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Video 1 KTLA Channel 5 News Story June 18, 2010: Lake Forest Medical Marijuana Dispensary Appealing Injunction Order Video 2 KTTV Channel 11 News Story June 4, 2010: Los Angeles Medical Marijuana Dispensary Challenges LA's Ordinance Video 3 Cannabis Law Group's Attorney Damian Nassiri Sues the City of Los Angeles To Block It's Ban on Medical Marijuana as Featured on PBS's So Cal Insider - Part 1

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The city of Detroit is set to open its second round of limited cannabis business licenses, marking a significant step in the expansion of the city’s cannabis industry. Starting August 1, the city will begin accepting cannabis business license applications for a variety of licenses, including dispensaries, microbusinesses, and consumption lounges. This presents a unique opportunity for entrepreneurs looking to enter the burgeoning cannabis market, and the Cannabis Law Group is ready to provide expert guidance to navigate this process.

In this round, the city is offering 30 marijuana retailer licenses, 10 microbusiness licenses, and 10 consumption lounge licenses. Notably, half of all licenses are reserved for “equity applicants.” These are individuals who live in communities that have been disproportionately impacted by marijuana prohibition and enforcement. Equity applicants also include those with certified Detroit Legacy status living in Detroit or another disproportionately impacted community.

The announcement of this second round of licenses comes eight months after the city awarded 33 businesses recreational retail marijuana licenses. Following this, in early January, recreational marijuana officially became available for purchase in the city. Currently, there are 28 recreational marijuana dispensaries operating in Detroit.

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San Jose, a city known for its thriving cannabis industry, is facing a significant drop in cannabis tax revenue this year. The decline, projected to be in the millions, is attributed to the growing competition from the black market and cannabis delivery services. With a predicted $19 million budget shortfall for next year, boosting tax revenue from the cannabis sector remains crucial.

The city’s budget surplus currently stands at $35 million. However, the decline in cannabis tax revenue is a significant concern. In response, the San Jose City Council has shown interest in easing the regulatory burden on cannabis businesses. Recent moves include loosening cannabis business licensing laws governing where dispensaries can establish themselves and reevaluating penalties placed on legal businesses.

Illegal sellers appear to be capitalizing on the market, often operating as seemingly legitimate delivery services, without generating any tax revenue for the city. Sean Kali-rai, a lobbyist and founder of the Silicon Valley Cannabis Alliance, expressed his concern over the growing prevalence of unauthorized dealers. He stressed the importance of the city’s Division of Cannabis Regulation in overseeing and regulating the cannabis market.

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In a surprising turn of events, Laguna Woods, a city in Orange County known for its high percentage of senior citizens, is considering welcoming local cannabis shops. This move is a testament to the growing recognition of the medicinal and recreational benefits of marijuana among all age groups, including seniors.

Longtime Cannabis attorney Damian Nassiri explained to us that Laguna Woods is home to the highest percentage of senior citizens in Orange County. The city is now in discussions about allowing local cannabis shops to provide residents with easier access to medicinal and recreational marijuana. The city council is holding a public hearing on July 19 to gather more input from residents and city staff about potential regulations for these businesses.

At a preliminary discussion on June 21, council members discussed the potential look and feel of cannabis shops in the city. Most residents who publicly commented were in support of allowing cannabis storefronts. In November 2022, Laguna Woods residents passed Measure T with 61.03% of the vote, approving a tax rate on cannabis businesses. The council later set this tax rate at 10%, the maximum amount allowed under state law.

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In the ever-evolving landscape of cannabis laws and regulations, the Cannabis Law Group, led by Damian Nassiri, stands as a beacon of guidance for businesses in Southern California and across the United States. With over 14 years of experience in the industry, Nassiri and his team primarily assist clients seeking cannabis business licenses, including cannabis retail storefront, delivery, cultivation, manufacturing, and distribution licenses. Today, they shed light on a significant development in California’s cannabis industry: Senate Bill 512 (SB 512).

SB 512, designed to end the double taxation of cannabis in California, is a beacon of hope for an industry struggling under the weight of over-taxation. Currently, under the Adult Use of Marijuana Act, the cannabis excise tax is set at 15% of gross receipts from licensed retail cannabis sales. Many local governments impose additional taxes on cannabis, ranging as high as 10% in some jurisdictions. Retailers are required to include these excise taxes in the definition of gross receipts when charging additional sales taxes of 7.25 – 10.5%. This double or even triple taxation has placed an undue burden on the cannabis industry.

SB 512 aims to rectify this situation by ending this excessive taxation, delivering much-needed relief to an industry that is currently unfairly overtaxed. The bill’s passage would significantly impact the financial health of cannabis businesses, potentially leading to increased profitability and growth.

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Introduction:

In the ever-evolving landscape of the legal cannabis industry, businesses face a unique challenge when it comes to taxes. The Internal Revenue Service (IRS) Code 280E has significant implications for cannabis businesses, placing them in a distinctive position compared to other sectors. In this blog post, we delve into the effects of IRS Code 280E on legal cannabis businesses and explore the challenges and strategies for navigating this tax provision.

Understanding IRS Code 280E:

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Given the challenging current state of the California cannabis industry, an increasing number of CEOs are considering joint ventures, where companies at different points of the finance and supply chains connect via contract for mutual benefit. Joint ventures can help bolster profits and reduce costs for both operations – without having to endure the hassle and legal headaches of a formalized acquisition.California cannabis joint venture

As our Los Angeles cannabis business lawyers can explain, a joint venture is a commercial enterprise with a specific goal undertaken by 2+ partners that otherwise get to retain their distinct identities. Joint ventures can take on many different forms, but typically involve some type of shared returns, ownership, risks, or governance. Often, they’re pooling resources such as expertise, labor, data, physical space, etc., and minimizing risk by dividing it up among them. The extent to which each partner benefits/takes a risk is outlined in the joint venture contract – which should only be signed after careful review by an attorney representing each party. In some cases, it can involve the creation of a separate business entity, such as an LLC.

Joint ventures can be an innovative solution, but it’s not ideal for every situation. Furthermore, it’s usually most beneficial for all involved when there is:

  • A clearly stated purpose, a tangible goal.
  • A time limit, either for termination or re-evaluation.
  • A specified hierarchy or authority structure.
  • Clear allocations of profit sharing and losses.
  • Stipulated resources that will be shared (and which will not).
  • A blueprint for dealing with disputes and liabilities.

These agreements tend to make the most sense in situations that involve:

  • Pooling resources for branding and intellectual property. Ex: A grower and distributor pool resources to develop a marketing strategy to promote and sell a certain strand.
  • Pooling resources for a single service. For instance, several small cannabis retailers might create a joint venture to get better rates on delivery or shipping. Smaller growers might band together to get better rates on regulatory testing of their products by an accredited testing facility.
  • Developing certain cannabis products that wouldn’t necessarily be released by a single company solely with its own resources.

It’s worth noting that identifying joint venture opportunities and partners can be challenging in virtually any industry, but it’s fairly new practice in the cannabis industry. This is another reason it’s a smart idea to hire an experienced cannabis business lawyer to help you navigate the process. Continue reading

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Licensed cannabis B2B operations in California are faced with some pretty substantial challenges when it comes to getting off the ground. A rampant black market, heavy taxes, and tight regulations – all of these drain time, money, and professional resources, and make it tough to turn a profit in this industry. Many can also add to that list: Deadbeat customers. Los Angeles cannabis lawyer

As Los Angeles cannabis company lawyers, we know this has grown to become a significant problem for our clients. Put simply: Customers aren’t paying their bills. In response, more than half the state’s wholesale B2B cannabis market has invested in help from a Los Angeles non-profit credit association tasked with rating retailers and flagging repeat offenders – with the ultimate goal of halting the growth of hundreds of thousands of dollars in unpaid invoices. The operation, Credit Management Association, is reviewing accounts receivable and documentation from dozens of brand and distributors. Ultimately, it will release a “do not sell list” of two dozen+ cannabis retailers and delivery companies flagged for:

  • Failure to pay their bills in a timely manner (90+ days late on invoices).
  • Owing at least $25,000 for products.

As longtime Los Angeles marijuana lawyers, we recognize that the majority of cannabis retail and delivery companies don’t set out with the intention of becoming bad actors. They are subject to many of the same brutal market forces as suppliers. They fall a bit behind, and then it’s an uphill battle to fight their way out of debt.

Still, it’s a significant issue because pretty much every manufacturer, distributor, and brand has a non-inconsequential amount of unpaid invoices. That’s not a new problem, but it’s one that’s been exacerbated in the last year thanks to plummeting stocks and dwindling capital. Companies are having to take a hard line with some of their biggest clients – because they simply aren’t paying up.

Companies say they’ve been left with increasingly few choices, particularly because they aren’t backed by investors. If they utilize a debt resolution service, they’re going to take a 20 percent hair cut right off the top – even if they are paid. Most of these claims exceed the small claims avenue because the debts are primarily in excess of $5,000. Continue reading

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California cannabis regulators are taking pointed aim at mistreatment of cannabis company employees throughout the state. The Department of Cannabis Control has sought assistance from law enforcement agencies throughout the state to help identify and root out labor exploitation, which they say has become a serious problem in the marijuana industry. There are even allegations of cartel-driving human trafficking within the cannabis industry. California cannabis employment lawyer

Even mor recently, the California Department of Industrial Relations issued a reminder to cannabis employers that they are bound to comply with California labor law requirements. Further, it was noted that labor protections apply to ALL workers – regardless of the worker’s immigration status or even the legal status of the business. That means individuals operating unlicensed cannabis businesses can catch heat not only for operating unlawfully, but also for failing to follow state statutes pertaining to worker rights.

As longtime Los Angeles cannabis lawyers who also practice employment law in Southern California, we are closely familiar with the intersection of these issues and the unique legal questions that can arise.

Cannabis businesses are expected to provide workers with:

  • Minimum wage. The statewide minimum is $15.50 as of January 2023. Some cities may impose higher minimum wages.
  • Overtime paid at 1.5 the regular rate. Generally, overtime rates must be paid if an employee works more than 8 hours in a day or more than 40 hours in a week. If the employee works more than 12 hours in a workday, they must be paid double for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.
  • Valid workers’ compensation insurance. If the worker is hurt on the job, they have a right to expect workers’ compensation coverage, which is required by almost all employers in the state. If the company doesn’t have workers’ compensation insurance, they can be fined by the government and the worker can can sue them for damages.

The new unit of the DCC is aimed at taking action against cannabis companies that coerce or threaten workers, compel them to work in dangerous conditions, or deny them pay, benefits, or breaks to which they are entitled.

Last year, the Los Angeles Times published an investigation exposing the unfair treatment of cannabis workers, who are sometimes cheated out of wages, threatened with physical harm, or compelled to work in dangerous conditions that have actually proven fatal for some. Continue reading

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If anyone knows how critical it is to keep good records, it’s California cannabis companies. From metric analytics to regulatory compliance, the marijuana industry depends on data and documentation to ensure their operations are successful. Routine audits are a part of this. IRS audit California marijuana businesses

As our Los Angeles cannabis lawyers know, there are many different types of audits. If you’re proactive, you conduct internal audits – of your policies, your practices, your financial records, your compliance accuracy, etc. There are external audits, which might be requested by the board, investors, etc. for a lot of the same reasons as an internal audit, except with a fresh set of eyes from the outside. And then there’s an IRS audit or compliance audit.

Three years ago, the Department of the Treasury’s Inspector General for Tax Administration indicated that the IRS intended to ramp up its audit of cannabis businesses nationally. That report flatly stated the IRS did not believe most marijuana industry companies were correctly applying IRC 28E, and thus might owe millions in taxes. (This was based on 2016 tax filings.)

Of the subsequent IRS audits that took place in three states (California, Washington, and Colorado), roughly 60 percent of cannabis companies had to adjust their tax returns – which totaled nearly $50 million in unpaid taxes just for 2016.

This year, the IRS has better staffing than in recent years – plus the ability to conduct most audits virtually. Owners of plant touching businesses need to be especially primed and ready for this. Continue reading

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Companies that produce CBD products for consumer sales need to be especially careful with respect to the potency of their product and proper labeling that does not make misleading medical claims. As our Los Angeles CBD lawyers can explain, these are the two fronts upon which most CBD product liability lawsuits and regulatory action were predicated on in 2022.preventing CBD lawsuits

Public acceptance of CBD and cannabis products has grown, use has expanded, and even the federal government has been steadily easing restrictions.

However, where companies are too often getting caught up in litigation and regulatory scrutiny is with respect to potency, mislabeling, and misbranding.

Let’s start with the risk of product liability claims. For those who are unfamiliar, product liability is when a consumer alleges that a product was defectively designed, defectively made, or the warning about the risks was inadequate. Claimants don’t need to prove negligence, but they do need to show the product was the cause or a major contributing factor to the plaintiff’s illness or injury.

The long-term adverse impacts of CBD (or lack thereof) aren’t really widely known because research on these products has been so restricted over the last several decades. The U.S. Food and Drug Administration has raised concern about the potential for CBD to interact negatively with certain medications, and that it might cause liver damage. But the extent to which this is true isn’t well-known because it hasn’t been thoroughly studied. These potential harms could end up being the subject of lawsuits in the future. President Joe Biden recently passed a law permitting advanced research on the risks and medical benefits of both cannabis and its derivatives – including hemp-derived CBD. Continue reading

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