MMJ Q&A

Common questions regarding the medical marijuana industry and legal climate.

  • What type of business entity should my medical marijuana business be?

    The cornerstone of what type of entity most medical marijuana businesses should form is found in the Attorney General’s Guidelines for the Security and Non-Diversion of Marijuana Grown For Medical Use. The AG Guidelines state, that

    “Nothing in Proposition 215 or the MMP authorizes collectives, cooperatives or individuals to profit from the sale or distribution of marijuana. (See, e.g., §11362.765(a) [“nothing in this section shall authorize any individual or group to cultivate or distribute marijuana for profit”].”

    Based on this language as well as California case law, it is strongly advised that medical marijuana collectives or cooperatives form as California Nonprofit Mutual Benefit Corporations or California Consumer Cooperatives. The purpose of these organizations is to provide only for the benefit of your members. Just like a regular corporations, a nonprofit mutual benefit corporation has members, officers and a board of directors. You keep appropriate corporate records and pay taxes just like a corporation.

  • What’s the difference between a collective and cooperative?

    Under California law, medical marijuana patients and primary caregivers may “associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes.” (§ 11362.775.). The Attorney General’s Guidelines lay out the definitions and highlight the differences between a collective and cooperative.

    Cooperative corporations are organized under California Corporations Code § 12201 and 12300. The Code explains that cooperatives are “democratically controlled and are not organized to make a profit for themselves, as such, or for their members, as such, but primarily for their members as patrons. The earnings and savings of the business must be used for the general welfare of its members or equitably distributed to members in the form of cash, property, credits, or services.

    California law, on the other hand, does not specifically define collectives. The common dictionary defines collectives as “business, farm, etc., jointly owned and operated by the members of a group.” A collective should be an organization that merely facilitates the collaborative efforts of patient and caregiver members – including the allocation of costs and revenues.

    Remember, whether you decide to operate as a collective or cooperative, the proper business entity still must be formed and maintained.

  • Can dispensaries provide edibles and marijuana-infused products?

    Concentrated cannabis, hashish and edibles are included within the meaning of “marijuana” in the Compassionate Use Act. Therefore, a medical marijuana patient is permitted to possess concentrated cannabis in amounts that are reasonably related to their medical needs. Additionally, lawful non-profit medical marijuana collectives may dispense concentrated cannabis and edibles under the protections of the medical marijuana laws.

    A strange contradiction exists as it relates to manufacturing concentrated cannabis. In California, there are no laws that provide for the lawful creation of concentrated cannabis. Under California Health and Safety Code 11379.6, also known as the “drug lab” statute, any person who “manufactures, compounds, converts, produces, derives, processes or prepares…by chemical extraction…any controlled substance” can be punished by imprisonment of three to seven years. Most notably, there is no medical marijuana defense to this offense in the state of California.

  • Do medical marijuana businesses need to charge sales tax?

    In February 2007, the California State Board of Equalization (BOE) issued a Special Notice confirming its policy of taxing medical marijuana transactions, as well as its requirement that businesses engaging in such transactions hold a Seller’s Permit – Attorney General’s Guidelines for the Security and Non-Diversion of Marijuana Grown For Medical Use.

  • Can I get a Grower’s License?

    The simple answer is no. When a patient visits a doctor to obtain their recommendation, they might be offered to upgrade their recommendation to a “Grower’s License” which claims to allow the individual patient to grow up to 99 plants. This so-called medical marijuana “grower’s license”, which typically costs more, provides a false sense of protection. The law does not allow a doctor to issue such a license and the document does not have the legal standing implied by the word “license”.

    In the eyes of the law, a growers license holds the same legal weight as the “regular” medical marijuana recommendation and only allows a patient to grow the medicine reasonably related to their medical need. Law enforcement and courts are highly unlikely to find that a 99 plant grow is reasonably related to one patient’s needs. If you are interested in growing in excess of your personal amount of cannabis, consider forming a collective or cooperative.

  • What makes some a Caregiver?

    A primary caregiver is an individual, designated by the patient, who consistently assumes responsibility for a patient’s housing, health or safety. A primary caregiver must, in the minimum, prove that they (1) consistently provided caregiving, (2) the care provided was independent of any assistance relating to medical marijuana, (3) the care provided was done at or before the time he or she assumed responsibility for assisting with patient’s medical marijuana needs. People v. Mentch (2008) 45 Cal. 4th 272,283.

  • I already have a doctor’s recommendation, why should I get the state I.D. Card?

    Under California law, all patients must have a doctor’s recommendation for medical marijuana. However, the Medical Marijuana Program Act established a state authorized medical marijuana identification card. Local county Health Departments can issue the identification card to a patient or primary caregiver who has a valid doctor’s recommendation.

    Patients and primary caregivers are not required to have this identification card. However, it is a powerful form of protection for patients because the card requires law enforcement to verify the validity of your qualified patient status. The I.D. card gives the patient immunity from arrest for transporting, possessing or cultivating medical marijuana in amounts that are reasonably related to their medical needs.

  • Is it mandatory for dispensaries to test its medical cannabis?

    Currently, in many cities, it is not required that dispensaries test cannabis for pesticides or potency. However, as the industry continues to evolve, many experts feel that testing requirements will become inevitable. Therefore, its encouraged for businesses to get into the habit of testing now so that when these requirements are enacted, businesses will be able to easily adapt to the new industry standards.

  • Can employers drug test medical marijuana patients?

    Unfortunately, California Law does not protect a patient from discrimination in the workplace. The prevailing case that cements this fact is Ross v. RagingWire Telecommunications (2008) Cal.4th920. The plaintiff, Mr. Ross suffered severe back injuries while serving in the United States Air Force. He used medical cannabis to treat his pain. He was hired by RagingWire and shortly thereafter was asked to take a drug test. Mr. Ross tested positive for cannabis and presented his medical cannabis recommendation. He was fired immediately. Mr. Ross sued RagingWire alleging discrimination under the Fair Employment and Housing Act (FEHA). The Court ruled that FEHA does not require employers to accommodate the use of illegal drugs, and that nothing in the Compassionate Use Act addresses the rights and obligations of employees and employers.  The Court held that if the voters wanted to protect employees, they would have done so and included such language into the statute. Ross at 927-28, 205.

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