Losing Your Cannabis Business License is Easier Than You Think


With an ever-evolving slate of regulations and requirements, it can be easy to make detrimental mistakes. Compliance is an unavoidable and critical requirement cannabis business owners and investors must take seriously. If you hope to continue your cannabis business's legal operation, you must prioritize the accuracy of your inventory records. In California, cannabis business owners have faced license suspension for not adhering to the mandatory track and trace system or for keeping incomplete inventory records. Losing your cannabis business license for any reason means ceasing all transactions until it’s reinstated. This type of setback could mean losing thousands of dollars per day in sales.

The Importance of Implementing Strong METRC Processes

According to the Adult Use of Marijuana Act (AUMA), all legal cannabis must be tracked from seed to sale. The State of California uses METRC as its Cannabis Track and Trace system. To remain compliant with California cannabis regulations, business owners must inventory every regulated item. The importance of careful and accurate product inventory cannot be stressed enough. California regulators have the right to audit and record incidents of missing inventory. You could face fines and a suspension of your license for failure to maintain an accurate record of your cannabis inventory.

4 Tips to Help Your Cannabis Business Avoid an Inventory Audit

Your business's continued operation depends on the processes you create in the daily operation of your cannabis enterprise. If you are a sole operator, it will be far easier to implement and adhere to strict inventory accounting. However, if you are not a one-person operation, here are some suggestions for how to begin creating a system to prevent incomplete inventory records.

  1. Train Your Employees: If you have employees, it’s imperative they fully understand how they fit into your business’ compliance requirements. If they have no role, then make that clear as well.
  1. Keep Up to Date Records: California requires that you reconcile your inventory at least once every 30 days. Waiting too long between inventories can present challenges, so we suggest reconciling your receipts daily or weekly.
  1. Ask Questions and Don’t Guess: If you have questions about compliance, regulations, or anything regarding the legal obligations of your business, find out who to ask. A good place to start would be a legal representative who knows your business and obligations.
  1. Be Careful Who You Work With: Ensure your vendors are compliant because this could impact your ability to work with them. You wouldn’t want unlicensed inventory mixed into your stock.

San Diego Cannabis Business Legal Services

At Purdy and Bailey, we offer our clients support for their cannabis business. Our attorneys can help you understand many of the regulatory issues you may face in this new marketplace. The California cannabis industry is still in its infancy, so growing pains for this first generation of business owners are to be expected. Being an early investor or business owner in this new industry can be challenging and frustrating for entrepreneurs.

Contact our attorneys at (858) 360-7080 for help navigating the system.