Hemp/CBD Products Retail Business Licensing

Overview

The retail sale of hemp products including CBD (cannabinoid) oils, foods, and other ingestible products is a business activity that often walks the line between being regulated as a Food Establishment and being regulated as a Marijuana Establishment. Thus, licensing authorities for this industry vary from state departments of health, to departments of agriculture, to marijuana licensing boards. Still, the majority of states either do not have specific licenses for this type of business, or allow that only licensed medical marijuana establishments may sell these products.

Industry Background

Only a handful of states have licenses specific to retailers of Hemp/CBD Products; however, almost all states require licenses for the sale of food items; therefore when starting a Hemp/CBD Products business, it is imperative to familiarize yourself with state, local, and federal definitions of "food" to determine if a license is required for your business. As most CBD products are meant to be ingested in either oil, powder, or smokeable form, there may be different license classifications associated with your business depending on exactly what products you sell.

Those states that do license retailers of Hemp/CBD Products specifically typically require adherence to state guidelines for product labeling, marketing, and percentage of delta-9-THC in the product (usually capped at 0.3%). Businesses can expect to be required to submit to random inspections by licensing boards of both their facility and their individual products to ensure compliance with regulations. The state of Utah requires that each product offered for sale be annually registered with the Utah Department of Agriculture and Food, with annual registration fees levied per product.

In general, licensing requirements are far less strict than those of marijuana establishments, and fees are less steep. Businesses can expect licensing fees of $50 to $650 on average, though some states, like Utah (mentioned above), may have hefty annual costs. Fingerprinting and background checks of owners and officers is common, as well as submission of facility layout plans, samples of labels, and product descriptions. As with any industry, state incorporation filings, tax registrations, and basic local business licenses are more than likely required.

Ramifications of Non-Compliance

Cannabis itself continues to be prohibited under federal law. This makes compliance with state laws in cannabis-adjacent industries particularly crucial. Unlicensed sale of cannabis or cannabis-derived products can lead to hefty fines and even incarceration of six months or longer depending on the amount sold.

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