Washington Cannabis: Liquor Control Board Proposes New/More Rules

The Washington State Liquor Control Board gave notice to the public last Friday that it is proposing more (and clarifying some) regulations for Washington’s recreational marijuana industry. Some of these proposals will be a welcome relief (like expanding the current producer plant canopy from 2 million to 8.5 million square feet and finally defining “selling price”), while others will have licensees and applicants pulling their hair out (like additional restrictions on packaging and labeling of marijuana-infused goods).

The following are the highlights of the proposed rule changes:

1. The Board plans to define “employee” as any person performing services on a licensed premises for the benefit of the licensee. This is important since many I-502 applicants have had questions regarding the definition of employees, as opposed to independent contractors.

2. The “selling price” of cannabis will be defined as “the total amount of consideration.” Important to note is that the Board will mandate that “no deduction from the total amount of consideration is allowed for the following: (a) The seller’s cost of the goods sold; (b) The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller; (c) Charges by the seller for any services necessary to complete the sale, other than delivery charges; and (d) Delivery charges.”

3. Transportation requirements will be amended to include transporting live plants. Specifically, live plants “may be transported in a fully enclosed, windowless locked trailer, or in a secured area within the inside body/compartment of a van or box truck. A secured area is defined as an area where solid or locking metal petitions, cages, or high strength shatterproof acrylic can be used to create a secure compartment in the fully enclosed van or box truck. The secure compartment in the fully enclosed van or box truck must be free of windows. Live plants may not be transported in the bed of a pickup truck, a sports utility vehicle, or passenger car.”

4. The Board plans to clarify that while processor to processor sales are exempt from the 25% excise tax, processors must pay tax on marijuana concentrates sold to retailers and retailers must pay tax on marijuana concentrates sold to consumers.

5. The Board is likely going to increase the plant canopy from 2 million to 8.5 million square feet. This could mean allowing producers to activate their additional licenses, potentially re-opening the licensing window, and allowing producers to go from the current 70% maximum production rate to full production capacity (i.e., tier 3 growers may be permitted to go from 21,000 square feet of plant canopy to the original 30,000 square feet).

6. There will be an added requirement that I-502 applicants must provide certification to the Board that their extraction equipment is a professional grade closed loop system commercially manufactured and built to codes of recognized and generally accepted good engineering practices.

7. Packaging and labeling requirements will now include marijuana concentrates. In addition, marijuana-infused products in solid form containing more than one serving must be packaged in a package and/or container that remains child resistant after opening.

The full drafts of the proposed rule changes can be found here, here, and here. If you’re an I-502 stakeholder, we urge you to review these proposed changes carefully and if you take any exception to any of them, let the Liquor Control Board know before the comment period ends on December 3, 2014.