California Commercial Cannabis Industry FAQs

This entry was posted on Friday, April 16th, 2021 and is filed under Cannabis Law.

This is the first part of a two-part series of frequently asked questions that KVK receives from new clients seeking to enter the commercial cannabis industry. The commercial cannabis industry is growing exponentially. As of January 2021, the three State cannabis licensing authorities have issued over 10,000 commercial cannabis licenses to cannabis businesses throughout California. Here is what you need to know to begin the journey of owning a licensed commercial cannabis business.  

Q: I want a commercial cannabis business license. Where do I start?

A: The first step is to determine what type of cannabis activities you are seeking to conduct – storefront retail, non-storefront retail (delivery), laboratory testing, distribution, cultivation, and/or manufacturing. 

The second step is to decide which local jurisdiction (city or county, if located in an unincorporated area) you want to operate in. Keep in mind that  you can only conduct commercial cannabis activity in a local jurisdiction that has approved such activity within its jurisdiction and established a licensing and regulatory framework for the type of activity or activities you seek to conduct. 

Finally, the third step is to determine whether the jurisdiction of your choice is accepting commercial cannabis business applications. If the jurisdiction is not accepting new commercial cannabis business applications, you may be able to purchase an existing license(s), provided the local jurisdiction allows license transfers. If you decide to acquire an existing license, you need to make sure that you comply with the local and state regulations relating to license transfers. Typically, local jurisdictions require that you obtain approval  from the local regulatory agency before an ownership transfer can occur.  

Q: What does the application process entail?

A: The Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) established a dual-licensing structure. In order to engage in commercial cannabis activity, you must obtain both a state license and a local approval. Thus, the application process is a two-part process. 

The first part entails applying for and obtaining a local permit/license/approval from the local jurisdiction. Each local jurisdiction has a different application process. Some examples of different application processes include: 

  • Land-use based process which requires applying for a Conditional Use Permit and entering into a Development Agreement with the local jurisdiction; 
  • Dual-permit process which requires a Conditional Use Permit plus applying for a regulatory permit;  
  • Merit-based application process where the application is judged and awarded points based on specific criteria, and applications with the highest scores are awarded licenses; and
  • Cannabis business license application process without a land-use component. 

The second part entails applying for and obtaining a license issued by the State of California regulatory agency(ies) (“State Agencies”). The State Agencies are:

In January of 2020, Governor Newsom announced a proposal to consolidate the State Agencies into a single regulatory agency. The consolidation proposal was delayed due the COVID-19 pandemic, but was included in Governor Newsom’s fiscal year 2021-2022 budget proposal released on January 8, 2021. If approved by the Legislature, the new Department of Cannabis Control (“DCC”) will be created within the Business, Consumer Services and Housing Agency on July 1, 2021.

Q: What are the application and licensee fees?

A: Each local jurisdiction and state agency has its own range of application fees and license fees. The application and license fees vary depending upon the license and uses sought.  The application and license fees on the local level also vary depending upon the type of application process the local jurisdiction utilizes. 

The application fees and license fees for the most common license types for each State Agency are below. Please note that the fees listed below are exclusively for the application and issuance of the license – they do not include the costs and fees associated with any required supplemental permits, documents, or services. 

Please reach out to us for information regarding application and license fees for a specific local jurisdiction or a State license type not listed below. 

Bureau of Cannabis Control 

  • Annual license fees are based on the annual gross revenue of the licensed activity
  • Application fee for all annual licenses: $1,000 per application

CalCannabis 

  • Annual license fees for specialty, small, and medium licenses are based on canopy size

Manufactured Cannabis Safety Branch

  • Annual license fees are based on gross annual revenue of the licensed activity

Read more Cannabis Q&A’s with our partner Yelena Katchko here.

By: Nellie Niakossary and Yelena Katchko, April 16, 2021