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Top 8 Cannabis Compliance Issues for Retailers

Compliance Issues for Cannabis Retailers

It’s true that we’ve seen progress socially and politically for legalization, but the struggle to keep cannabis retail stores free from legal scrutiny is still an uphill battle.

Despite imminent changes in legislation across North America, existing and new operations alike should be ready to dot their I's and cross their T’s as it pays to get ahead of the cannabis compliance game. Here are eight common areas where dispensaries slip up, with tips to help avoid these common compliance pitfalls.

1. Poor Inventory Management

Your cannabis retail store should never be caught in a situation where there is a lack of sufficient explanation for missing stock or inventory discrepancies. The simplest inventory oversight could lead to hefty fines, penalties, suspension or the loss of your cannabis license.

Inventory management becomes an issue for cannabis retail operators when the little pieces fall through the cracks over time. Discrepancies are typically due to human error, lack of quality assurance, careless packaging, and employee theft.

Avoid gaps in supply and sales numbers by tracking every bud through a sophisticated cannabis dispensary POS system created with the industry in mind.

2. Failure to Properly Report Data

Every local government that has legalized cannabis implements their own compliance requirements. You can check out these requirements on our Canada Dispensary Laws and California Dispensary Laws pages.These outline the frequency and format for reporting sales. Some states require sales reports to be submitted at the close of every business day, while others opt for weekly and monthly sales numbers.

As compliance reporting becomes a regular part of doing businesses, you should be able to provide on-demand sales reports that are as accurate as your inventory counts and in the format required by the local government.

Enlisting the support of a POS system will allow you to easily and robustly report your sales, inventory by product, taxes incurred, and any inventory discrepancies that may come up.

3. Failure to Pay Taxes

Gone are the days when regulations around state sales taxes for products bought and sold in dispensaries were ambiguous.

States such as California are putting forth and regularly revising sales tax requirements for cannabis retail and dispensary products. Failure to comply with sales tax payments can result in a hefty bill, onerous audits, or fines for unpaid state taxes.

In California, it’s estimated that only 25 percent of the state's cannabis companies were tax compliant, leading to invasive audits and hefty fines. Don’t be part of this statistic! Resources are available to ensure that you are tax compliant, including cannabis-tax specific charts and legal representatives.

4. Out of Date or Lack of Proper Licenses

License requirements for medical and retail cannabis stores can get confusing. Each legal state has their own regulations in terms of what licenses are required by cannabis dispensaries: business licenses, retail licenses, dispensary licenses, cultivation licenses, and other specific regulated documents.

Licensing requirements for cannabis dispensaries in California were defined and implemented in 2018. In Washington and Oregon, licensing processes for cannabis retail are well-established, with holds placed currently on some forms of licensing.

Know what’s required in your state – don’t risk getting shut down for lack of proper documentation. Set reminders for license renewal dates at the municipal and state level, and be sure all associated fees are paid on time.

5. Illegal Sales

Illegal sales can take many forms. In California, it was reported that some dispensaries were caught selling recreational marijuana before Proposition 64 took effect. But even after successfully receiving a license, illegal sales can still be a problem. Whether it’s selling to an underage person, making a sale outside of authorized operating hours, or exceeding the daily sales limit for an individual, every form of illegal sale can cause compliance trouble.

Luckily, there are sensible ways to avoid this. Wait until you are properly licensed to conduct business and implement technology that will verify age and validity of an ID, prevent any transactions outside of operating hours, and alert your staff when daily sale limits are exceeded so your busy employees don’t have to do the math. Implementing a POS with these automatic controls will minimize the risk of staff errors that could end up costing you your business.

6. Unreliable Technology

The effort put into tracking each and every transaction or inventory change will all be for nothing if that data is stolen, corrupted, or cannot be recorded. Loss of data due to unreliable technology can mean significant compliance risk, especially since most states require all records to be kept for three (Washington) to seven (California) years after the fact.

Unreliable technology can take many forms. There have been high profile data breaches in the news recently and the cannabis industry has not been spared. And some POS providers do not account for the possibility of their system going down, leaving staff to manually transcribe each and every transaction and uploading it to the system later, exposing you to risk of errors or lost data.

Protect your business and its data by partnering with a technology provider known for data security, a proven record of uptime, and offline mode that can store transaction data until your system or internet is back up and running.

7. Failure to Follow Packaging, Labeling, & Product Safety Laws

Packaging, labeling, and product safety issues are quickly becoming one of the largest compliance pitfalls for cannabis businesses. In California, all packaging must be child-resistant, with specific government warnings and symbols clearly and prominently placed. In Colorado, all edibles must be marked with a THC or cannabis warning on each piece.

Avoid getting into trouble by paying close attention to local laws and rule changes or hire a compliance officer to be on top of these changes for you.

8. Failure to Find Reliable Legal & Technology Partners

The common theme with all of these compliance pitfalls is that they can be avoided. It is vital for cannabis retail owners to find legal and technology partners that will keep them on the right side of the law.

Find a lawyer or firm that focuses on the cannabis industry in your area and can keep you up to date on all licensing issues, rule changes, or potential compliance problems. Look for a technology partner that understands the industry and will keep you compliant on multiple levels.

Keep On Your Toes

There are a few things that are certain about the legal cannabis industry: it is changing fast, but the tides of change are slow to take effect.

A general rule of thumb about compliance is that you can never work too hard at your compliance efforts to stay above the law. Watch our video to learn what sets us apart from the rest and how Cova can help you avoid compliance headaches. 

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