Standards
• What happens after your state license is issued

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Cannabis Co-Working Space - Los Angeles

Benefits Include:

• Access to 45,000 sqft Building & Equipment
• Fully Licensed, Vertically Integrated Facility
• Turn-Key Cannabis Business Solutions
• Personal Office Space & Storage
• Professional Financial Services

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Who is a Cannabis Manufacturer?

A manufacturer is anyone who makes or packages a prepared cannabis product Cannabis products: edibles, topicals, tinctures, extracts, vape cartridges, capsules and more. Cannabis manufacturers can also package flower and roll and package pre-rolls on their licensed premises.

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Key Definitions

EXTRACTION is the process of separating cannabinoids from cannabis plant material using chemical solvents or mechanical methods INFUSION is the act of creating a cannabis product by incorporating either cannabis extracts or plant material into a recipe PACKAGING AND LABELING is the final step in cannabis product creation in which finished cannabis products are placed into a container and marked for retail sale VOLATILE SOLVENT is a solvent that produces a flammable gas or vapor. Examples include butane, hexane and propane NONVOLATILE SOLVENT is any other type of solvent used during the extraction process.Examples: carbon dioxide, ethanol, water, butter and oil SHARED-USE FACILITY is a manufacturing premises operated by a Type 7, 6 or N licensee in which Type S licensees can conduct manufacturing operations

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Types of Cannabis Manufacturers

Type 6: For manufacturers using non-volatile solvents, such as carbon dioxide, ethanol, water, butter or oil, or performing extraction using mechanical methods. Can also engage in Type N or P activities. Type 7: For manufacturers using volatile solvents, such as butane, hexane, or propane. Can also engage in Type 6, N or P activities. Type N: For manufacturers performing infusion. Can also engage in Type P activities. Type P: For manufacturers only packaging or labeling cannabis products Type S: For manufacturers operating on a registered shared-use facility

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Shared-Use Facilities

A shared-use facility is a manufacturing premises in which businesses take turns utilizing the space and equipment. Primary Licensee is the owner or operator of the shared-use facility Cannabis manufacturers that work within the shared-use facility are Type S Licensees Type S licensees may conduct the following cannabis manufacturing activities:

• Infusions
• Packaging and labeling
• Extractions with butter or food grade-oils

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Licensing Agency: Who is in Charge?

• Three (3) CA government agencies:

○ California Department of Food and Agriculture (CDFA): CalCannabis ○ California Department of Public Health (CDPH): Manufactured Cannabis Safety Branch ○ Bureau of Cannabis Control (BCC)

• Make sure you have be granted local approval before applying for a state license

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Licensing Fees

Application fee is $1,000 for all manufacturing types except Type S, which requires a fee of $500 Tier Type: Gross Revenue ($) Fee per License ➔ Tier I: Up to $100,000 $2,000 ➔ Tier II: More than $100,000 and less or equal to $500,000 $7,500 ➔ Tier III: More than $500,000 and less or equal to $1.5 million $15,000 ➔ Tier IV: More than $1.5 million and less or equal to $3 million $25,000 ➔ Tier V: More than $3 million and less or equal to $5 million $35,000 ➔ TIer VI: More than $5 million and less or equal to $10 million $50,000 ➔ Tier VII: More than $10 million $75,000

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

All application and licensing fees are nonrefundable!

CDPH’s General Requirements

• Medicinal (M), Adult Use (A) or both
• Owner(s) Information
• Property Owner’s Statement
• Premises Diagram
• Local Authorization (optional)
• Business Formation Documents
• Limited Waiver of Sovereign Immunity*
• California Environmental Quality Act (CEQA)

Compliance

• Seller’s Permit

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

• Closed-Loop System Certificate (if applicable)
• Labor Peace Agreement
• Financial Information Form
• Surety Bond
• Live Scans
• Operating Procedures

○ Transportation ○ Inventory ○ Quality Control ○ Security ○ Waste Management The online Manufacturing Cannabis Licensing System (MCLS) and other resources can be found at on the CDPH website.

*This only applies if the applicant is a federally recognized tribe or other sovereign entity

Local Authorization

As with all state licensing, it is important to ensure that your business has secured local approval before attempting to attain a state license. You can submit local authorization to CDPH to ease the state licensing process

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Closed-Loop System Certificate

This is for extractions using CO2, volatile solvents, chlorofluorocarbon, hydrocarbon, or other fluorinated gas that are processed in a closed-loop system during the extraction process. It applies to both volatile and nonvolatile solvents. Certification by a California-licensed engineer is required for each extraction system, and must be completed following a review of the equipment installed on the premises. The certificate should include:

• The serial number of the extraction unit
• Confirmation that the unit was commercially manufactured, safe for use with the intended solvent, and

built to codes of recognized and generally accepted good engineering practices

• The signature and stamp of the engineer

Documentation showing the extraction system has been approved for use by the local jurisdiction’s fire

• department. Approval from the fire department is also required for licensees conducting ethanol extraction.

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Operating Procedures

Standard Operation Procedures (SOPs) that are needed:

• Inventory Control Plan
• Transportation Plan
• Quality Control Plan
• Security Plan
• Waste Management Plan

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Requirements for Shared Facilities

The Primary Licensee must first obtain a Type 7, 6 or N (not Type P) cannabis manufacturing license and register their space as a Shared-Use Facility. Once the facility registration is approved, cannabis manufacturers wishing to utilize the space will apply for a Type S license. The following conditions apply:

• Licenses are only available to Type S applicants with an estimate gross revenue of less than $1 million
• Activities are limited to infusion, packaging/labeling, and certain extractions using butter or food-grade
• ils used for infusion (see above).
• The shared-use facility must meet all requirements outlined in the cannabis manufacturing regulations,

and include secured storage for the Type S licensee’s cannabis and cannabis products.

• All responsibility for the maintenance of commonly used equipment/services is allocated between the

Primary Licensee and Type S licensee. Both parties may assume liability for any violations.

• The Primary Licensee will assign a designated area to be used as shared space. An occupancy

schedule, outlining the days and/or times that the space will be used by Type S licensees, must be posted.

• A signed agreement between the Primary Licensee and Type S applicant must be submitted to the
• CDPH. Only one licensee can utilize the space at a time!

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Owner’s Information

Owners can be defined as individuals, business entities, or other groups with an aggregate ownership interest of 20% or more in the business applying for a license. Chief executive officer (CEO) or member of the board of a non-profit, or an individual who will participate in the direction, control, or management of the business, as outlined in BPC, Division 10, Sections 26001 al. Full disclosure necessary!

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Property Owner’s Statement

Leasing the property the Landlord will have to provide documentation

• Demonstrating that the applicant has permission to conduct specific

commercial cannabis activities on the property. Lease Agreements and/or other agreements regarding the lease should be included. If the applicant is the landowner...

• Applicant will have to provide a title or deed of the property,

demonstrating the applicants ownership.

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

The Premises Diagram

• Made to scale
• APN and parcel boundaries
• Premises boundaries/dimensions
• Perimeter dimensions of all rooms
• Entrances/exits
• Common areas
• Interior partitions, windows and doors
• Areas where commercial cannabis

activity will be conducted (including extraction, infusion, packaging/labeling, loading/unloading, and transportation)

• Limited access areas

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

• Waste disposal areas
• Numbering and locations of all

cameras

• Label any neighboring licensees and
• ther businesses on the property
• Shared-Use Facilities: indicate the

designated area to be used by the Type S applicant and detail where the applicant will store its cannabis, cannabis concentrates, and cannabis

• products. Identify any shared

spaces/equipment.

Business Formation Documents

• Sole proprietor: Fictitious Business Name (DBA) form filed with local business permit
• ffice along with appropriate tax forms
• LLC, Limited Partnership, General Partnership, or Corporation

○ Articles of Incorporation, Statement of Information, Certificate of Stock, Stock Ledger, Organizational charts, Bylaws, List of Board Members, Partnership Agreements, Statement of Partnership Authority, Certificates of Limited Partnership, and Operating Agreements.

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Other Business Types

• Trusts must provide a Certificate of Trust establishing Trustee Authority.
• Foreign Corporation or Foreign Limited Liability Company: Statement and

Designation by Foreign Professional Corporation, Certificate of Qualification, Certificate of Registration, or Certificate of Status issued by the California Secretary of State.

• NOTE: The Secretary of State maintains a portal called “cannabizfile”

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

CEQA Compliance

• Documentation that demonstrates exemption or compliance with CEQA

○ Notice of Determination ○ Notice of Exemption

• For this purpose, the BCC has uploaded the following forms to its portal:

○ CEQA Project-Specific Information Form ○ CEQA Exemption Petition Form

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Additional Requirements

• CDTFA’s Seller’s Permit: apply online (https://onlineservices.cdtfa.ca.gov)
• Labor Peace Agreement: if the applicant has employed 20 or more employees
• Surety Bond: submit a $5,000 surety bond to the state
• Financial Information Form: a list of all investments, loans, funds, and gifts

associated with the cannabis business

• Live Scans: background checks (https://oag.ca.gov/fingerprints/locations)
• Compliance with Compassionate Use Act (if applicable): approval from local agency

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Product Standards: Rules for Edibles

Here are some additional rules specific to cannabis production by manufacturers, as listed under §40300 of the California Code of Regulations:

• Products cannot be infused with nicotine or alcohol or have added caffeine.
• Edible products cannot be shaped like a human, animal, insect, or fruit.
• Potentially-hazardous foods, such as meat and seafood, and other products requiring

refrigeration below 41℉, are prohibited for sale as cannabis products.

• Juice and dried meat are allowed (must accord with §40272).
• All dairy products are prohibited, except for butter purchased from a licensed milk products

plant or retail location for the purposes of infusion

• Commercially available products are allowed to be used for infusion as long as they are

rendered unrecognizable through processing (and the original product is not listed on the cannabis product’s label).

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Product Standards: THC Limits

The following limits apply to all cannabis products:

• Edible products are limited to a maximum of 10 mg of THC per serving

and 100 mg of THC per package.

• Other cannabis products, such as tinctures, capsules and topicals, are

limited to a maximum of 1,000 mg per package for the adult-use market and 2,000 mg of THC per package for the medicinal-use market.

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

After your State License is Issued

• Track and Trace Training

○ Account manager has ten (10) business days to register for CalCannabis’ California Cannabis Track and Trace Training upon receiving notice that the application has been received by the CDPH ○ To gain access to the track-and-trace system the licensee’s designated account manager must have completed, and provided proof of completion, of the track-and-trace training prescribed by the department ○ Obtain UID tags from the Department of Food and Agriculture (CDFA)

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

Key Takeaways

• There are five types of Manufacturing

Licenses: 6, 7, N, P and S

• Licensing Fees are scaled based on the

size of your operation

• Closed-Loop Certificate is required from

a licensed Californian engineer

• Shared-Use Facilities required a Primary

Licensee (Type 6, 7 or N)

• Certain ingredients for infusion are

limited

• Ask a specialist for guidance when

applying for local and state approval

The information contained in this webinar presentation is meant for guidance purposes only and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.