California Marijuana Distribution License

Does California Require a License to Distribute Marijuana and Marijuana Products?

Yes. Pursuant to the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), persons interested in distributing marijuana and marijuana products in the state must obtain distribution licenses. According to MAUCRSA, marijuana distribution refers to the procurement, sale, and transport of marijuana goods between licensees. Only licensed distributors may transport marijuana from one license to another. Marijuana distributors act as intermediaries between cultivators, manufacturers, and retailers. There are two marijuana distribution licenses in California. These are Type 11 and Type 13 licenses.

What Distribution Activities are Covered by California Marijuana Distribution License?

A California marijuana distributor licensee can distribute only cannabis goods, cannabis accessories, and licensees' branded merchandise or promotional materials. California defines cannabis goods to mean cannabis, including dried flower, and products containing cannabis. The distribution license also permits the holders to carry out storage services. Per the storage services offered:

• A licensed distributor may offer storage services to a licensed cultivator, licensed manufacturer, licensed microbusiness, licensed retail, or another licensed distributor, including storage-only services unrelated to the quality assurance and laboratory testing procedures.
• A licensed distributor may also offer storage facilities to other licensees for cannabis goods packaged for retail sale, cannabis accessories, and licensee merchandise or promotional materials.

Note that a licensed distributor is not permitted to store live plants, except for seeds, on the licensed premises.

Licensed distributors are also permitted to package, re-package, label, and re-label cannabis, including pre-rolls, for retail sale. California requires that cannabis packaging, including pre-rolls, must comply with the requirements under Section 15303 of the Department of Cannabis Control Regulations.

Does California Offer Transport-Only Distributor License?

Yes. California offers a transport-only distributor license which restricts licensees to moving cannabis and cannabis products between cultivation, manufacturing, or distribution premises. Transport-only distributor licenses cannot perform any other functions of a distributor, including testing, packaging, or labeling. A transport-only distribution license in California is also referred to as a Type 13 license.

A cannabis transport-only distribution license does not permit the transportation of cannabis goods to a licensed retailer. However, they can transport immature live plants and seeds from a licensed nursery.

Who Can Distribute Marijuana in California?

According to Section 15005 of the Department of Cannabis Control Regulations, the following persons cannot hold a cannabis distributor license in California:

• Persons holding office in or employed by any agency of the State of California or any of its political subdivisions whose responsibilities are related to MAUCRSA enforcement.
• Persons holding office in or employed by any agency of the State of California or any of its political subdivisions whose duties involve the enforcement of any penal provisions of California law prohibiting or regulating the sale, possession, use, transportation, distribution, testing, manufacturing, or cultivation of cannabis goods. \ These persons include those employed as peace officers by the State of California Department of Justice, district attorneys, city or county attorneys, sheriffs, and municipal police departments. California citizens who fall into these categories are not permitted to have a direct or indirect ownership stake in any business that will be owned or performed under a cannabis license.
• An individual with a conviction for a serious felony, as described in Penal Code Section 1192.7
• An individual with a conviction for a violent crime, as defined in Penal Code Section 667.5
• An individual with a Conviction on a felony charge of embezzlement, deceit, or fraud.
• A felony conviction for drug trafficking according to Health and Safety Code sections 11370.4 or 11379.8.
• A felony conviction for employing, hiring, or using a minor to transport, carry, sell, give away, prepare for sale, or peddle any controlled substance to a minor; or for selling, offering to sell, providing, intending to furnish, administering, or delivering any controlled substance to a minor.

In California, no one under the age of 21 may legally own a cannabis distributor license. Additionally, the state prohibits licensees from hiring or retaining anyone under the age of 21.

How to Get Marijuana Distribution License in California

Cannabis distributor license applicants must first obtain approval from the local municipalities in which the prospective business will be situated before submitting an application to the State of California. You will require authorization from cities and counties to conduct business in the area and verification that your cannabis establishment complies with zoning restrictions and building codes.

Additionally, some towns and counties have adopted legislation establishing social equity programs to help applicants who may have been negatively impacted by the War on Drugs. Direct financial aid, expedited application processing, and support with managing cannabis distribution operations are available to individuals in these categories. Equity ordinances enacted by local governments in California include the following:

• County of Humboldt
• City of Coachella
• City of Rio Dell
• City of Long Beach
• City of Los Angeles
• City of Oakland
• City of Sacramento
• City and County of San Francisco
• City of San Jose

You can contact your county or city government to learn about any equity programs available to cannabis distribution license applicants. In California, the proposed premises of a cannabis distribution establishment must not be located within a 600-foot of a school providing instruction in kindergarten or any grades 1 through 12, a daycare center, or a youth center. Otherwise, the applicant must provide evidence that the local jurisdiction has approved a different radius that has been adhered to.

Per the Department of Cannabis Control Regulations, an application for a cannabis distributor license must be completed by an owner as defined by the DCC. An owner is a person with an aggregate ownership interest in the cannabis business of 20% or more, unless the interest is solely a security, encumbrance, or lien. An owner includes:

• A person who owns 20% or more of the applicant or licensee, unless the interest is simply a security, lien, or encumbrance.
• A nonprofit or other entity's Chief Executive Officer (CEO).
• A member of a nonprofit organization's board of directors.
• The trustee(s) and any individuals who exercise control over the trust and/or commercial cannabis business owned by the trust.
• A person who will be involved in the control, or management of the license applicant. This may involve the following:
  • A partner in a partnership-structured commercial cannabis company.
  • A non-member, managing partner, or manager of a limited liability corporation that does commercial cannabis operations.
  • A corporate officer or director of a commercial cannabis company.
• Any person who accepts responsibility for the license.
• When an entity's CEO/members of the board of directors have a combined ownership stake of 20% or more, they are considered owners.

Applications for cannabis distributor licenses may be completed online or in hard copy and submitted along with the required documents to:

Department of Cannabis Control

P.O. Box 942872

Sacramento, CA 94271-2872

To complete an application online, follow these steps:

• Create a user account online on the DCC portal: You will need to establish a username, password, and security question and answer in order to create a user account. An email address, first and last name, main phone number, Social Security number or individual taxpayer identification number, date of birth, and postal address are all needed.
• Provide the following:
  • The name of the applicant. Individuals must provide both the first and last names. For business entities, the applicant must provide the legal business name of the applicant.
  • The business trade name (DBA) of the applicant, if applicable
  • The commercial cannabis license you are applying for, and whether you are requesting that the license be designated as medicinal, adult-use, or both.
  • Payment of the application fee
  • If applicable, proof of prior military service. This voluntary declaration may speed up the application process for people who served as active-duty members of the United States Armed Forces and were honorably retired.
  • A list of the license categories and license numbers that the applicant has, as well as any additional state cannabis licensing authorities that the applicant holds, including the date the license was granted and the licensing authority that issued the license.
  • Any prior license rejection, suspension, or revocation by the Department of Cannabis Control or any other state cannabis licensing body. The kind of license sought, the name of the licensing body that rejected the application, and the date of rejection must all be included.
  • The physical address of the premises. You may also provide a document confirming the physical address of the premises, such as a utility bill, printed information from the county assessor, deed, or title.
  • The mailing address of the applicant, if different from the address of the premises
  • The telephone number for the premises
  • The applicant's company's website URL and email address.
  • The federal employer identification number of the business (FEIN).
  • Contact information for the applicant's chosen main contact person, including the individual's name, title, phone number, and email address.
  • A description of the applicant's company organizational structure, such as partnership or corporation.
  • Articles of incorporation, bylaws, operating agreements, partnership agreements, and fake company name declarations are all examples of business formation papers. Articles of incorporation, certificates of stock, articles of organization, certificates of limited partnerships, and statements of partnership authority are to be submitted. If the cannabis company is held in trust, a copy of the certificate of trust establishing trustee authority must also be provided.
  • Certificate of qualification, certification of registration, or certificate of status issued by the California Secretary of State. (Applicable to cannabis businesses that are foreign corporations or foreign limited liability companies)
  • A list of all fictitious business names used by the applicant, as well as the location where the entity is situated.
  • Financial information on investments, loans, money retained, and any other kind of donation.
  • A comprehensive list of all individuals with financial stakes in the company but is not an owner.
  • A full list of the applicant's owners, including personal, financial, and criminal background information. Each owner must fill out an Owner Submittal form and transmit fingerprint pictures to the Department of Justice online (DOJ). The applicant must complete the Bureau's live scan form. Locations for Live Scan may be accessed online on the Office of the Attorney General's website.
  • Evidence showing the applicant is legally entitled to possess and utilize the requested site.
  • Evidence that the proposed premises complies with Business and Professions Code Section 26054(b) and Section 15026 of the Department of Cannabis Control Regulations.
  • An applicant with 20 or more workers must certify that they have engaged into a labor peace agreement and will follow the provisions of the agreement. The applicant must provide a copy of the page of the labor peace agreement on which the union representative and the applicant have signed. Applicants who have not yet engaged into labor peace agreements must submit a notarized declaration stating that they intend to enter into and abide by the provisions of a labor peace agreement as soon as reasonably feasible following licensing.
  • A valid California Department of Tax and Fee Administration seller's permit number (CDTFA). If the applicant has not yet obtained a seller's permit, the applicant must provide certification to prove active application for one.
  • Section 15006 of the Department of Cannabis Control Regulations requires a schematic of the premises.
  • Section 15008 of the Department of Cannabis Control Regulations requires proof of a bond. A $5,000 surety bond payable to the State of California is required of the applicant. The surety bond will cover the destruction of cannabis and cannabis products if a breach of the license criteria occurs. The bond must be issued on the Commercial Cannabis Licensee Bond form by a corporate surety licensed to conduct surety business in the state of California and must be issued under Title 11, California Code of Regulations, Article 56, Section 118.1. Each licensing application requires obtaining a bond.
  • A detailed description of the applicant's operating procedures. Include the Transportation Procedures form, non-laboratory quality control procedure form, security procedure form, and inventory procedures form.
  • Evidence of exemption from the California Environmental Quality Act or compliance with it (CEQA). The Project-Specific Information form or the Exemption petition form may be used to provide evidence.
  • The applicant's California Employment Development Department-issued State Employer Identification Number (SEIN).
  • For applicants with more than one employee, the applicant must certify a current employment or prospective employment within one year of receiving a license, two persons (one supervisor and one employee) who have completed a Cal-OSHA 30-hour general industry outreach course offered by a training provider authorized to provide the course by an OSHA Training Institute Education Center.
  • If the applicant is a sovereign body or a federally recognized, a limited waiver of sovereign immunity may be granted.
  • Proof of insurance compliance. A distributor license applicant must provide to the DCC, a Certificate of Insurance demonstrating that general liability insurance in the aggregate of at least $2,000,000 and in the amount of at least $1,000,000 for each loss has been obtained. The insurance coverage must be purchased from an insurance firm that complies with the Department of Cannabis Control Regulations Section 15308.

The DCC licensing system allows you to save your progress during the online application process, so you do not have to complete the application in one sitting. You will be required to sign and submit your application when you have completed it. Note that the DCC will not process your application until you have paid the application fee.

If the information provided in any section of your application is insufficient, you will receive an email from the DCC licensing team. You will be notified of any required adjustments or additional information. Additionally, you will be given a deadline for responding. By promptly submitting the required information to complete the application, you can have your application processed in time by the DCC.

The DCC will not process an incomplete application. Applications will be deemed complete only if all necessary information has been submitted. If an applicant does not submit the needed information within the stipulated timeline, the application is considered abandoned. Application costs are non-refundable for abandoned applications. After abandoning an application, an applicant may resubmit a license application at any time. However, a new application will be necessary, along with a new application fee.

After the DCC approves your application, you will get an email from the DCC with instructions on how to pay your license cost. The cost may be paid using a bank account, a check, a money order, or a credit card. Cash payments can also be made at the DCC office by scheduling an appointment and paying in person. For security concerns, cash payments are not accepted without planned appointments. Your license will be issued only when you have paid the licensing cost.

If the fee is paid by debit or credit card, it will be processed via the DCC's online licensing system, and the applicant will be responsible for any related processing or convenience costs charged by the third-party vendor processing the payment on the DCC's behalf. California considers nonpayment of the required license fee to be cause for punishment. If it is found that the licensee paid less than the applicable licensing price, the licensee will be required to pay the difference in the applicable fee plus a penalty equal to 50% of the applicable licensing cost; however, the DCC may waive the penalty fee at its discretion.

If an application is denied, the DCC will notify the applicant in writing of the rejection and the applicant's entitlement to an administrative hearing to dispute the refusal. The applicant may request a hearing by submitting a written petition to the DCC within 30 calendar days following the serving of the notice of rejection. The written petition must be postmarked within the 30-day timeframe. If a hearing request is not made within 30 days, the applicant waives the right to a hearing.

Note that an applicant may withdraw an application at any time before the DCC issues or denies the license application. The request to withdraw an application must be submitted to the DCC in writing, dated, and signed by the applicant. The DCC will not refund application fees for withdrawn applications. After withdrawing an application, an applicant may reapply at any time, but will need to submit a new application and application fee.

A distributor license is only valid for one year. When your license is approved, the licensing system will make the license certificate accessible for download. It is recommended that you display your license certificate at the entrance of your cannabis business.

How Much Does Marijuana Distribution License Cost in California?

Cannabis distribution license fees in California are based on the gross annual revenues generated by the cannabis businesses. License and application fees are:

Distribution License Fees

Distributor Transport-Only Licenses: Reduced license fees are available to businesses that transport only goods they cultivate or manufacture.

\ The gross annual revenue of a licensed premises is calculated based on the gross annual sales of cannabis products and, if applicable, the gross annual revenue from manufacturing, packaging, labeling, or otherwise handling cannabis products for other licensees in the 12 months preceding the application date. Gross annual income is determined for a new license application based on gross sales and revenue anticipated during the first 12 months after licensing.

Cannabis distribution licenses are renewable every year. The license fee corresponding with the licensing tier category identified by a licensee based on the expected gross revenue over the next 12-month period will be the renewal fee.

Can Licensed Marijuana Distributors Also Get Other Cannabis Licenses in California?

Distributor licensees (Type 11) must also hold transportation licenses (Type 12) but may not hold any other license type. Transport-only distributor licensees (Type 12) may also hold Type 11 distribution licenses, but this is not mandatory.