Understand the possible rule changes

By Stephanie Boehl

The Washington State Liquor Control Board made important changes to its marijuana rules in October.

On Oct. 22, the board approved temporary emergency rules. These rules went into effect immediately, but expire in four months. The rules are identical to prior emergency rules issued back in June, which were originally set to expire Oct. 23.

In addition, on Oct. 15, the Liquor Control Board published permanent proposed rule revisions. These revisions incorporate the temporary emergency rules and include additional changes. Unlike the emergency rules, these changes do not go into effect until after the public is afforded an opportunity for comment and feedback. Please review the proposed rules, available on the Liquor Control Board website, for more information. Public comment is due Dec. 3, 2014, which is also the date for a public hearing. The hearing is scheduled at 10 a.m. in the Liquor Control Board’s office at 3000 Pacific Ave. SE in Olympia. Comments may be submitted in writing by email or fax, or in person at the public hearing.

Below is a summary of the proposed revisions. New changes, not previously addressed by emergency rule, are noted.

All Licenses

Here is a rundown of the new proposed rule revisions that were not previously addressed by emergency rule.

1. Employee is defined to include “any person performing services on a licensed premises for the benefit of the licensee.”

Licensees have received mixed messages regarding their ability to use contract and temporary workers. This proposed change would presumably allow for those arrangements. However, for purposes of employment law and tax withholding requirements, other definitions of employee continue to apply.

2. The 25 percent marijuana excise tax applies to total amount of consideration received, with no deduction for delivery charges or cost of materials.

For purposes of the marijuana excise tax, selling price is defined as “the total amount of consideration.” Accordingly, there is no deduction for cost of property sold, cost of material used or delivery charges.

3. Firearms are prohibited at licensed locations.

Signs indicating that firearms are prohibited (provided by the Liquor Control Board) must be posted at the entrance of each licensed location. This is a welcome development in light of federal law, which imposes significant criminal penalties when a person is in possession of marijuana while armed with a firearm.

4. The Liquor Control Board and law enforcement may stop and inspect transportation vehicles at any licensed location or while en route during transportation.
5. The sunset provision, of July 1, 2014, on the exception to the criminal history point assignment for certain marijuana-related convictions is removed, and therefore, the exception continues to be available for certain qualifying marijuana convictions.
6. Liquor Control Board enforcement officers are granted the authority to impose an administrative hold on licensees to prevent destruction of evidence, diversion or other threats to public safety.

The proposed rules would also make permanent the following emergency rules:

7. Licensees must maintain a visitor’s log, showing the full name of each visitor entering the licensed premises, badge number issued, time of arrival, time of departure and purpose of visit. The log must be maintained on the premises for three years and is subject to inspection by the Liquor Control Board and law enforcement.
8. All visitors must display an identification badge while on the licensed premises.
9. Testing labs will be evaluated under a good laboratory practice checklist.

Retailers

There are two proposed rule revisions that would specifically affect I-502 retailers that were not previously addressed by emergency rule.

1. Retailers may not sell items used to extract or grow marijuana, like blenders, extractors or grow lights.

Retailers are limited to selling marijuana and paraphernalia. The proposed rule defines paraphernalia to include products used for storage or use of marijuana, including lighters, roach clips, pipes, rolling papers, bongs and storage containers. Items for growing, cultivating and processing marijuana, like butane, grow lights and chemicals, are excluded from the definition. This change is consistent with the Liquor Control Board’s recently-published frequently asked questions, which states that retailers may not sell blenders or extractors, despite those items qualifying as paraphernalia under the state’s Uniform Controlled Substances Act (RCW 69.50.102).

2. Retailers may affix their trade name and UBI to products with a sticker.

Producers/Processors

Several proposed rule revisions are on the table for producers and processors. Here are the revisions that were not previously addressed by emergency rule.

1. State-wide plant canopy limit is increased from 2 million to 8.5 million.

The current rules cap the total state-wide plant canopy at 2 million square feet. This cap is what led the Liquor Control Board, back in February 2014, to restrict each principal/entity to one producer license and to reduce the allowable plant canopy per license by 30 percent. The proposed rule revision would increase the state-wide cap, based on marketplace demand, up to 8.5 million square feet.  Anything higher would require board approval. Although this is a welcome change, it does not necessarily mean that the 30 percent reduction will be removed, nor that the hold placed on additional producer license applications will be lifted.

2. Packaging for solid infused products that contain more than one serving must remain child resistant after the package is opened.

Solid infused products containing more than one serving must be sold in a package that remains child resistant after the package is opened. Based on my conversations with the Liquor Control Board, this would include packaging such products in a child-resistant, resealable zipper bag or a container with a push-down cap. In the alternative, individual servings would have to be separately packaged, each in child-resistant, heat-sealed, four mil plastic. Remember, a single serving of a solid infused product is limited to 10 milligrams of THC; one package of such product cannot exceed 100 milligrams of THC (or 10 servings).

3. Producers may transport live plants in trailers or in a secured area of a van or box truck.

Although it was always assumed to be permissible, the proposed rules make clear that producers may transport live plants. Such transportation must be in a fully enclosed, windowless, locked trailer or in a secured area within the inside body of a van or box truck. Live plants may not be transported in the bed of a pickup truck, SUV or passenger car.

4. Vessels on professional-grade, closed-loop CO₂ gas extraction systems may be rated to a minimum of 600, as opposed to 900, pounds per square inch.
5. Processors planning to use professional-grade, closed-loop extraction systems must provide a certification to the Liquor Control Board of the system’s compliance with certain manufacturing standards and good engineering practices.
6. Processors using ethanol to create extract must recapture the solvent and ensure that it is not vented into the atmosphere.
7. Quality assurance testing is added for marijuana trim and ready-to-roll cannabis mix.
8. The proposed rules identify additional producer violations, some of which are already provided in existing rules, but with conflicting penalties (at the time this article was published, it was not clear to me why, in some instances, the proposed rules create duplicate violations with conflicting penalties).

The proposed rules would also make permanent the following emergency rules:

9. The Liquor Control Board must pre-approve all marijuana-infused products, labels and packaging prior to offering these items for sale. If the board denies the product, the processor may request an administrative hearing.
10. Solid infused products must be scored to indicate individual servings.
11. All infused products must be homogenized to ensure uniform disbursement of cannabinoids.
12. In addition to the other warnings, infused products must also contain the warning: “This product contains marijuana.”
13. Infused edibles “designed to be especially appealing to children” are prohibited.

The proposed rule also provides additional clarification, not provided in the emergency rule, on what products are considered “especially appealing to children.” Such products include gummy candies, lollipops, cotton candy and brightly-colored products.

4. Infused edibles which contain certain food items are prohibited, including potentially hazardous foods, as defined by Washington Administrative Code 246-215-01115.

Prohibited foods include:

– Any food that has to be acidified to make it shelf stable;

– Food items made shelf stable by canning or retorting (according to the Liquor Control Board, this would include pasteurization);

– Fruit or vegetable juices (not including shelf-stable concentrates);

– Fruit or vegetable butters;

– Pumpkin pies, custard pies and any pies containing egg;

– All dairy products, including butter, cheese, ice cream and milk;

– Dried or cured meats.

A processor may infuse dairy butter or fats to prepare allowable infused products, but the infused butter or fats may not be sold as stand-alone products. In addition, vinegar and oil derived from natural sources may be infused with dried marijuana if the plant material is removed from the final product and the vinegar and oil is not infused with any other substance, including herbs and garlic.

5. All processors producing infused edibles must pass a processing facility inspection, as well as ongoing annual inspections, and maintain recipes for products on the premises at all times.

For more information on the requirements of a facility subject to inspection, visit the Washington State Department of Agriculture’s website. Licensees must also permit the state to visit or inspect the processing facility at any time of operation without advance notice.

6. Processor-to-processor sales of marijuana concentrate or infused product is permitted.

The state legislature, during its last session, amended the law to allow for processor-to-processor sales. The proposed rules incorporate this statutory change. Of particular importance, that legislative change did not impose marijuana excise tax on such wholesale transactions.

7. Marijuana concentrates are expressly incorporated into the rules.

The state legislature, during its last session, amended the law to allow for marijuana concentrates. The Liquor Control Board’s proposed rules incorporate this statutory change by inserting references to marijuana concentrate where applicable. Concentrates are defined as “products consisting wholly or in part of the resin extracted from any part of the plant Cannabis and having a THC concentration greater than sixty percent,” according to RCW 69.50.101.

Attorney Stephanie Boehl co-chairs Garvey Schubert Barer Law’s cannabis practice group. She advises marijuana growers, processors and retailers, as well as other businesses on critical legal issues in order to maintain compliance with the multitude of state rules and regulations.