Amendment 64: An Overview of Colorado s New Approach to Marijuana

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1 Amendment 64: An Overview of Colorado s New Approach to Marijuana On November 6, 2012, voters in Colorado chose a new approach to their state s marijuana policies. By a margin of 55 45%, Colorado voters replaced marijuana prohibition with a model that legalizes marijuana for adults and taxes and regulates it like alcohol. The new constitutional amendment which MPP provided the bulk of the funding for took effect in December In 2013, the legislature and the Department of Revenue crafted implementing legislation and regulations for four types of marijuana establishments: retail stores, cultivation facilities, product manufacturers, and laboratories. Marijuana retail stores will begin to open in those cities that have approved them including Denver, Northglenn, Steamboat Springs, and Telluride in January Below is a detailed overview of the new law and regulations. At a glance: The 30,000-foot view of the new law is fairly straightforward. Amendment 64 removed all penalties criminal and civil for the private use, possession, and cultivation of a limited amount of marijuana by adults 21 and older. However, adults are still prohibited from consuming marijuana openly and publicly. Additionally, the amendment directed the Colorado Department of Revenue to develop regulations to regulate marijuana businesses. It made no changes to the medical marijuana law or to laws prohibiting the possession, use, and cultivation of marijuana by individuals under 21. Amendment 64 did not alter federal law, which is controlling on federal lands. Thus, the federal government retains the right to enforce its strict prohibition on use, possession, cultivation, distribution, and transportation of marijuana on federal lands. Marijuana laws for those 21 and over: Adults 21 and over in Colorado can now possess up to one ounce of marijuana without violating state law. They may also grow up to six marijuana plants three of which may be mature in a secure, enclosed location. Those adults who grow marijuana may possess all of the marijuana grown from those plants at the personal cultivation location. Only one ounce may be possessed in other locations. Those 21 and older can also gift for no remuneration up to an ounce of marijuana to other adults 21 and older. It is illegal for anyone to provide marijuana to those under 21. Amendment 64 did not alter federal law. The federal government has made it clear it intends to enforce its strict prohibition on use, possession, cultivation, distribution, and transportation of marijuana on federal lands. Cultivation, testing, and retail sales of marijuana: Amendment 64 required the Department of Revenue to develop regulations governing the commercial manufacture, sales, and testing of marijuana. The department s rules govern everything from the process for issuing a new license to a marijuana business to signage requirements. Cities and counties may enact their own rules and licensing as well. Below is an overview of the most vital rules, organized by topic. The Department of Revenue also regulates medical marijuana businesses and will continue to do so. To read the full rules, please visit the Colorado Department of Revenue, Marijuana Enforcement Division s website.

2 Licensing On or after October 1, 2013, a person who is operating in good standing a licensed medical marijuana center, optional premises cultivation license, or a licensed medical marijuana-infused product business may apply for a retail marijuana establishment license ( retail marijuana establishment is used in the Colorado rules to refer to all types of marijuana businesses other than medical marijuana including cultivation facilities, testing labs, retail stores, and product manufacturers). Those who do not hold a medical marijuana establishment license in good standing must wait until July 1, 2014 to apply for a retail marijuana establishment license. The licenses for applicants who operate medical marijuana businesses could go into effect as soon as December 30, The licenses for everyone else would not go into effect before October 1, General requirements for issuing of a new retail marijuana establishment license: o Applications may be submitted by natural persons, partnerships, associations, companies, corporations, and organizations. o Applicants must obtain all necessary licenses and approvals from both the state licensing authority and the relevant local jurisdiction before they can operate as marijuana establishments. Cities and counties are allowed to prohibit any type of marijuana establishment or to limit their number. They may also enact local laws governing the time, place, and manner of operation, as well as limit the number of licenses that will be granted. o Application and licensing fees for each premise must accompany all applications. Applicants that operate state-legal medical marijuana businesses will be charged $500 per license sought. The application fee for all other applicants is $5,000 per license sought. If approved, applicants must also pay licensing fees. These fees vary from $2,740 to $14,000 depending on the nature of the applicant and the license sought. o Each applicant must provide the following: If requested, suitable evidence of proof of residence in Colorado, and good character and reputation. Requested information concerning financial and management associations and interests of persons in the business. Department of Revenue tax payment information. Proof of good and sufficient surety bond. Accurate floor plans for the premises to be licensed. The deed, lease, contract, or other document governing the terms and conditions of the occupancy of the premises licensed or proposed to be licensed. Additional information the department deems necessary or relevant. o If an applicant is in compliance with the Retail Marijuana Code as well as all relevant local laws and regulations, the department must issue the license within 45 to 90 days of receiving the application. Where a locality

3 has limited the number of marijuana establishments it will license and a greater number of applications are received than licenses available, the department must consider the locality s preference when granting licenses. o The division will send a copy of the license application and half of the fee to the local jurisdiction where the applicant seeks to operate. o Any license granted by the division is conditioned on local approval and will be revoked if the locality fails to grant or denies the license. o An applicant who has been approved for a state license has one year from the date of approval to obtain local approval or licensing. If the applicant fails to obtain local approval within a year, the state licenses expire and may not be renewed. Existing medical marijuana businesses: Existing medical marijuana businesses have a couple options if they are interested in operating a retail marijuana business. A medical marijuana business may apply to convert to a retail marijuana establishment or it may apply to obtain one additional license so that it may operate as both a medical marijuana business and a retail marijuana establishment. o In order for an existing medical marijuana business to apply for a retail marijuana establishment license, it must be in good standing and have paid all applicable fees. o Existing medical marijuana businesses that seek to convert to retail marijuana establishments must declare the amount of medical marijuana or medical marijuana-infused product they intend to transfer to the retail marijuana establishment. They will only have one opportunity to transfer inventory. For those seeking full conversion, this amount will be equal to its inventory. For those seeking retail marijuana establishment licenses in addition to their medical marijuana business licenses, they may convert as much or as little marijuana as they wish. Only medical marijuana and medical marijuana-infused product that has been declared as transferred to the retail marijuana establishment license may be sold at retail. Once the retail marijuana establishment has made this declaration and has begun operating as a retail marijuana establishment, no additional medical marijuana or medical marijuana-infused product may be transferred from the medical marijuana business to the retail marijuana business. Individual qualifications for licensure: o Applicants must be truthful in the information they submit to the licensing division. The division may recommend denial of a license where an individual has made intentional misrepresentations or given false information in connection with their background investigation. o All applicants for initial licensure must provide fingerprints for a criminal history background check. This background check must demonstrate that the applicant is of good moral character, defined as having a personal history demonstrating honesty, fairness, and respect for the rights of others and the rule of law. o An applicant or licensee must report any felony charge or conviction to the division within 10 days of the arrest, summons, or the charge s disposition.

4 o All application forms filed by an applicant for license are accessible by the state licensing authority, local jurisdictions, and any state or local law enforcement agent. Additional qualifications for owner applicants: o Among other specific requirements, owner applicants must be of good moral character, be 21 years of age or older, be current on any taxes, interest, and penalties owed to the Department of Revenue, and prove that they have been a resident of Colorado for at least two years prior to applying. Additional qualifications for occupational license applicants: o In order to work for a marijuana retail establishment, an individual must apply for an occupational license. Among other requirements, potential employees of marijuana establishments must be of good moral character, be 21 years of age or older, and be a resident of Colorado. Individuals who have current medical marijuana occupational licenses issued pursuant to the medical marijuana code may also work in a retail marijuana establishment without being issued a separate occupational license. However, an individual with a current occupational license to work in a retail marijuana establishment may not work at a medical marijuana bushiness unless the person obtains the medical marijuana occupational license. The Licensed Premises Limited access areas the locations where marijuana is grown, stored, packaged, sold, or processed for sale may only be accessed by occupational or owner license holders, or by people accompanied by licensed individuals. The license badge must be worn in a visible manner. Visitors must be 21 and older, and the licensee must keep and maintain a log of all visitors. Any material change to the licensed premises must be approved, in writing, by the division. If a license holder wishes to relocate, he or she must first apply for and be granted a change of location application. Medical marijuana businesses may share their existing premises with a licensed retail marijuana establishment. However, medical marijuana businesses and retail marijuana stores must ensure proper separation of the two entities. All licensed premises must adhere to security rules, including specific requirements for alarm systems, lock standards, video surveillance, and waste disposal. Retail marijuana establishments cannot be open past midnight or before 8:00 a.m. any day of the week. Local jurisdictions may further restrict their operating hours. Retail marijuana establishments must adhere to all requirements of the Marijuana Inventory Tracking Solution (MITS). MITS allows the division to track all retail marijuana and marijuana products from either seed or immature plant stage until they are sold or disposed of. MITS is web-based coupled with the use of RFID technology that allows both the MITS user and the division to account for all retail marijuana and marijuana products.

5 Each type of marijuana establishment is subject to health and safety standards that include, but are not limited to, adequate and convenient hand-washing facilities, adequate lighting, and adequate and accessible toilets. They may be inspected by the local fire department, building inspector, or code enforcement officer to ensure safe and sanitary conditions. On-site consumption is forbidden at all types of marijuana establishments retail marijuana stores, cultivation facilities, product manufacturers, and testing facilities. Retail Marijuana Sales From January 1, 2014 until September 30, 2014, at least 70% of all marijuana sold at retail must have been grown by a retail marijuana cultivation facility owned by the same person or entity that owns the retail store. Retail marijuana stores may purchase and sell up to 30% of its on-hand inventory from another retail marijuana establishment regardless of common ownership. In the event a licensee experiences a catastrophic event, the licensee may petition for a waiver to exceed these limits. Retail marijuana stores are prohibited from distributing marijuana to anyone under 21 years of age. Prior to any sale, a retail marijuana establishment must check the person s government-issued photo identification. Marijuana retail stores may not sell more than an ounce of marijuana or its equivalent in marijuana-infused products during any single transaction with a Colorado resident. Non-residents may only buy a quarter ounce of marijuana or its equivalent per transaction. Internet sales are prohibited. Marijuana retail stores may not sell consumable products including tobacco products, alcohol, food, and beverages unless they are marijuana-infused. Marijuana retail stores may not give away marijuana or infused products. Only individuals who are 21 or older may enter areas where retail marijuana is sold, possessed for sale, displayed, or dispensed. Marijuana Cultivation Facilities A marijuana cultivation facility may propagate, cultivate, harvest, prepare, package, store, and label retail marijuana, including in concentrated forms. From January 1, 2014 until September 30, 2014, a cultivation facility license will only be issued to an applicant that has been issued a retail license or a marijuanaproducts facility license. During this time frame, cultivators are allowed to sell up to 30% of their inventory to other retail marijuana establishments that don t have the same owners. The associated retail licensee must use the other 70%. Subject to the above limitations, a marijuana cultivation facility may sell marijuana to retail marijuana stores, marijuana products manufacturing facilities, and to other marijuana cultivation facilities. Cultivation facilities are prohibited from selling marijuana that is not labeled according to the rules developed by the division.

6 Cultivation facilities may not sell marijuana directly to consumers. If a retail marijuana cultivation facility produces concentrates, all areas in which they are produced are subject to further sanitary requirements listed in the division s rules. Additionally, cultivation facilities are only permitted to make water-based concentrates. The rules list specific chemicals that are prohibited from use in marijuana cultivation. Marijuana Products Manufacturing Facilities Marijuana products manufacturing facilities may manufacture, prepare, package, store, and label marijuana products, including in concentrated forms. They may also combine marijuana with other ingredients to create edible products, ointments, or tinctures. From January 1, 2014 until September 30, 2014, if an individual or entity owns both a product manufacturing facility and a cultivation facility, the product manufacturing facility is prohibited from selling marijuana grown by the cultivation facility to another marijuana establishment unless it has been processed into marijuana products and the sales are to marijuana retailers. The cultivation facility itself may sell 30% of its marijuana inventory to marijuana establishments other than the associated product manufacturing facility. Product manufacturing facilities may only sell products they produce to retail marijuana stores and to other manufacturing facilities. Marijuana products manufacturing facilities cannot operate from a location that is also a retail food establishment or a wholesale food registrant. All products sold by marijuana products manufacturers must meet the division s labeling requirements, which are detailed later in this overview document. Each individually packaged edible retail marijuana product, regardless of the amount of servings it contains, may contain no more than 100 milligrams of active THC. Retail marijuana product manufacturers may not sell directly to consumers. Marijuana product manufacturing facilities must have adequate refrigeration and storage. Marijuana Testing Facilities Marijuana testing facilities can seek certification to test for one or more of the following: (1) residual solvents; (2) poisons or toxins; (3) harmful chemicals; (4) dangerous molds, mildew, or filth; (5) harmful microbials, such as E. coli or Salmonella; (6) pesticides; and (7) THC and other cannabinoid potency. Marijuana cultivation facilities are required to test all retail marijuana concentrates for: (1) residual solvents, poisons, or toxins; and (2) potency. A person who is an owner of a retail marijuana establishment or a medical marijuana business may not have a financial interest in a testing facility. The division must certify testing facilities before they can test for the listed contaminants. Testing facilities may only perform the tests for which they have

7 been specifically certified (for instance, a testing facility certified to test for potency only may do so, but is prohibited from testing for pesticides). Certification of a testing facility is contingent upon an on-site inspection, participation in proficiency testing, and ongoing compliance with division rules. Testing facilities must adhere to the personnel standards developed by the division. For example, the laboratory director must have three years experience in toxicology, analytical chemistry, or diagnostic laboratory testing and either an M.D. or doctoral degree in one of the natural sciences. Individuals with a Master s degree in one of the natural sciences are allowed to be a lab director so long as they have five years of experience. Testing facilities must adhere to a standard operating procedure manual. Certain requirements must be met for facilities that wish to test via gas chromatography, gas chromatography mass spectrometry, immunoassays, thin layer chromatography, high-pressure liquid chromatography, and liquid chromatography mass spectrometry. Testing facilities must participate in proficiency testing for each approved category for which they seek certification. Marijuana testing facilities must establish, monitor, and document the ongoing review of a quality assurance program sufficient to identify problems in the laboratory pre-analytic, analytic and post-analytic systems. Marijuana testing facilities must establish an adequate chain of custody. Marijuana testing facilities are subject to certain record keeping and reporting requirements. Transportation and Storage The division allows for transportation of marijuana and marijuana-infused products between locations that are licensed under the retail marijuana code, subject to restrictions and limitations. If the location is also a medical marijuana business, inventories must be properly separated and tracked. Marijuana and marijuana products may not be stored off-premises unless the licensee has a permit to do so. A permitted off-premises storage facility must meet all video and security requirements applicable to licensed premises. Business Records Required Marijuana retail establishments must maintain certain information required by the division in a format that is readily understood by a reasonably prudent businessperson. These books and records shall be maintained in a manner that shows the full nature of business transactions conducted in the current year and the three preceding calendar years. Marijuana retail establishments must provide on-demand access to on-premises records following a request from the division during normal business hours or hours of apparent operation and must provide access to off-premises records within three business days following a request from the division.

8 All retail marijuana establishments must collect and remit sales tax on all retail sales made pursuant to the licensed activity. Tax returns must be filed, and taxes remitted, on or before the 20 th day of each month for the prior month. When it deems one necessary, the state licensing authority may require a marijuana establishment to undergo an audit by an independent accountant. The regulations include a non-exhaustive list of when an audit may be deemed necessary. Labeling, Packaging, and Product Safety Packaging and labeling requirements for retail marijuana cultivation facilities: o Prior to transferring marijuana or marijuana concentrates to another marijuana establishment, a cultivation facility must place all marijuana and marijuana-concentrates in a sealed, tamper-proof package that contains no more than one pound of retail marijuana or concentrates. o The packages must each have a label with the information required by the division: the cultivation facility s license number, the harvest batch number, weight, and a complete list of all nonorganic pesticides, fungicides, and herbicides used in cultivation. Concentrates labels must also include a complete list of solvents and chemicals used in the concentration process. o If the marijuana or marijuana concentrates were tested for potency and contaminants, the labels must also detail the test results. If they were not tested, there must be a label stating, The retail marijuana/marijuana concentrate contained within this package has not been tested for potency/contaminants. Packaging and labeling requirements for retail marijuana manufacturing facilities: o Retail marijuana manufacturing facilities must individually package all retail marijuana products before transferring them to another retail marijuana establishment. Individually packaged marijuana retail products must be placed within a shipping container. o Retail marijuana manufacturing facilities must affix a label to every individually packaged retail marijuana product before transfer. The label must include the following: the license number of the cultivation facility where the marijuana used to manufacture the product was grown and the license number of the cultivation facility or manufacturing facility that produced the marijuana concentrate (if they are separate entities), the production batch number assigned to the marijuana concentrate used in the product, a statement about whether an individual package is childresistant, and a complete list of all nonorganic pesticides, fungicides, and herbicides used during the cultivation process. o If the marijuana products being transferred from a manufacturing facility to another marijuana establishment had potency and contaminant tests performed on them by a testing facility, the manufacturing facility may affix labels detailing the results of those tests. If they were not tested, there

9 must be a label stating, The retail marijuana contained within this package has not been tested for potency/contaminants. o Marijuana product manufacturing facilities must affix a label to all shipping containers containing individually packaged marijuana products prior to shipping them to another marijuana establishment. The label must contain: the number of individually packaged marijuana products within the container, the license number of the facility that produced the marijuana retail products, and an RFID tag for tracking purposes (RFID tags do not need to be affixed upon each individually packaged item). o Marijuana product manufacturing facilities must follow the same rules placed upon cultivation facilities when transferring marijuana or marijuana products to another marijuana establishment. Packaging and labeling requirements for retail marijuana stores: o Retailers may only sell marijuana, marijuana products, and concentrates if they are in properly sealed, labeled, secure, and either individually or collectively placed in child-resistant packaging. o The packages with marijuana and marijuana products must be labeled with the following: the license number of the cultivation facility that grew the marijuana, the license number of the retail store, the name and logo of the retail store, the batch number assigned by the cultivation facility to the plant or plants that produced the marijuana, the date of sale to the consumer, the net weight, a universal symbol indicating that the container holds marijuana, a complete list of all nonorganic pesticides, fungicides, and herbicides used in the cultivation of the marijuana, and the following warning statements: There may be health risks associated with consumption of this product. This product is intended for use by adults 21 years and older. Keep out of reach of children. This product is unlawful outside the State of Colorado. There may be additional health risks associated with the consumption of this product for women who are pregnant, breastfeeding, or planning on becoming pregnant. Do not drive or operate heavy machinery while using marijuana. o Labels on retail marijuana products (such as foods containing marijuana) must also contain a statement about whether the container is childproof and the following additional statements: This product is infused with retail marijuana. This product was produced without regulator oversight for health, safety, or efficacy. The intoxicating effects of this product may be delayed by two or more hours. o Labels on retail marijuana concentrates must also include a complete list of all solvents and chemicals used in the creation of the concentrate. o Edible products offered for sale by a retail store must also include the following information: ingredient list, statement regarding refrigeration, a

10 serving size statement, and an expiration date. Retail stores may also include a statement regarding compatibility with certain dietary restrictions and a nutritional fact panel. o If the retail marijuana, marijuana products, or marijuana concentrates being offered for sale by a retail store to a consumer have had potency and contaminant tests performed on them by a testing facility, the manufacturing facility may affix labels detailing the results of those tests. Otherwise, they must state, The retail marijuana contained within this package has not been tested for potency/contaminants. Signage and Advertising Television advertising is prohibited unless the marijuana retail establishment has reliable evidence that no more than 30% of the audience for the program on which the advertising is to air is expected to be under the age of 21. Radio advertising is prohibited unless the marijuana retail establishment has reliable evidence that no more than 30% of the audience for the program on which the advertising is to air is expected to be under the age of 21. Retail marijuana establishments are prohibited from advertising in print publications whose primary target audience consists of individuals under the age of 21. Retail marijuana establishments may only advertise on internet websites that require the user to verify that he or she is at least 21 years of age. This restriction applies to all internet advertising, including but not limited to pop-up advertising. Retail marijuana establishments may not engage in advertising via unsolicited pop-up advertising on the internet. Retail marijuana establishments are prohibited from targeting advertisements, in any medium, to persons who are not Colorado residents. Retail marijuana establishments may not advertise or utilize signage to assert that their products are safe because they are regulated by the state. Retail marijuana establishments may advertise that their products have been tested by a testing facility, but may not claim that their products are safe because they have been tested. All signage must comply with applicable local ordinances. Retail marijuana establishments are prohibited from using advertising that is visible to members of the public from any street, sidewalk, park, or other public place, including, but not limited to, advertising in the following ways: billboards, vehicle-mounted signs, and hand-held signs. However, retail marijuana stores may have signs on their lots that identify the location of the retail store. Retail marijuana establishments may not use cartoon characters, images, or other content that is known or should be known to appeal to individuals under 21 in any advertising or signage. Retail marijuana establishments may not use location-based devices, like cell phones, to advertise, unless the marketing is a mobile device application installed on the device by the owner of the device who is 21 or older and includes a permanent and easy opt-out feature.

11 Retail marijuana establishments may sponsor an event, but retail marijuana establishments may not engage in advertising at an event, where there is a high likelihood that individuals under 21 will be exposed to the advertising. This rule does not prohibit donor acknowledgement by the recipient in a format that is not highly likely to reach individuals under 21. Enforcement The Marijuana Enforcement Division of the Department of Revenue, its officers, and employees are charged with the investigation of all aspects of marijuana licenses to ensure the fair, impartial, stringent, and comprehensive administration of the Retail Code and related regulations. Retail marijuana establishments must cooperate with the division when they are acting within the normal scope of their duties. Failure to do so may result in penalties ranging from monetary fines to license revocation depending on the severity of the violation. Certain conduct, such as an intentional or purposeful misstatement in an application, could be used as the basis for criminal charges. Retail marijuana establishments who are alleged to have violated the Retail Code, any rule or regulation promulgated pursuant to it, or any of the division s orders are subject to the disciplinary process contained within the Marijuana Retail Code. Taxes On November 5, 2013, Colorado voters approved a marijuana tax measure that imposes a 15% excise tax on the wholesale price of marijuana sold for adult use, as well as a 10% sales tax on the retail price of adult use marijuana. Cities and towns may impose additional local sales taxes. The first $40 million of the revenue collected by the excise tax will go towards the construction of new schools. The rest will go to the general fund to help pay for enforcement of the new program, to pay for the implementation studies called for in the law, to monitor the health effects of marijuana, and for advanced roadside impaired driving enforcement training. Any money remaining may be used by the state treasure as provided for in law. Sales taxes will be remitted to the state and locality, respectively.