1. Understand regulatory and legal requirements. Do market research.

California Cannabis Laws

Today, cannabis is legal in California for both medicinal and adult (recreational) use. On November 16, 2017, California published the long awaited rules and regulations to implement voter approved Proposition 64, the Adult Use of Cannabis Act of 2016, which legalized adult use of cannabis in the State of California. The California Legislature passed and the Governor signed into law the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), which created the general framework for the regulation of both commercial medicinal and adult-use (recreational) cannabis.

As of January 2024, the state’s three licensing authorities have issued 9,683 commercial cannabis licenses to cannabis businesses throughout the state of California, including 5,472 cultivators, 748 manufacturers and 1,241 retailers, 446 non-storefront retailers, 1,134 distributors, 408 microbusinesses, 150 transporters, 46 event organizers and 38 testing laboratories.

California Cannabis Market

Research cannabis laws and regulations to learn more about the regulatory requirements for obtaining a license in the city or county in which you want to operate. View municipal zoning status and bylaws by city or county.

  1. Decide the type of cannabis business. Choose a location. Check local zoning regulations.

California Cannabis Licensing

There are at least 20 different types of cannabis licenses for the following cannabis operations:

  • Growing cannabis (cultivation)
  • Transporting cannabis (distribution)
  • Making cannabis products (manufacturing)
  • Testing cannabis or cannabis products (testing laboratory)
  • Selling cannabis (retail)
  • Holding an event where cannabis will be sold (event organizers)
Where to apply for a state license?

There are three different state agencies that are tasked with issuing licenses to cannabis business in California and several more agencies that will assist in the process.

  • Cultivation will be regulated by the Department of Food and Agriculture
  • Manufacturing will be regulated by the Department of Public Health
  • Testing, Distribution, Retail and Micro-business will be regulated by the Bureau of Cannabis Control
California License Types and Fees

The California Department of Food and Agriculture (CDFA) is authorized to issue the following Types of Cannabis Cultivation Licenses:

(a) Type 1C Specialty Cottage:

(1) “Specialty Cottage Outdoor” is an outdoor cultivation site with up to 25 mature plants. (application fee $135; license fee $1,205)
(2) “Specialty Cottage Indoor” is an indoor cultivation site with 500 square feet or less of total canopy. (application fee $205; license fee $1,830)
(3) “Specialty Cottage Mixed-Light Tier 1 and 2” is a mixed-light cultivation site with 2,500 square feet or less of total canopy. (application fee $340 and $580; license fee $3,035 and $5,200)

(b) Specialty:
Type 1 “Specialty Outdoor” is an outdoor cultivation site with less than or equal to 5,000 square feet of total canopy, or up to 50 mature plants on noncontiguous plots. (application fee $270; license fee $2,410)
Type 1A “Specialty Indoor” is an indoor cultivation site between 501 and 5,000 square feet of total canopy. (application fee $2,170; license fee $19,540)
Type 1B “Specialty Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 2,501 and 5,000 square feet of total canopy. (application fee $655 and $1,125; license fee $5,900 and $10,120)

(c) Small:
Type 2 “Small Outdoor” is an outdoor cultivation site between 5,001 and 10,000 square feet of total canopy. (application fee $535; license fee $4,820)
Type 2A “Small Indoor” is an indoor cultivation site between 5,001 and 10,000 square feet of total canopy. (application fee $3,935; license fee $35,410)
Type 2B “Small Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 5,001 and 10,000 square feet of total canopy. (application fee $1,310 and $2,250; license fee $11,800 and $20,235)

(d) Medium:
Type 3 “Medium Outdoor” is an outdoor cultivation site between 10,001 square feet and one acre of total canopy. (application fee $1,555; license fee $13,990; fee per additional 2,000 square feet $640)
Type 3A “Medium Indoor” is an indoor cultivation site between 10,001 and 22,000 square feet of total canopy. (application fee $8,655; license fee $77,905; fee per additional 2,000 square feet $7,080)
Type 3B “Medium Mixed-Light Tier 1 and 2” is a mixed-light cultivation site between 10,001 and 22,000 square feet of total canopy. (application fee $2,885 and $4,945; license fee $25,970 and $44,517; fee per additional 2,000 square feet $2,360 and $4,040)

Type 4 “Nursery” is a cultivation site that conducts the cultivation of cannabis solely as a nursery. (application fee $520; license fee $4,685)
Type 5 “Processor” is a cultivation site that conducts only trimming, drying, curing, grading, packaging, or labeling of cannabis and non-manufactured cannabis products. (application fee $1,040; license fee $9,370)

Manufacturing licenses are separated into two categories based upon the type of solvent used. Like Type 3 licenses, the Department of Public Health (DPH) will limit the number of licenses for manufacturers who use volatile solvents (Type 7).

Manufacturer 1 (Type 6): Manufacturing using non-volatile solvents or mechanical extraction.

Manufacturer 2 (Type 7): Manufacturing using volatile solvents.

Gross annual revenueApplication feeLicense fee
Less than or equal to $100,000 (Tier I)$1,000$2,000
$100,001 to $500,000 (Tier II)$1,000$7,500
$500,001 to $1,500,000 (Tier III)$1,000$15,000
$1,500,001 to $3,000,000 (Tier IV)$1,000$25,000
$3,000,001 to $5,000,000 (Tier V)$1,000$35,000
$5,000,001 to $10,000,000 (Tier VI)$1,000$50,000
More than $10,000,000 (Tier VII)$1,000$75,000

There are additional Type N (infusion of products), Type P (packaging and labeling) and Type S (manufacturers who work in a shared-use facility) manufacturing licenses.

The DPH is responsible for ensuring that all cannabis is tested prior to sale at a retailer, and will specify how such testing will be conducted. Type 8 license holders must test for THC, cannabinoids, contaminants, microbiological impurities, among other compounds listed in Business & Professions Code § 19344.

Gross annual revenueApplication feeLicense fee
Less than or equal to $160,000$1,000$3,000
$160,001 to $320,000$1,000$6,000
$320,001 to $480,000$1,000$8,000
$480,001 to $800,000$1,000$13,000
$800,001 to $1,200,000$1,000$20,000
$1.200,001 to $2,000,000$1,000$32,000
$2,000,001 to $2,800,000$1,000$48,000
$2,800,001 to $4,400,000$1,000$72,000
More than $4,400,000$1,000$112,000

Retailer (Type 10): A storefront retailer has a physical location where cannabis products are sold. Storefront retailers can also deliver cannabis products.

Non-Storefront Retailer (Type 9): A non-storefront retailer sells cannabis products to customers through delivery only.

Gross annual revenueApplication feeLicense fee
Less than or equal to $500,000$1,000$2,500
$500,001 to $750,000$1,000$5,500
$750,001 to $1,000,000$1,000$7,500
$1,000,001 to $1,500,000$1,000$11,000
$1,500,001 to $2,000,000$1,000$14,500
$2,000,001 to $3,000,000$1,000$22,500
$3,000,001 to $4,000,000$1,000$30,500
$4,000,001 to $5,000,000$1,000$38,500
$5,000,001 to $6,000,000$1,000$46,500
$6,000,001 to $7,500,000$1,000$57,000
More than $7.5 million$1,000$96,000

Distribution (Type 11): All cultivation (Types 1-4) and manufacturing licensees (Types 6-7) are required to send their products to a Type 11 licensee where their cannabis products will be inspected for quality assurance before the products pass to the next stage of manufacturing or retail.  Type 11 licensees must also send the cannabis products to a Type 8 laboratory for batch testing and certification.

Gross annual revenueApplication feeLicense fee
Less than or equal to $1,000,000$1,000$1,500
$1,000,001 to $2,500,000$1,000$6,000
$2,500,001 to $5,000,000$1,000$11,250
$5,000,001 to $10,000,000$1,000$22,500
$10,000,001 to $20,000,000$1,000$45,000
$20,000,001 to $30,000,000$1,000$75,000
$30,000,001 to $50,000,000$1,000$120,000
$50,000,001 to $70,000,000$1,000$180,000

Distributor transport only (Type 13): Allows a licensee to transport cannabis goods between licensed cultivators, manufacturers, and distributors. A licensee may not transport cannabis goods to a licensed retailer and may not engage in any other distributor activities.

Gross annual revenueApplication feeLicense fee
Less than or equal to $1,000$1,000$200
$1,001 to $3,000$1,000$500
More than $3,000$1,000$1,000

Allows a licensee to engage in cultivation (on an area less than 10,000 square feet), manufacturing (Level 1 manufacturing, Type 6), distribution, and retail sale, or any combination of at least three of the activities. Licensees will be required to comply with all rules and regulations, which will include, where applicable, regulations adopted by the California Department of Food and Agriculture and the California Department of Public Health, governing the activities they are engaged in.

Gross annual revenueApplication feeLicense fee
Less than or equal to $1,000,000$1,000$5,000
$1,000,001 to $2,000,000$1,000$12,000
$2,000,001 to $3,000,000$1,000$20,000
$3,000,001 to $4,000,000$1,000$32,000
$4,000,001 to $6,000,000$1,000$45,000
$6,000,001 to $7,000,000$1,000$60,000
$7,000,001 to $10,000,000$1,000$80,000
$10,000,001 to $20,000,000$1,000$100,000
$20,000,001 to $30,000,000$1,000$120,000
$30,000,001 to $40,000,000$1,000$140,000
$40,000,001 to $50,000,000$1,000$160,000
$50,000,001 to $60,000,000$1,000$180,000
$60,000,001 to $80,000,000$1,000$220,000
More than $80,000,000$1,000$300,000

Cannabis events can only be held by a person with an event organizer license, and the event itself requires a temporary cannabis event license.

Number of planned cannabis eventsApplication feeLicense fee
5 or fewer$1,000$3,000
6 to 10$1,000$5,000
11 to 20$1,000$9,000
More than 20$1,000$20,000

Temporary cannabis event licenses are $1,000 per event.

  1. Develop a solid cannabis business plan. Secure financing.
  1. Prepare the necessary documentation. Obtain local licenses, permits, or authorization.

California has a dual licensing system and cannabis businesses will be required to obtain a city, county, or city and county license, permit, or other authorization, before a business can apply for a state license. If you sell cannabis or cannabis products, you must register with the California Department of Tax and Fee Administration (CDTFA) for a seller’s permit and for a cannabis tax permit.

You will also need to check and comply with non-cannabis business regulations, such as the responsibility of registering your business with the California Secretary of State.

  1. Register and apply online. Obtain required state licenses. Pay fees.
  1. Register your business as an employer and a tax payer.

If you intend to have employees for your business, you must register your business as an employer and obtain a federal Employer Identification Number (EIN). There are also several agencies that administer a variety of taxes for businesses in California, which should be consulted to determine any obligations that your business may have.

  1. Keep track of your ongoing compliance requirements.

Physical security measures, good production practices, packaging, labelling and transport requirements, reporting requirements and more.

Main steps in short

  • Understand regulatory and legal requirements. Do market research.
  • Decide the type of cannabis business. Choose a location. Check local zoning regulations.
  • Develop a solid business plan. Secure financing.
  • Prepare the necessary documentation. Obtain local licenses, permits, or authorization.
  • Obtain required state licenses. Register and apply online. Pay fees.
  • Register your business as an employer and a tax payer.
  • Keep track of your ongoing compliance requirements.

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