Recreational Marijuana Business Licensing


California voters approved Proposition 64 – or the Adult Use of Marijuana Act (AUMA) – on November 8, 2016. This historic legislation legalizes growing, possessing, and selling marijuana for recreational purposes. The law is straightforward for adults over 21 years of age, who can possess up to one ounce of marijuana and cultivate up to six plants for their personal use. But when it comes to operating a recreational cannabis business, AUMA is far from simple. In fact, it will be virtually impossible to complete the recreational marijuana business licensing process without the assistance of an experienced California marijuana business lawyer.

Attorney Jessica McElfresh has helped numerous marijuana businesses through the licensing process. If you have questions about your recreational cannabis business in California, call McElfresh Law today at (858) 756-7107.

Free consultation for criminal defense cases only. Cannabis business consultation requires a fee.

Recreational Cannabis Business Licenses Under AUMA

The license categories created under AUMA are similar to those available under California’s new medical cannabis law, the Medical Cannabis Regulation & Safety Act (MCRSA). To avoid confusion, adult use marijuana business licenses will be clearly marked “nonmedical” or NM.

The same state agencies will be responsible for issuing licenses and regulating different kinds of cannabis businesses operating under either AUMA or MCRSA:

  • California Department of Consumer Affairs – Creates the Bureau of Marijuana Control to license and regulate cannabis transportation, distribution, and retail businesses.
  • Department of Food and Agriculture – Issues licenses for and regulates cannabis cultivation.
  • Department of Health – Oversees the manufacture and testing of cannabis products such as concentrates, ointments, and edibles.
  • Department of Fish and Wildlife and the State Water Board – Ensures that cannabis cultivators do not damage California’s waterways and riparian zones.

AUMA authorizes the Department of Food and Agriculture to issue the following recreational cannabis cultivation licenses:

  • Type 1 NM – The specialty outdoor license applies to growers with up to 5,000 square feet or 50 plants that do not use any artificial lighting.
  • Type 1A NM – The specialty indoor license is for cannabis farms with up to 5,000 square feet of plants that only use artificial light on one premise.
  • Type 1B NM – The specialty mixed-light license covers growers using a mix of natural and artificial lighting on up to 5,000 square feet of canopy area at one location.
  • Type 2 NM – The small outdoor license applies to cultivators who use only natural lighting at a single location with between 5,001 and 10,000 square feet of canopy.
  • Type 2A NM – The small indoor license applies to single-location grow operations of 5,001 to 10,000 square feet of canopy that use only artificial lighting.
  • Type 2B NM – The small mixed-light license covers farms that use a combination of natural and artificial lighting on one premise containing 5,001 to 10,000 square feet of canopy area.
  • Type 3 NM – The outdoor license is for cultivators who want to grow 10,001 square feet to one acre of canopy at one location without any artificial light. These licenses will be issued in limited numbers.
  • Type 3A NM – The indoor license is for growers who use only artificial light on 10,001 to 22,000 square feet of canopy at one location. These licenses will be issued in limited numbers.
  • Type 3B NM – The mixed-light license applies to operations that use a combination of natural and artificial light on one premise that holds 10,001 to 22,000 square feet of canopy area. There will be a limited number of these licenses available.
  • Type 4 NM – The nursery license does not place any limits on the number of plants or canopy area that you may cultivate.
  • Type 5 NM – The large outdoor license is for operations larger than one acre that use only natural lighting. No one can apply for such a license until 2023.
  • Type 5A NM – The large indoor license covers indoor grow operations that use only artificial lighting on an area larger than 22,000 square feet. Licenses available in 2023.
  • Type 5B NM – The large mixed-light license may be available in 2023 to operations that use a combination of artificial and natural light on 22,000 square feet or more of canopy area.

The Department of Health will issue the following licenses to adult use marijuana businesses:

  • Type 6 NM – The manufacturer 1 license is for manufacturers of products that do not require volatile solvents.
  • Type 7 NM – The manufacturer 2 license is for manufacturers of products that do require volatile solvents such as butane.
  • Type 8 NM – The testing license is for third party product testing laboratories.

AUMA authorizes the Bureau of Marijuana Control to issue the following licenses:

  • Type 10 NM – The retailer license allows for the retail sale and delivery of recreational marijuana.
  • Type 11 NM – The distributor license is for businesses that connect cultivators with retailers. In some cases, the distributor will also pass product samples along to the testing laboratory.
  • Type 12 NM – The holder of a micro-business license can cultivate up to 10,000 square feet of plants, and also operate as a level 1 manufacturer, distributor, and retailer with on-site consumption.

How Do I Obtain a License Under AUMA?

You will not be able to apply for any AUMA licenses until early 2018. The regulatory agencies are still determining the application process, fees, and rules that will apply to adult use cannabis businesses. For now, we know of the following requirements:

  • Submission of a detailed business plan
  • Proof that you have the legal right to occupy the location of your proposed business
  • As a cultivator, you should be registered as an agricultural employer
  • Sending fingerprints to the Department of Justice
  • If you’ve been convicted of a felony involving drug trafficking, fraud, deceit, or violence – or any other crimes that show that you don’t have the qualifications necessary to operate a cannabis business – your application may be denied
  • Your application may be denied if your business will result in an excessive concentration of marijuana businesses in one location, or if it will create a monopoly

Unlike MCRSA, AUMA doesn’t require proof of a local permit in the license application process. Nonetheless, you will still need to obtain local permission if you want to operate your business without hassle once you have your state license.

How Will AUMA Regulate Recreational Cannabis Businesses?

One of the most important effects of both AUMA and MCRSA is to limit vertical integration, which occurs when a single business handles multiple steps in the supply chain, such as cultivation, distribution, manufacturing, transport, testing, and retail. Only Type 12 NM micro-businesses may become truly vertically integrated because they are limited in size. On the other hand, Type 5 NM growers of Type 8 NM testing facilities cannot hold any other license type.

Other regulations that we know of so far include:

  • Taxation – The state will put in place a 15 percent sales tax on all cannabis starting in 2018. Additionally, cultivators will need to pay the state $9.25 per ounce of buds they grow. Local governments may also tax cannabis businesses.
  • Packaging – Adult use cannabis products must be sold in tamper-evident packages that display consumer warnings.
  • Organic Certification – There may be standards for certifying organic cannabis by 2020.
  • Pesticide Standards – The Department of Food and Agriculture will regulate the use of pesticides in cannabis cultivation.
  • Appellations of Origin – Growers must accurately represent where their product is grown. The Department of Food and Agriculture may eventually create standards for appellations of origin.
  • Track and Trace Program – The Department of Food and Agriculture will oversee a computerized system to track every cannabis plant or product that goes to market.
  • Local Rules – Your city, town, or county may ban adult use cannabis businesses, or severely restrict them.

Will AUMA Protect Me From Criminal Prosecution?

As long as your adult use cannabis business complies with both state and local laws, you will be shielded from prosecution at the state and local levels. However, cannabis is a Schedule I controlled substance under federal law, and so far the federal government has not indicated that it will give recreational marijuana businesses the same treatment it has given medical marijuana businesses. This year, Congress is contemplating legislation that would force the federal government to respect a State’s right to legalize either medical or recreational cannabis.

An Experienced Recreational Cannabis Business Lawyer Can Help

Attorney Jessica McElfresh has a proven track record of helping San Diego area cannabis businesses operate legally and profitably. And if the authorities bring criminal or administrative legal action against you, she is a zealous advocate who will ensure that your rights will get respected. If you want to open an adult use cannabis business in San Diego, schedule a consultation with McElfresh Law today by calling (858) 756-7107.

This website is intended for informational purposes only. Use of this website does not create an attorney-client relationship. Free consultation for criminal defense cases only. Cannabis business consultation requires a fee.