8 Compliance Problems California Dispensaries Would
Want To Avoid
You’ve probably read somewhere that medical buds can be as profitable as Apple stores and that retail dispensaries can make thousands of dollars in revenue per square foot. Without a doubt, this is a budding industry especially now that the medical variety is legal in 30 states and the recreational herb is legal in nine states; but entering the leafy market isn’t as easy as you think.
Like in any business operation, there are licenses and permits to secure and there are rules and regulations to follow.Many assume that obtaining a license to operate a dispensary is a “golden ticket” to riches but that’s not really the case. No matter the nature of a business, profitability and success will still depend on the establishment and maintenance of sound business practices and that includes compliance with state laws.
To help you remain compliant with those laws, we’ve identified the most common areas where dispensaries fall short. Exert all effort to avoid these and you’ll see your dispensary business thriving in a market rife with both opportunities and risk.
First and foremost, you’ve got to keep your doors open to benefit from this lucrative business and an out-of-date license won’t help you do that. You need to have a permanent business permit with the BCC to run a dispensary. This requires annual application that entails submission of business information and financial documents and payment of fees.
Poor Inventory Management and Sales Reporting
Neglecting to do frequent inventory of all stocks can lead to product and income loss. Not only that, though. Inaccurate reporting of stock and sales can get your dispensary business at risk of getting closed down. Ideally, dispensary inventory reports must be prepared daily but since this is a time-consuming task, inventory counts or reconciliation are to be done every 14 days.
A quick, easy, cost-efficient and more time-efficient solution would be the installation of POS stations. Utilizing point-of-sale software can take the stress out of tracking inventory as well as in reporting compliance, sending marketing campaigns, managing staff, and processing orders.
This regulated market requires track and trace reporting so that the state can monitor every single plant from seed to final consumer sale. Dispensaries in California are required to submit daily reports of commercial herb activity including sale, receipt, return and disposal of herb products before the day ends (11:59 p.m.).
Disregarding Rules on Patient Purchasing Limits
For legal adult-use activities, the amount a person 21 years or older can possess, process, transport, purchase and obtain is limited to up to one ounce (28.5 grams) only of non-concentrated herb per day or 8 grams of concentrated herb. California dispensaries are only permitted to sell up to 6 immature plants to recreational users. For medical patients, purchase should be not more than 8 ounces of medicinal herb per day unless otherwise specified by a doctor’s recommendation.
Illegal Sales to Minors
Under the California Health and Safety Code 11360, it is a crime for adults to sell, give or offer “the herb” to a minor.Violating HS 11361 would carry a penalty of at least three years in state prison and a maximum of $10,000 fine. Sentence can increase to up to seven years in prison plus fine if convicted of selling or trying to sell to a minor.
As a retailer, you are responsible for verifying the age and the identity of your customers. Adult-use consumers must at least be 21 years old with valid identification while medical consumers must be 18 or older and with valid ID and physician’s recommendation.
State testing regulations say that herb products must be tested for pesticides and molds. The fact that there are less than 20 labs in the state equipped to perform the necessary tests makes it a challenge for dispensaries to comply and ensure that their shelves are stocked.But know that skipping this step could lead to license revocation.
Incorrect Tax Reporting
Just like other businesses, your dispensary must file income tax returns.This shouldn’t be a problem if you choose a POS system with built-in tax reporting function. The California Department of Tax and Fee Administration (CDTFA) has this Tax Guide for Retailers.
Improper and Inadequate Labels
There’s a mind-altering substance in your product so the public must be fully aware of the effects of consumption. Make sure you only sell products that are properly labeled, with adequate public safety warning.
California laws require all products to be packaged and labeled prior to arriving at the retail facility or dispensary. Again, on-site labeling and packaging is no longer allowed at dispensaries. Manufacturers and distributors will be the ones responsible for packaging and labeling flowers and herb-infused products. If you want to produce, distribute, package and label your own herb, you need a microbusiness license to be able to engage in at least three leafy business activities.
Lack of Security Measures
A lot goes into owning an herb dispensary. There are security measures that must be seriously taken to ensure that your business will run as usual. All your employees must have ID badges and alarm systems and 24-hour video surveillance in point of sale areas must be present.
Note, however, that California dispensaries experienced problems in partnering with major security companies because of their unwillingness to offer their services due to the associated stigma. Fortunately, there are now specialized security providers for this specific industry that are ready to provide security services related to transportation of products and currency, and surveillance.
The leafy industry still has many unknowns yet to be resolved.As a dispensary owner, you may at one point find yourself in a struggle to keep up with the compliance laws because they vary depending on which market you’re in and they are quickly changing. But if you’ll be on your toes and be a little more diligent in learning about the industry and adapting to the constant movement, you wouldn’t have problems overcoming compliance challenges.