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Game Changer

State bill brings sweeping changes for cannabis industry



With little fanfare, state lawmakers passed a landmark bill last week that will have reverberating impacts on the state's budding marijuana industry.

Attached to the Legislature's votes on the state budget was a rider that will essentially merge the landmark Medical Cannabis Regulation and Safety Act (MCRSA) and Proposition 64 into a single regulatory framework for the multi-billion-dollar industry. The bill, which now sits on Gov. Jerry Brown's desk awaiting his signature, passed the Senate 31-3 and the Assembly 73-2. Both North Coast representatives — Sen. Mike McGuire and Assemblymember Jim Wood — voted for it.

Here's a brief look at how Senate Bill 94 — if signed by Brown — will change California cannabis law:

Creates the Bureau of Cannabis Control: The law would create the bureau as the sole entity responsible for issuing, denying, suspending and revoking licenses for the transportation, storage, distribution, testing and sale of cannabis in the state.

Allows Consolidated Storefronts: Under the bill, medical and recreational cannabis could both be sold from a single shop so long as its owner has licenses to do both and follows the separate testing provisions outlined for each. A testing facility, meanwhile, could test both types of marijuana under a single license.

Organics: The law requires the California Department of Food and Agriculture to come up with standards for an organic cannabis designation by 2021. Similarly, the department is tasked with coming up with designated "origin regions," similar to how the food sector treats some specialty wines and cheese.

Marketing: The proposed law will only allow cannabis advertising in mass media if at least 71.6 percent of the audience is "reasonably expected" to be 21 years of age or older. Under the bill, edibles will all have to be marked with a universal symbol hoped to make them instantly recognizable.

Residency: The bill repeals a residency provision that was included in Proposition 64 and required that people starting cannabis businesses in the state to have lived here prior to Jan. 1, 2015. The provision had been included in Proposition 64 to protect the state's existing cannabis industry from an out-of-state green rush.

Taxes: The bill subjects all cannabis — medical or recreational — to a cultivation tax of $9.35 per ounce of flowers to be collected at the time of harvest and a 15 percent excise tax that will be determined based on average market value rather than retail sales receipts.

Tax Collection: Recognizing that cannabis will be a cash-heavy industry for the foreseeable future, the bill establishes that by 2018, the state will establish a "safe and viable" way to collect cash payments for fees and taxes. Further, the bill requires the new bureau, in coordination with the Department of General Services, to establish a new office specifically to collect cash payments from the industry in either Humboldt, Mendocino or Trinity counties so folks in the industry don't have to drive car-fulls of cash down to Sacramento.

Vertical Integration: The bill would largely do away with prior laws that restricted people's ability to hold different license types, preventing a single company from being licensed to grow, transport and distribute cannabis.

Delivery: The bill allows cannabis home delivery but requires delivery retailers to have a "brick-and-mortar" store, even if it's closed to the public and solely operated for cannabis deliveries.

Compliance: In potentially the most significant change for Humboldt County, the new bill changes the proof-of-compliance provision previously enacted under MCRSA, which required that, as a condition of getting state licenses, applicants would have to submit proof that they were in compliance with local laws. Under the new bill, it's up to the city or county to alert the state of an applicant who is out of compliance with local laws.

The bill won't become law until signed by Brown, which most expect will happen in the coming days.

Thadeus Greenson is the news editor at the Journal. Reach him at 442-1400, extension 321, or [email protected]. Follow him on Twitter @thadeusgreenson.

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