We just published a post on what cannabis businesses can be doing to stay ahead of the curve with respect to the coronavirus (COVID-19), which is shutting down businesses across the globe. In this post, my goal is to talk about things that California can do to ease the situation for California cannabis companies, all of which have a tough road ahead.
Before jumping into my recommendations, it’s worth noting the obvious: the state is extremely burdened right now and cannabis is probably nowhere near the top of the list of priorities. That said, if the state does nothing with respect to cannabis, the outcome will be that licensed businesses will fail, employees of those businesses will not be paid, and importantly, the illicit market will grow even further out of control. Here are some of my recommendations:
1. Extend Licenses
I don’t want to get too into the weeds on the history of temporary and provisional licenses under MAUCRSA. Needless to say, there are probably thousands of provisional licensees whose licenses expire between May and August 2020. Those businesses should not have to worry about re-applying in the near future. The agencies should just automatically extend all licenses for three to six months. The same goes for all local jurisdictions too.
2. Reduce or Suspend Taxes
Cannabis businesses were having a tough enough time with state taxes before there was a global pandemic. The state can and should temporarily reduce or suspend the cultivation and excise tax requirements to ease financial burdens on already cash-strapped cannabis companies. This would have an immediate effect on the entire cannabis industry. Here too, local jurisdictions should follow suit.
3. Allow Statewide Delivery
With the state closing down all retail food establishments, cannabis businesses should follow suit. Consumption lounges and brick-and-mortar retailers should temporarily cease doing business and the state should do everything in its power to allow them to conduct deliveries, even if such businesses presently don’t do deliveries. The state can adopt emergency regulations that ease the requirements on delivery companies so that brick-and-mortar only retailers can easily use vehicles of their own to deliver cannabis.
Notably, the Bureau of Cannabis Control (BCC) already allows statewide deliveries despite prohibitions in most cities and counties. Those cities and counties should step up to the plate and take appropriate action to make clear that they will not enforce delivery bans during this time, so that people do not have to be out and about purchasing cannabis.
4. Cut Licensing Fees
State and local agencies collect massive fees for people to apply for and operate cannabis businesses. Medium indoor cultivation licenses, for example, cost nearly $80,000 per year. The state should immediately ease the burden on cannabis companies by significantly reducing license fees throughout the balance of 2020 (and possibly beyond).
5. Keep up Enforcement
The state and local agencies should continue enforcement efforts against unlicensed operators during this time. As noted above, the illicit market is going to be the winner if the government does not step in any help licensed operators. But even help alone won’t be enough if the state allows the illicit market to continue unchecked. Enforcement should continue.