If your business isn’t fully compliant you could risk many California cannabis penalties and full criminal liability,

2018 is going to be the California Cannabis Industry’s most important year to date!

The Bureau of Cannabis Control is unfortunately starting to collect on all those compliance mistakes that your cannabis related business has most likely been making.

Let’s think about what a legitimate market means for compliance.

Have you ever seen a multi-million dollar company in the United States that doesn’t comply with the laws?

It becomes a necessity for survival, and as a practicing California attorney, I have seen it too often…

I’ve experienced more than my fair share of small-potatoes breach of contract cases to multi-million dollar lawsuits against companies breaking the law and they weren’t even cannabis companies!


Are the penalties for a non-compliant cannabis business only financial?

Which means commercial California cannabis penalties aren’t just financial penalties anymore. If your California cannabis business isn’t fully compliant; you could also face full criminal liability, increased risk of federal prosecution, and expulsion from the cannabis industry. Oddly enough, California marijuana companies are not scrambling to become compliant to CA Recreational cannabis laws – Just Yet.

Whether you already think your commercial cannabis company is following the laws because you were issued a license or you are crossing your fingers and trying to hide under the radar – finding out your compliance status is a must and TWI can help for free! Please read through this article and sign up for a FREE cannabis business compliance review.

…it’s free for now, but we only have limited quantities available. Read on to learn more about California cannabis penalties.


What Penalties Do I Face Under “MAUCRSA”?

Did you know? On December 7, 2017 California implemented SB-94 with 148 pages of new cannabis commercial laws (our lawyer, Jimmy, might be a little salty about that) fondly called the Medicinal and Adult-Use Cannabis Regulation and Safety Act or “MAUCRSA”.

If you pre-applied for a California State license prior to December 7, 2017 there are 148 pages of new laws that could potentially affect you. Remember, we made our lawyer read it. All.

If you applied after, or have not applied yet, then there are still 148 pages of laws you need to know. Not that anybody is counting.

If you don’t intend to be compliant at all, then there are a lot more than 148 pages worth of legal paperwork, penalties, and jail time that you’ll face. TWI’s in house legal counsel is going to break down the reasons why you should be trying to follow the california laws. And he should know, he read all 148 pages.


If You Don’t Have a Cannabis License, Get Ready to be Fined (a lot!)

In California, operating without a license carries a massive financial penalty of up to three times the amount of the license fee for each violation. We’ve listed the current schedule of license fees for cannabis businesses in California so you can calculate the pain yourself if you want.

Schedule of License Costs and Fees in California

License TypeFee 
Annual License$1,000
Cannabis Event Organizer$1,000
Temporary Cannabis Event$1,000
Physical Modification of Premises$500
- Type -- Value of Product -- Fee -
Testing LaboratoryUp to $50 Million
$50-$500 Million
Over $500 Million
DistributorUp to $2 Million
$2 to $8 Million
$8 to $80 Million
Over $80 Million
Distributor - Transport OnlyUp to $2 Million
$2 to $8 Million
Distributor - Transport Only (Self Distribution)Up to $2 Million
$2 to $8 Million
Event Organizer (Annually)1-10 Events
Over 10 Events
ManufacturingAnnual Gross RevenueFee
Tier 1
Tier 2
Tier 3
Tier 4
Tier 5
Tier 6
Tier 7
Up to $100,000
$5,000,001-$10 Million
Over $10 Million

TWI has put together the licensing fees in this chart based on current California laws last reviewed as of March 1, 2018. A California state license varies depending on the type of business and the gross annual operations value. The lowest license being $500 for the year and going up to $125,000 a year.

Being convicted of a violation of operating without a license can impose a financial fine of a minimum of $1,500 to $375,000.

As a cannabis business operating under the radar, you might be thinking you can handle paying a fine and you would still want to take the risk of operating without a license.

But this might change your mind, BPC 26038(a) also states:

“Each day of operation shall constitute a separate violation of this section.”

Simply put, if your license fees were $5,000 and you operated without a license for half a year before being caught, that’s 180 days times $5,000 meaning you would be punished with a $900,000 fine. It only gets worse the bigger your operation. Imagine if you had a $125,000 annual license fee, you would be punished with a $22,500,000 fine after 180 days.

Did we forget to mention that they can order you to destroy your own cannabis and force you to pay for that too? Bummer 🙁


You May Be Subject to Criminal Penalties if You Are Not Compliant

If you are operating without a license, ALL Criminal penalties apply to you. California Business and Professions Code 26038(c) provides that “criminal penalties shall continue to apply to an unlicensed person engaging in commercial cannabis activity in violation of this division.”

This means that all criminal penalties that are a result of a violation of MAUCSRA and the regular penalties will also apply to you. For example, if you operate a cannabis manufacturing facility and were distributing your product, you would face the following criminal penalties:

  • Under RTC 34014 – a misdemeanor for distributing without a license
  • Under RTC 34016 – a misdemeanor for false or fraudulent reporting
  • Under HSC 11359(c)(1)-(3) – Up to 3 years of jail time
  • Under HSC 11379.6(a)-(f) – Up to 7 years of jail time and $50,000 fine

PLUS potentially more city/county local and other penalties.

Anyone working underneath you would be subject to conspiracy penalties as well. Essentially, they could stack multiple penalties and utterly ruin your life.

And to think, a quick cannabis compliance check could have saved you from extra financial burden, or worse – jail time!


California Cannabis Penalties include severe Tax Penalties

California’s Revenue and Tax Code Section 34016 allows California peace officers to inspect a facility every 24 hours for possible tax violations. Failure to allow an inspection is a misdemeanor, up to $5,000 fine, or imprisonment for a year.

In addition, under the Revenue and Taxation Code 34013, non-payment of taxes will require an offending company to pay the full amount of taxes not paid AND be subject to a penalty of at least one-half the amount of the taxes not paid. Essentially, non-compliance with cannabis tax laws will result in 1.5x the amount of taxes being paid.

And they will revoke your license too!!!


California Cannabis Penalties Include Loss of Everything Related to your Cannabis Operations

Did you buy an airplane, a boat, or spend millions on a top of the line extraction setup? Well upon violating MAUCRSA, California can literally take EVERYTHING related to your business under Health and Safety Code 11470 including all your cannabis, product, raw material, and anything you used to manufacture, deliver, process. This includes any vehicle, boat, airplane, or container.

If you spent years developing a proprietary strain, they can take your formulas, research products and materials. Any money, financial instruments, securities that were purchased using said funds.

It’s kind of like a game of capture the flag, except with your property. And you don’t get it back.


You can also be banned after they revoke your license

Many of the laws implemented by MAUCRSA also involve having your license revoked, any renewal being pre-emptively denied, and banning non-compliant cannabis operators from the industry for several years to forever.

For example, Business and Professions Code 26057 provides a slew of reasons to deny a renewal including having outstanding fines, violations of MAUCRSA, or being sanctioned by licensing authorities. It also provides a 3 year ban if your license was ever revoked.


Why would the State care about Cannabis Penalties?

It’s pretty simple, like we mentioned in our Cole Memo summary article:

“California intends to ‘vigorously enforce our state’s laws and protect our state’s interests.”

So what is the state’s interests? Was it a gift from California to its citizens so that we could all be weed-smoking hippies at peace with the world?


California legalized the Cannabis industry for monetary gain. If you thought the State’s interest was anything else, you should probably stop toking.

Here are some of the obvious reasons for enforcement that didn’t exist pre-January 1, 2018:

  • Immense Monetary Benefits through Fines, Taxes, and Penalties.
  • Protection of Cannabis Consumers – weeding out legal cannabis companies from backyard dealers, ensuring quality (think moonshine vs grey goose).
  • Protection of the Cannabis Industry – the big companies are paying millions, protect your golden goose.
  • Regulation is in place and is being developed.
  • Non-compliant Cannabis Companies are incredibly easy to identify.
  • Giving up non-compliant companies as fodder to federal prosecutors.


Every City and County publicly lists all legal cannabis companies operating within their borders. The State lists all cannabis companies that have received a license from them.

If you aren’t on that list or in the process of getting on that list – you’re illegal.


What areas of non-compliance are there to deal with?

If you aren’t in compliance with all of these, it will be very easy for California to find fault and impose some sort of fine or tax. So even if you have your license or had your process reviewed before, having a second opinion doesn’t hurt. We hope you will sign up for a FREE Cannabis Business Compliance Review.

Areas cannabis companies now have to worry about being compliant:

  • inventory requirements,
  • security and surveillance requirements
  • labeling and packaging,
  • business records
  • transport and storage.
  • Structural
  • Licensing
  • BCC lists all compliant companies (but not coops)
  • Cannabis advertising


Unfortunately Non-Compliance Penalties are Severe, Extensive, and Easy to Get.

MAUCRSA ushered in a wave of new penalties including triple penalties for unlicensed operators, severe tax penalties, and complete criminal liability. Misdemeanor convictions are a minor punishment but get enough of them and they essentially ban you from the industry.

At TWI, we hope to see a California where everyone has the opportunity to succeed and we want to take the risk to grow with you or elevate your business to the next step while avoiding the penalties at hand. Which is why we spend so much time reviewing California Cannabis Compliance. TWI understands the difficult and was created to bring a white collar approach to a former black market. Our process of assessing California Cannabis businesses helps create a network of like-minded, legally operating cannabis businesses.

If you aren’t trying to follow the laws, we urge you to take advantage of our free compliance assessment. Likewise, even if you believe you are legally compliant, no one is infallible and it never hurts to have a second opinion and join our rapidly growing network of Cannabis businesses.


As always,

Toke and grow safely!