How California Dispensaries Can Prevent $30,000 Track-and-Trace Violations
By Green Bits
Did you know that California dispensaries can receive a fine of up to $30,000 for every violation of the Adult Use of Marijuana Act, Section 26160 (f)?
According to the Adult Use of Marijuana Act, Section 26160 (f) states that if a licensee, such as a legal California cannabis dispensary, fails to keep accurate cannabis activity records, like sales and inventory adjustments, they’re subject to a citation and a fine of up to $30,000 per violation. In other words, every discrepancy matters.
As a cannabis dispensary with tight margins, one or two violations could hinder you from purchasing your next batch of inventory or paying employees' salaries. In turn, this can prevent you from providing an ideal customer experience and force your customers to turn to a competitor.
In this article, we’ll cover what can cause these $30,000 violations and how California cannabis dispensaries can prevent them. This article is in collaboration with BriAnne Ramsay, CEO ofRocky Mountain Cannabis Consulting.
What causes a track-and-trace violation?
A significant discrepancy, too many adjustments in inventory, or missing sales data in Metrc will trigger an investigation.
Additionally, if the state thinks you are diverting product to the black market or not properly reporting wasted product, the state will come in and conduct an investigation. Bottomline, if the state believes you are working with non-licensed holders or doing something else illegal, you will be audited.
What happens during an investigation?
State officials will visit your store and request all of your employees and customers leave the premises. They may also place a sign on the door that says your license has been suspended. They'll create a report from your Metrc account and ask you to show them every one of your Metrc package tags and, if necessary, to weigh all the product in front of them.
Per section 26160 (c), “Licensing authorities may examine the records of a licensee and inspect the premises of a licensee as the licensing authority, or a state or local agency, deems necessary to perform its duties under this division. All inspections and examinations of records shall be conducted during standard business hours of the licensed facility or at any other reasonable time. Licensees shall provide and deliver records to the licensing authority upon request.”
Metrc has also created a robust notification system for California dispensaries who have significant discrepancies. When you receive a notification in Metrc from the state, you have to submit a report within the next three business days. You will need to explain why you're out of compliance and what you are doing to resolve the issue.
Per a September 2018 report, "The state has already hired data analysts to review the flood of information expected to come in through Metrc. And they’re partnering with agricultural commissioners in Humboldt, Alameda, San Mateo, Santa Barbara, Los Angeles, Trinity, and Mendocino counties for help with site inspections — a pilot program that could be extended to track-and-trace inspections."
How do California dispensaries prevent track-and-trace violations?
Above all, you want to ensure your physical inventory, POS inventory, and Metrc inventory are accurately kept in sync. Here's how you can do this:
Learn Metrc. If your POS has a Metrc integration, you should only purchase tags from Metrc for your inventory and accept the tags in Metrc, accept manifests in Metrc, and transfer inventory in Metrc if you need to return products or transfer a package to another store.
Regularly audit three or more inventories. We recommend auditing one to two product types per day when the store isn’t busy. Remember, with Track and Trace, you need to keep track of your inventory in Metrc, your POS, and your physical inventory.
Assign a team or individual to ensure the three major compliance documents are correctly kept. This includes your waste logs, your Metrc adjustment logs, and your manifests.
Budget for a compliance department (if you haven’t already). This includes roles such as a compliance officer, a Metrc specialist, logistics manager, and an inventory control manager.
Standardize your data. We recommend combing through your data to ensure there are no duplicates and that each naming convention contains the brand, flavor or strain, product type, and weight or potency. Additionally, it’s best practice to verify the cost, price, and margin when conducting internal audits.
Properly organize your physical inventory. We recommend following FIFO (First-In-First-Out) inventory management because your Certificate of Analysis (COA) tests expire after six months. Not following FIFO could result in your store selling expired product to customers.
Create a reconcile schedule. This correlates with Tip #2 and means creating the audit schedule of one to two product types per day.
Become familiar with your physical and digital inventories. In general, getting to know how your physical inventory is organized in the back room and on the floor will help prevent violations.
All of these tips will help prevent significant discrepancies in Metrc and greatly reduce your chances for citations and fines from the BCC.
Additional Resources - RMCC
BriAnne Ramsay, CEO of Rocky Mountain Cannabis Consulting, offers free online compliance trainings. Her unique background in strategically planning the expansion of cannabis businesses, compliance, and seed-to-sale technology produces a fresh perspective to each operation.