CBD product popularity is on the rise. By 2026, the market is expected to reach $16 billion in the U.S. alone.
With this increasing popularity, many shop owners are turning their eye toward CBD products. But there’s one barrier to consider: CBD restrictions and licensing.
Navigating the complex world of CBD licensing can be daunting, especially for those new to the industry. From understanding the differences between federal and state laws to ensuring that your products meet quality and labeling standards, there's much to consider.
Worse, failing to comply with these regulations can result in hefty fines, legal issues, and damage to your business' reputation.
So, how do you get licensed to sell CBD products? We have you covered.
This post covers the basics of how to get licensed to sell CBD inventory. We’ll discuss licensing requirements and agencies, setting you up for success in your CBD sales.
Any good smoke shop owner is always looking for new opportunities to attract a wider customer base. If you’re examining new product categories, you’ve probably heard a bit about CBD. But what exactly are CBD products, and how can you tell if they’re the right fit for your business?
CBD, short for cannabidiol, is a non-psychoactive compound derived from hemp or cannabis plants. Hemp-derived CBD products contain less than 0.3% THC, the compound responsible for the "high" associated with marijuana, while cannabis-derived CBD may have higher THC concentrations.
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If you receive the proper licenses, you can carry a variety of CBD products, including tinctures, isolates, vapes, and topical formulations. But are CBD products worth the hassle?
Selling CBD products can offer some key advantages for your smoke shop:
But selling CBD is not without its challenges. Some of the challenges you must keep in mind before starting to carry CBD in your smoke shop include:
Despite these challenges, the benefits of selling CBD products can be substantial for your smoke shop. Considering these details, let’s examine some of the requirements and restrictions in the CBD market.
Before discussing the specifics of obtaining a license to sell CBD products, let's discuss the general legal requirements for all businesses.
First and foremost, you'll need to choose a business structure, either a sole proprietorship, partnership, LLC, or corporation. This choice will impact your personal liability, tax obligations, and overall management structure. Once you've selected your business entity, you'll need to register with your state and obtain a tax ID number, also known as an Employer Identification Number (EIN), from the IRS.
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In addition to these basic requirements, most businesses need to obtain a general business license from their local city or county. This license grants you the right to operate within your jurisdiction and typically needs to be renewed annually. If you plan to conduct business under a name other than your own, you'll also need to file a DBA (Doing Business As) with your state or local government.
Another essential aspect of running a business is obtaining a sales tax permit. This permit allows you to collect sales tax from your customers and remit it to your state's tax authority.
These steps may seem remedial, but all these steps to opening a retail business are prerequisites for obtaining a license to sell CBD products. Attempting to sell CBD without proper licensing can result in severe consequences, including fines, legal action, and business closure.
The penalties for selling CBD without a license vary by state and jurisdiction but can be severe. In some cases, unlicensed CBD sales may be treated as a criminal offense, resulting in potential jail time and substantial fines.
Even if the consequences are less severe, operating without a license can damage your reputation and make it harder to obtain proper licensing in the future.
To avoid these risks and ensure your business's long-term success, you need to establish a strong legal foundation and obtain the necessary licenses before moving forward.
Once you have all your standard business licensing in place, you’re ready to kick off your process for getting licensed to sell CBD products. How do you get started?
Several state and local agencies are involved in CBD licensing. These departments are responsible for regulating the cannabis industry, ensuring compliance with laws and regulations, and issuing the necessary licenses and permits.
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At the state level, the agencies responsible for CBD and cannabis licensing vary depending on the jurisdiction.
In addition to state-level agencies, local licensing departments have a significant role in the licensing process. These may include city or county departments responsible for issuing business licenses and health departments conducting compliance checks to ensure businesses adhere to all relevant regulations.
It's crucial to research the specific agencies responsible for CBD and cannabis licensing in your state and locality, as the requirements and processes can vary significantly.
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Some states also have unique laws and regulations you'll need to be aware of when applying for your license. For example:
Navigating the complex web of state and local agencies with unique requirements and processes can be daunting. However, taking the time to research is essential if you want to avoid potential legal issues down the road.
Let’s now explore the requirements and regulations you must consider when applying for your CBD business license. While the specific regulations may vary depending on your state and locality, there are several basic requirements that most businesses need to fulfill.
As discussed earlier in this post, you must properly register your business before applying for a CBD license.
Under the 2018 Farm Bill, CBD products must be derived from hemp plants that contain less than 0.3% THC. When applying for a license, you'll likely need to provide documentation verifying the source of your CBD and ensuring that it meets the required THC threshold.
Many states require businesses to have their CBD products tested by an independent, third-party laboratory to ensure their quality and safety. These tests verify that the products meet the required THC threshold and are free from contaminants such as heavy metals, pesticides, and residual solvents.
Proper labeling and packaging are critical to selling CBD products. Product labels must accurately list the amount of CBD, other ingredients, and the manufacturer's name and contact information. NOTE: Making unsubstantiated health claims on product labels is not permitted and can lead to legal issues and fines.
Most states have age restrictions for selling CBD products, particularly inhalable or vaping products. Businesses must adhere to these age limits and implement proper age verification procedures to avoid selling to underage customers.
Some areas may have specific restrictions on where CBD businesses can operate, such as minimum distance requirements from schools or other sensitive locations. Before applying for your license, research the zoning requirements in your area and verify that your location is eligible.
While the FDA does not officially regulate CBD products, businesses should still strive to comply with the agency's guidelines. This includes avoiding unsubstantiated health claims, ensuring product safety, and maintaining accurate labeling and packaging.
In addition to the basic requirements outlined above, some states may have additional licenses or permits specifically for selling CBD products. These may include special CBD retailer licenses, distributor permits, or other state-specific requirements.
Meeting these CBD business license requirements can be complex and time-consuming, but it's crucial if you want to run a legal operation. Thoroughly researching the regulations in your area, gathering the necessary documentation, and staying informed about industry updates are the only ways to ensure you can sell CBD products without running into legal issues.
Congratulations on taking the first step towards expanding your business by getting licensed to sell CBD products!
By following the steps and requirements outlined in this post, you'll be well on your way to tapping into a lucrative new market and attracting a brand-new customer base.
However, obtaining the necessary licenses is just the beginning. To succeed in the CBD market, you need a reliable system to manage your sales, track your inventory, and process high-risk payments.
That's where Cigars POS comes in.
Our point of sale system is designed specifically for smoke and vape shops. With advanced inventory management features, you can easily keep track of your CBD products alongside your other offerings. Our high-risk payment processing capabilities ensure that you can confidently accept payments, while our robust reporting and analytics tools provide valuable insights into your sales trends and customer behavior.
Ready to see what Cigars POS can do for you? Schedule a demo today and experience the difference for yourself.