Most cannabis business owners can agree on at least one thing — the danger of cannabis compliance risks and breaches feels ever-present. As the cannabis industry grows throughout the U.S., legal scrutiny hasn’t eased up.
It’s more important than ever to ensure your cannabis business avoids hefty fines, arduous audits, or even license revocation. If you have your compliance in order — and keep it that way — you should have nothing to worry about. Here are some of the most common cannabis compliance risks and mistakes and how to successfully mitigate them in your business.
1. Failing to Pay the Right Amount of Taxes
As each state regularly puts forward and revises its tax requirements, the rules around taxes are generally clear everywhere. Neglecting to pay taxes correctly can result in some of the worst punishments a cannabis business can see.
Do the math by using your state’s cannabis tax chart, and stay up to date with any changes. Leafly has a useful state-by-state guide on cannabis taxes. You may also want to hire the services of an accountant.
If you run a dispensary, let your cannabis retail point-of-sale (POS) software automate the task of calculating the retail taxes for you. It should record and charge the correct taxes every time your staff inputs a sale.
2. Falling Short of Correctly Reporting Data
Every local government has its own requirements for how to correctly report on data. Accurate compliance reporting means being able to produce on-demand reports that align with your business on the ground. Critical data to collect and report includes:
- Sales
- Taxes incurred
- Inventory
- Disposals
Check the frequency and format required for reporting in your state. Invest in an online reporting and compliance system that will automate product tracking and submit the needed documentation to your state’s tracking system for you. If you run a dispensary, set up a cannabis retail POS system that automatically syncs with your reporting system so you can track all sales easily and accurately.
3. Not Complying With Product Safety and Labelling Laws
All cannabis labeling must clearly display the amount of THC in the product. Manufactured products must feature the total dosage and serving size information on their packaging before they’re delivered to retail. In most states, every cannabis product’s packaging must be child-proof or child-resistant certified. The list of packaging requirements can be extensive.
Learn and keep up to date with changes to your state’s local laws around packaging. You may also wish to hire a compliance officer to help you stay compliant with product packaging laws at all times.
4. Neglecting Security Requirements
As dispensaries are cash-heavy operations and manufacturing facilities carry a lot of cannabis material, they’re both especially vulnerable to robberies and break-ins. However, it’s not just the theft itself that will impact your business negatively — discrepancies in your inventory or security system could also land you large fines.
Ensure inventory is kept under constant video surveillance during all of its transit and storage stages. Every state requires dispensaries to have 24-hour video surveillance, so make sure it’s working optimally for you — cover your entrances, exits, check-in area, sales floor, stockroom, and outer perimeter. It’s a good idea to invest in an intelligent alarm system as well.
5. Not Allowing Customers to “Loop”
Customers who “loop” go to dispensaries, buy the maximum amount of product they’re legally allowed, then return later in the day to make another maximum purchase. They may be doing this because they intend to resell your product. Failure to catch looping customers is serious — it can result in jail time for both the customer and you.
You could ask your budtenders to manually track customer IDs and sales throughout the day, but it’s easier to automatically record this information with a POS system. It will warn your budtenders when they’re about to make a sale that will put a customer over the daily limit. Your security cameras will allow you to have all the proof you need when customers revisit the store.
6. Relying On a Single Employee to Manage Inventory
Most theft in the cannabis industry is carried out internally. This is just one reason why you should never rely on only one employee to perform checks on your business’s inventory. Additionally, one person is unlikely to count stock perfectly every time or interpret every new state rule correctly.
Build checks and balances amongst employees into your inventory schedule. Ask different staff members to manage inventory on assigned days. If you’re not able to do this, require your manager to perform regular spot checks. This will demonstrate to a regulatory agency that you’re responsibly managing your inventory. You should also ask team members to review and discuss new state regulations to ensure everyone understands and agrees on their meaning.
7. Carrying Out-of-Date Licenses
Multiple licenses are often necessary for a cannabis business, and every legal state has its own requirements. These can include:
- Business licenses
- Local permits and licenses
- Cultivation licenses
- Dispensary licenses
- Retail licenses
- Additional regulated documents
The failure to hold necessary valid licenses is one of the easiest cannabis compliance risks to avoid, but not dealing with it could shut down your business.
Find out exactly what licenses and documents are required by your state and city and ensure they never fall out of date by setting digital reminders for license renewal deadlines. Don’t forget to make sure all associated fees are paid on time as well — these are an essential part of the licensing process.
8. Illegal Sales
Illegal sales are surprisingly easy for an unwitting dispensary to carry out, yet they can have a long-lasting effect. Your budtender may accidentally sell a product outside of authorized operating hours, make a medical sale to a person without a valid license, or sell to an underage person with a fake ID. Compliance regulators routinely check for illegal sales, and any of these mistakes are guaranteed to cause a cannabis compliance problem.
Having the correct licenses and SOPs in place and safeguarding against “looping” customers is a start, but there are other measures you can take. Install an alarm or bell that will sound to warn your sales staff when they can no longer make sales. Have a dedicated, separate check-in area manned by a security officer or receptionist who can thoroughly verify IDs before each customer is even allowed to speak with a budtender.
Avoid Cannabis Compliance Risks With Professional Assistance
If you’re looking for a marijuana business consultant with hands-on experience as cannabis business owners, M Consulting Experts is here to help. We’ll provide you with the cannabis compliance consulting services needed to successfully navigate you through the murky waters of cannabis regulation and compliance.