Governor Newsom’s Budget Proposal: California Cannabis Licensing Agency Consolidation & Other Upcoming Changes

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On January 10, 2020, the Bureau of Cannabis Control announced that Governor Newsom’s budget proposal includes a few items that will drastically change the way California commercial cannabis businesses obtain licenses and communicate with the state. 

A Single Unified Department of Cannabis Control

Specifically, the Newsom Administration plans to merge the three existing licensing agencies – the Bureau of Cannabis Control, CalCannabis Cultivation Licensing, and the Manufactured Cannabis Safety Branch – into a single Department of Cannabis Control. The change will likely take place by July 2021, but details about the consolidation have not yet been released. 

According to January 10, 2020 correspondence from the CalCannabis Cultivation Licensing, the creation of a single standalone department with an enforcement arm will “centralize and align critical areas to build a successful legal cannabis market by creating a single point of contact for cannabis licensees and local governments.”

With no additional information from the applicable agencies or the Newsom Administration, it is yet to be seen how the consolidation of the three agencies will impact those with licenses or pending state license applications. For reference, the Bureau of Cannabis Control is currently responsible for the licensing and management of the following business types: 

  • Retailers;
  • Distributors;
  • Micro-Businesses; and
  • Testing Laboratories

The Manufactured Cannabis Safety Branch of the California Department of Public Health is responsible for the licensing and management of the following business types:

  • Non-Volatile Manufacturers;
  • Volatile Manufacturers;
  • Infusers;
  • Packager and Labelers; and
  • Shared Use Facilities

CalCannabis Cultivation Licensing is responsible for the licensing and management of the following types of cannabis businesses:

  • Cultivators (multiple types);
  • Nurseries; and
  • Processors 

Of particular interest is how the submission of (i) application materials, (ii) amendments to existing and pending applications, and (iii) updates to issued licenses will be handled and how the switch to a single governing agency/department will be facilitated. Given that each licensing agency currently has significant data on each applicant and licensee, a detailed and substantial data and information transfer will likely occur. Whether or not that will be done smoothly is yet to be seen. The Newsom Administration will provide more details on this proposal in Spring 2020, but it is not anticipated that the consolidation will have a detrimental impact on operators or applicants. 

Simplification of Cannabis Tax Administration

Another cannabis related item in Governor Newsom’s budget proposal is the Administration’s goal to simplify cannabis tax administration by changing the point of tax collection. The proposal changes the “person” responsible for collecting the cultivation excise tax from the final distributor to the first distributor and changes the “person” responsible for collecting the retail excise tax from the distributor to the retailer itself. The Newsom Administration is also working to make other changes to the existing cannabis tax structure to make things simpler for those involved. 

Industry operators can expect updates from the agencies involved and the Newsom Administration in the coming months. If you’d like to discuss the potential changes to the California licensing agency set up or the potential changes to tax collection under Governor Newsom’s budget proposal, give the cannabis industry attorneys at Rogoway Law Group a call

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