Articles Posted in California marijuana business lawyers

Laws pertaining to cannabis trade samples and medical marijuana donations have been recently updated in California. Marijuana businesses would be wise to review this changes with their Los Angeles cannabis lawyer to ensure their company processes and practices are aligned with the letter and intent of these laws. Los Angeles cannabis business lawyer

Let’s start with trade samples. These are samples of cannabis plants or products that are sent to cannabis licensees by producers, processors, wholesalers, and holders of hemp certificates to create brand and product awareness. It’s considered a solid means to generate more business. Trade samples allow products to be sampled, tasted, and smelled by licensed business buyers. An example would be marijuana producers who sell immature plants to other producers. Prospective buyers may want to know what kind of strain those immature plants are going to ultimately produce. A trade sample can show them. Similarly, producers could send samples to retailers to convince them to stock their product. Other industries have engaged in this for eons, but there has been some question about how those in the California cannabis industry could not only do it lawfully, but without having to pay the hefty taxes associated with retail sales.

Now, with the passage of AB 141 (a large piece of legislation that went into effect Jan. 1, 2022), cannabis products can be designated as trade samples from one licensee to another for marketing purposes. This will allow them to bypass cannabis taxes they’d otherwise have to pay. Exempted exchanges will include all harvested cannabis that has been or will be designated as a trade sample, as well as all cannabis that is used to manufacture a cannabis product that is/will be designated as a trade sample. Furthermore, the cannabis excise tax won’t apply to product that is designated as trade and simply given to another licensee absent consideration. Continue reading

Targeted by repeated traffic stops and seizures over the last year by federal and state law enforcement officers in California and other states, an ancillary cannabis company says cops are committing “highway robbery” by seizing millions in cash from armored vehicles transporting funds between dispensaries and financial institutions. The logistics company, Empyreal, has filed a federal lawsuit seeking to recoup losses and end the practice. Our Los Angeles marijuana business lawyers understand an initial request for a restraining order has been denied. Los Angeles marijuana business lawyer

This lawsuit is being closely watched by cannabis company legal advocates as it could have a direct impact on their bottom line and ability to engage in financial transactions.

The plaintiff, with more than 25 years in banking, launched her logistics/armored vehicle business four years ago in Colorado. Since then, it’s expanded to operation in 28 states. Her goal, she told Colorado News Online, was to address some of the challenges that cannabis companies face with financial transactions. Although many states now allow medicinal and even recreational marijuana, THC products are still considered illegal under federal law. That makes federally-backed banks – bound to comply with the U.S. Anti-Money Laundering Act and Bank Secrecy Act – wary of doing business with cannabis companies. For the 700-or-so banks that will accept money from marijuana dispensaries, there is a large compliance list that involves things like background checks, verification of money origins and destinations, and other stringent guidelines. Plaintiff said she only works with banks that are meticulous about meeting all the strict requirements.

Meanwhile, particularly in states where possession of marijuana for any reason is still criminal. Kansas is one of those. State law enforcement officials there report that in the last three years, its officers have seized more than $8 million from all motorists (not just those ferrying marijuana-related funds through the state). That accounts for half of all civil forfeitures, which is a process by which law enforcement agencies can seize money, vehicles, real estate, weapons, and other personal property they suspect may have been involved in criminal activity. It is not necessary for the cops to arrest anyone or secure a conviction in order to seize the money/property. In Kansas, half of all forfeitures were done with no criminal case being filed. All they had to do was demonstrate a connection between the property and a crime – and show a lawful reason for making the stop. (As any attorney will tell you, follow behind any driver long enough and you’ll find some minor traffic infraction that can be used as cause to pull them over.)

The lawsuit alleges that the company’s vehicles have been stopped by law enforcement in Kansas and California a total of five times since last May – twice resulting in cash seizures of more than $1 million, money that was later turned over to the FBI. Continue reading

As legal recreational marijuana businesses continue to put roots in communities throughout California, employees and owners of these companies are increasingly looking to buy homes. But can they qualify? Los Angeles marijuana lawyer

Los Angeles cannabis business lawyers can explain that residential mortgage for marijuana business owners may not be as tricky as commercial loans or rental agreements for marijuana companies. But owners and employees of marijuana companies have struggled to get approved for a mortgage loan because they are not allowed to factor income from the dispensary or other marijuana-related revenue. That all goes back to marijuana’s continued classification as a highly-restricted Schedule I narcotic at the federal level. Residential mortgages are federally-backed loans. That has meant that cannabis owners and their employees must clear numerous hurdles to qualify for a mortgage.

That said, as the industry grows (and the workforce with it), there are some options still on the table for these workers. It’s important for workers to understand home loan restrictions and alternative financing options.

Recently, one wholesale mortgage lender, Encinitas, quietly released the news that it would be accepting borrowers with cannabis-related income applying for home loans. Restrictions for at-home grow operations or farms would still remain in place. The terms are generous, though the interest rate you pay for such a deal is quite high. Continue reading

The state has issued $100 million in funding assistance to help bolster legal marijuana businesses in California, an effort aimed to speed up license permitting in areas where it’s stalled. Los Angeles marijuana business attorney

The Department of Cannabis Control, managed by state officials, designated the funds be sent to 17 cities and counties where there are a disparate number of provisional marijuana business licenses (as opposed to full year licenses). As our Los Angeles marijuana business lawyers can explain, those provision licenses were intended to help quickly prop up the adult-use market, but the entire category was set to expire Jan. 1, 2022. That deadline has since been extended, allowing more municipalities time to kick-start the permitting process, while also meeting stringent environmental requirements.

The $100 million in grant money is intended to further accelerate progress – in turn squeezing out black market operators. The thinking goes that the more competitive, state-legal operations there are in a district, the fewer opportunities there will be for underground pot purveyors.

Applications to receive money through the Local Jurisdiction Assistance Grant Program, opened four months ago. Municipalities that were awarded the additional funding were those that had significant license processing backlogs. Funding is also available to implement social equity programs.

Goals for funding were outlined as followed:

  • Hire or designate additional staff to help wade through the sizable workloads necessary to transition businesses into a well-regulated local market.
  • Create streamlined license processing with dedicated IT systems.
  • Complete thorough environmental assessments to ensure water is protected and energy is renewable.

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Our Los Angeles marijuana business lawyers know it’s not only companies selling cannabis that are being caught up in the regulatory quagmire of state and federal marijuana laws. Los Angeles cannabis company attorney

In recent months, there have been numerous reports of technology software companies servicing the cannabis industry facing financial consequences for that partnership. Firms have been dumped by payment processors, classified as “high risk” by credit card brands and banks (requiring higher fees to handle payments), and overall faced difficulty in the course of day-to-day businesses.

As the legalized cannabis market continues to mature, we’re seeing regulatory headaches continue for ancillary businesses like tech companies, particularly when it comes to handling banking and payment processing. This is true even for companies that never touch a single marijuana plant or product. Businesses working with cannabis growers, producers, and retailers at every leg of the supply chain have found themselves suddenly grappling with growing red tape.

The irony for some of these tech companies is that a primary part of the service they provide to the cannabis industry is the ability to more easily maintain and track regulatory compliance. Some of those who are working high up the compliance chain for these firms have literally helped to write the laws for cities across California. And even they are struggling to maintain operations and meet compliance standards. Continue reading

Heading into the new year, California cannabis company tax compliance and banking will continue to be challenges. Marijuana retailers, growers, product makers and others in the industry would be wise to work closely with an experienced Los Angeles cannabis business attorney to help them navigate these ongoing difficulties. Los Angeles marijuana banking and tax attorney

Recently, the Internal Revenue Service (IRS) issued tips for cannabis compliance. The federal agency noted that while it’s outside of the agency’s power to resolve many of the unique business predicaments that arise from federal prohibition, it wants to help support cannabis companies in becoming tax compliant. Even though marijuana continues to be classified as a Schedule I narcotic by federal authorities, these businesses are still required to shell out federal taxes.

In September, the agency released tips for tax compliance for cannabis businesses. Among those:

  • Know your investors. Thousands of people are fighting to get into the industry, but working with investors may have some tax implications and repercussions for cannabis companies. Unregistered and “silent” financing and ownership arrangements, with investors sometimes being referred to as “beneficial owners,” get the benefits of ownership but avoid having the property title or activity in their name. That creates numerous challenges for the IRS, and it may result in issues for proper tax filing and accurate reporting of gross receipts. Also, cannabis business owners should be wary of nefarious investors who attempt to put their funds into a business like this, but jeopardize the entire operation with allegations of money laundering.
  • Make sure you’re licensed. You can’t get federal licensing, but make sure you have proper state and local licensing for your operation.
  • Timely file and pay your taxes. Even if your business operates with cash, you’re still responsible to file and pay your taxes on time. IRS code doesn’t parse out which income stems from legal vs. illegal sources. All income must be reported. Note that because you’re dealing with a Schedule I narcotic, you must abide by Section 280E – even if your business is 100 percent state legal. That section doesn’t bar you from reducing gross receipts by properly calculating the cost of goods sold to ascertain gross income, though you may not be able to deduct things like selling or advertising expenses. There aren’t any exemptions from employment tax. It may be beneficial to make quarterly payments. Late payments can result in interest and penalties. Non-filers are a priority enforcement for the IRS. So too are those who use cryptocurrency; it’s imperative to use a reputable exchanger.
  • Report cash transactions. Your business may not use traditional banking, but you still need to report all cash transactions. Any company receiving $10,000 or more in cash (which is most California marijuana businesses) need to file Form 8300 within 15 days of receiving that payment. Failure to be diligent about this can cause major headaches for your business.
  • Maintain good records. This is mission critical for a cannabis business. Keeping meticulous records – all receipts, canceled checks, any shred of documentation that can support income, deduction, or credit should be kept in some form. Keep these records even for expenses that aren’t legally deductible because it’s going to make it easier to prepare your returns and also answer a question quickly if one arises.

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It’s been more than two centuries since the New World colonists dumped their tea into the sea to protest unfair taxation. Now, legal proprietors of California’s retail cannabis industry say it may be well past time for a “Weed Party” in response to astronomical taxes imposed on them when they can’t compete with black market operators.cannabis business taxes

However, rather than toss their crops into the ocean, shop owners are floating the notion of not paying state taxes. If the idea where to gain traction statewide, that would amount to roughly $1.3 billion.

Whether the call will lead to real action is questionable, but Los Angeles marijuana business lawyers know there is no doubt retailers are treading water. Steep competition from illicit providers who don’t follow state rules – yet aren’t unequivocally shut down by the state – have cut into the survival odds for these firms. Some call it a clear case of “taxation without representation,” echoing the Revolutionary War grievances.

This is not a new problem. It’s a situation that has been ongoing for the last five years, ever since state voters approved recreational use cannabis for adults. The prospect of bolstered taxes was one that spurred many government leaders to climb aboard. The problem, business owners say, is that while those firms are happy to rake in the tax revenue, they aren’t doing enough to protect the industry from unfair competition.

Beginning first thing next year, taxes on cultivation of cannabis is increasing by 4.5 percent. This comes even as the state is staring down a budget surplus next year of $31 billion.

The “Weed Party” proposal is to put all taxes in an escrow account rather than handing to the state, in an effort to force their hand and bring them to the table. However, as marijuana business attorneys, we would tend to strongly advise against this, as it’s going to violate a myriad of regulations and tax laws and risk state license suspension. The hope is that there will be viable solutions proposed in the coming year.

Why California Marijuana Industry Tax Hikes Are Unique

Of course, no industry is a fan of tax increases, but there is also no other industry (save tobacco) that is taxed at the same sky-high rates as cannabis retailers. And unlike the tobacco industry, legal marijuana retailers are banned in most cities in the state. Plus, legal tobacco retailers aren’t threatened by a behemoth black market. Continue reading

California became the first state in the U.S. to approve marijuana for medicinal use back in 1996. It was also among the first to legalize recreational adult use marijuana in 2016. Los Angeles cannabis retail attorney

However, it would be erroneous to assert that marijuana sales are legal everywhere in the state. As our Los Angeles marijuana lawyers can explain, cannabis still remains widely unavailable in some of the largest cities in the Golden State.

Of the state’s 482 cities, only 174 of them allow some type of licensed, cannabis business to operate within their district. In a number of those jurisdictions, the only allowable businesses are those that are not classified as retail locations. That means that a key piece of the supply chain puzzle is missing. Ultimately, this leaves millions of people without immediate access to retail recreational cannabis.

The one exception is delivery. Having a state license from the California Department of Cannabis Control authorizing delivery allows that company to deliver in any jurisdiction in the state – something that has been affirmed in subsequent court rulings challenging this right. However, those companies might still be subject to local jurisdictional requirements. All cannabis company owners and operators should be working with an experienced marijuana business attorney to help ensure their operation rights are protected.

But the benefit of accessible cannabis for all communities goes beyond the shop owners. It benefits the industry as a whole, as well as citizens. Accessible legal cannabis constricts opportunities for those in the black market to gain a foothold.

So what’s the holdup? Continue reading

Revocation of a cannabis license can prove fatal to a marijuana business, unless one takes swift and decisive legal action. All legal remedies should be discussed with an experienced and highly qualified L.A. cannabis business lawyer. Los Angeles marijuana business lawyer

Recently, it was announced that a marijuana dispensary has filed a lawsuit against the city of South Lake Tahoe after the city council of the California community on the Nevada border revoked its business license for failure to open on time. The delay, according to the plaintiff, was directly related to the COVID-19 pandemic, something entirely outside the firm’s control.

According to the Associated Press, the company had been awarded two microbusiness marijuana licenses two years ago. Part of the deal was the firm would open up shop within one year. However, the pandemic created an unforeseen situation that prevented the company from meeting the deadline. The agreement became effective in February 2020, but the world effectively turned upside down with the pandemic, with both business and construction coming to an abrupt halt the following month. When construction picked up again, the demand for construction materials and workers was such that the business couldn’t keep up. Continue reading

Allegations of candy company trademark violations by cannabis companies are leaving sweets makers bitter. Manufacturers of confections are imploring producers of cannabis edibles to avoid creating labels that may closely mirror popular snack and treat products. Los Angeles cannabis trademark lawyers

One of the major concerns, companies say, is that kids might mistake certain cannabis edibles for well-known and loved snacks like Oreos, Sour Patch Kids or Doritos. Numerous law enforcement agencies and even some state attorneys general had issued warnings prior to Halloween warning of similarities of cannabis products that could closely mirror treats.

Concerns about mistakes might be fair where cannabis companies post deceptive packaging on products that contain high levels of THC, the psychoactive ingredient in marijuana. According to the American Association of Poison Control Centers, there were 2,050 kids under the age of 12 who allegedly ingested cannabis edibles at home, compared to about 130 in 2016.

There were no reported issues with trick-or-treat (it’s highly unlikely anyone is going to intentionally pass out edible marijuana products to kids, as it’s not only dangerous, but such products can be quite expensive), but there is a legitimate concern for accidental ingestion of products that look like snacks. Symptoms of overdose can range from mild to severe, in the most extreme cases resulting in seizures or even a coma. Although there have been no reported deaths, the risks for kids are always heightened compared to adults. Continue reading

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