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Do’s and Don’ts of Wholesaler, Distributor, and Delivery Licenses

By: Shravan Subramanian                                                                                                     November 6th, 2023

The Cannabis Regulatory Commission (CRC) is preparing to unveil its new license types for public applications— Class 3 Wholesaler, Class 4 Distributor, and Class 6 Delivery. Applications are now live to tap into the market. It is worth noting that these new license types are available strictly for Social Equity individuals until December 27, 2023, before being available for Diversely-Owned businesses and finally on March 27, 2024, to all other applicants. There is much discussion on how lucrative each license type is and the benefits and limitations of each one, and it is in your best interest to determine which one is best suited for you with a full understanding of each one. 

WHOLESALE

A Class 3 Wholesaler license allows that entity to sell, transfer, and store cannabis items from cultivators, wholesalers, and/or manufacturers to other manufacturers, wholesalers, and/or cultivators, typically in bulk. In simple terms, it is easy to think about it as the cannabis ‘General Mills’ for all these entities. The entities listed would sell their product to these wholesalers in bulk, who can then resell these products to others for profit. Wholesalers can accrue large sums of cannabis at once from these entities in the scale of 100s of pounds of cannabis flower at a time. Wholesalers also have the added advantage of storing cannabis products, which cultivators would want to utilize to move on inventory to make room in their facility for more yield and other necessities.

Do’s

  • Ensure that the warehouse premises are the only location that stores the cannabis products (locked and enclosed)
  • Secure a well-lit, ventilated, and sanitary location within the warehouse for cannabis storage that also has A/C and heating controls
  • Verify that they are only selling packaged and labeled products that have not been adulterated
  • Comply with having a recordkeeping book (written or electronic) to note down and be maintained for four years
    • The number of ounces of usable cannabis purchased and sold
    •  The number of ounces of cannabis products purchased and sold
    • The total number of cannabis item sales transactions

Don’ts

  • Cultivate, package, or manufacture cannabis products
  • Work directly with the consumers or retailers

DISTRIBUTOR 

A Class 4 Distributor license allows that entity to conduct intrastate transport of cannabis or cannabis items between cannabis entities. Similar to a broker, in a sense, these license holders are the intermediary between the buyers and the sellers of the industry. For example, a manufacturer who has set up a shop in Vineland wants to get their products out to retailers in Newark, where the manufacturer has a sparse reputation. It would be essential for this business to go through a reputable distributor to get the Vineland cannabis items on shelves in those retailers. Distributors should have a large network spanning all license types to spread themselves out and expand a larger reach. They can engage in as many transports as possible throughout the state. Distributors can also demand exclusivity from the buyer or seller if they choose to go that route.

Do’s

  • Ensure that the warehouse premises are the only location that stores the cannabis products (locked and enclosed) if engaging in temporary storage
    • Do possess an administrative office to handle operations on the authorized site if not engaging in any temporary storage activities (no storage in this office)
  • Secure a well-lit, ventilated, and sanitary location within the temporary storage for the cannabis that also has A/C and heating controls
  • Verify that they are only selling packaged and labeled products that have not been adulterated
  • Comply with having a recordkeeping book (written or electronic) to note down and be maintained for four years
    • The number of ounces of usable cannabis transported
    •  The number of ounces of cannabis products transported 
    • The total number of cannabis items transported

Don’ts

  • Transport cannabis products outside of NJ 
  • Cultivate, package, or manufacture cannabis products
  • Work directly with the consumers
  • Purchase and resell cannabis products

DELIVERY

A Class 6 Delivery license transports a consumer’s ordered cannabis items directly from the retailer to the consumer. Many retailers avoid the approach of handling both retail and delivery. This is where the opportunity presents itself for prospective delivery license applicants. This will allow both retailers and delivery services to focus on their role in the supply chain and establish that the highest quality service is provided for the consumer. These license holders are the link between the retailer and the consumer. Since this license works directly with the consumer, the CRC sees benefits in instructing delivery license holders to provide consumer education on cannabis and any warnings related to electronic smoking devices. Establishing adequate consumer support is critical for the success of this license type. 

Do’s

  • Obtain and transport the cannabis products listed in the purchase order from the retailer to the consumer 
  • Acknowledge that any undelivered cannabis items must be delivered back to the originating location 
  • Verify the consumer’s valid state or government-issued ID before giving the product
  •  Consider implementing interpreter services for those in the population served who have a visual or hearing impairment 
  • Provide a receipt to the consumer 
  • Comply with having a recordkeeping book (written or electronic) to note down and be maintained for four years
    • The number of ounces of usable cannabis purchased and delivered
    • The number of ounces of cannabis products purchased and delivered
    • The number of consumers who purchased each cannabis item provided by the cannabis delivery service 
    • The total number of cannabis items sales transactions

Don’ts

  • Cultivate, package, or manufacture cannabis products
  • Retain any personal information about the consumer beyond that is typically required in a financial transaction
  • Sell over one ounce of cannabis flower in a single transaction to a consumer or:
    • four grams of solid cannabis concentrate 
    • four mL of liquid cannabis concentrate (oil)
    • Ingestible cannabis-infused products containing an aggregate total of more than 1000 mg of THC
  • Sell  cannabis or cannabis products to other cannabis businesses

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