Commercial cultivation, retail and marketing

Business licensing requirements

What licensing requirements apply to businesses seeking to cultivate, distribute, produce and sell cannabis products in your jurisdiction? What procedures, timeframes and fees apply in this regard, and on what grounds can a licence be revoked?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 122 of the Texas Statutes & Codes Annotated (West 2001); 43 TexReg 2825 (2018)). Therefore, there are no specific business licenses for cannabis businesses. Any “dispensing organization” under the Texas Compassionate Use Act must obtain a license issued by the Texas Department of Public Safety (Section 481.032 (2015) of the Texas Statutes & Codes Annotated). Under the Texas Compassionate Use Act, a “dispensing organization” is any “organization licensed by the [Department of Public Safety] to cultivate, process or dispense” cannabidiol permitted under the Compassionate Use Act (Id. at Section 487.001(3)). In order to be eligible for a license as a dispensing organization, the applicant must have:

  • the technical ability to cultivate the cannabis-related products allowed under the Compassionate Use Act;
  • the resources necessary to operate as a dispensing organization;
  • the ability to secure premises reasonably located to allow patients listed on the compassionate use registry access to the applicant;
  • the ability to maintain accountability for the cannabis-related product and its raw materials and by-products to prevent unlawful access or diversion of those materials; and
  • the financial ability to maintain operations for at least two years following the date of its application (Id. at Section 487.102).

Moreover, each director, manager, and employee of the applicant must register under the Compassionate Use Act (Id. at Section 487.151).

In addition, although the Agriculture Improvement Act 2018 legalized “hemp”—defined as any part of the cannabis sativa L. plant with a tetrahydrocannabinol concentration of 0.3% or less—by removing it from the Controlled Substance Act’s definition of “marijuana,” Texas has not implemented a hemp program or removed it from the definition of “cannabis.” Thus, there are no business licenses for businesses seeking to cultivate or produce hemp.

Are any businesses specifically prohibited from selling cannabis products?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 122 of the Texas Statutes & Codes Annotated (West 2001)); 43 TexReg 2825 (2018)). Therefore, all businesses are prohibited from selling cannabis products, other than licensed dispensing organizations which distribute medical-use cannabidiol pursuant to the Texas Compassionate Use Act (see Sections 487.101 to 108 of the Texas Statutes & Codes Annotated (West 2015)).

Zoning and real estate considerations

Are there any zoning restrictions on where businesses can cultivate, produce and sell cannabis products?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 122 of the Texas Statutes & Codes Annotated (West 2001); 43 TexReg 2825 (2018)). Therefore, all businesses are prohibited from cultivating, producing, and selling cannabis products regardless of location. The Texas Compassionate Use Act prohibits any political sub-division from enacting any rule prohibiting the cultivation, production, dispensing, or possession of cannabidiol pursuant to the Texas Compassionate Use Act (Section 487.201 (2015) of the Texas Statutes & Codes Annotated). However, all regulated premises under the Texas Compassionate Use Act must be at least 1,000 feet from any private or public school or day-care center that existed before the date of the initial license application (37 Texas Administrative Code § 12.7(n) (2017)).

Are there any other notable real estate issues pertinent to cannabis businesses, including with regard to landlord/tenant relationships and real estate market activity?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 122 of the Texas Statutes & Codes Annotated (West 2001); 43 TexReg 2825 (2018)). Therefore, real estate in Texas may not be used by cannabis businesses for the cultivation or distribution of cannabis. Although hemp remains illegal in Texas, if and when the state legalizes hemp production, it will likely be an opportune place to grow hemp given its abundance of farmland and hemp’s ability to flourish in arid climates. Consequently, in the event that Texas passes a hemp program, the state should expect numerous real estate deals.

Product restrictions and specifications

Are any cannabis products and accessories prohibited from sale? Do any product specifications apply?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 122 of the Texas Statutes & Codes Annotated (West 2001); 43 TexReg 2825 (2018)). Therefore, no product specifications apply to cannabis products in Texas. Further, it is illegal to use, possess with the intent to use, or deliver or manufacture with intent to deliver:

Drug paraphernalia to plant, propagate, cultivate, grow, harvest, manufacture, compound, convert, produce, process, prepare, test, analyze, pack, repack, store, contain, or conceal a controlled substance in violation of [the Texas Controlled Substances Act] or to inject, ingest, inhale, or otherwise introduce into the human body a controlled substance in violation of [the Texas Controlled Substances Act]. (Sections 481.125(a) to (b) of the Texas Statutes & Codes Annotated (West 1994).)

Therefore, cannabis accessories are illegal, and no product specifications apply to cannabis accessories in Texas.

Packaging and labelling

What packaging and labelling requirements apply to the sale and distribution of cannabis products and accessories?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 122 of the Texas Statutes & Codes Annotated (West 2001); 43 TexReg 2825 (2018)). Therefore, no labelling requirements apply to cannabis products in Texas. However, cannabinoids produced pursuant to the Texas Compassionate Use Act must be packaged in child-resistant packaging and must be labelled with:

  • the prescribing physician’s name;
  • the patient’s name;
  • the dispensing organization’s:
    • name;
    • state license number;
    • telephone number; and
    • mailing address;
  • the dosage prescribed and means of administration;
  • the date on which the dispensing organization packaged the contents;
  • the batch and serial numbers (and a barcode with such information if applicable);
  • the potency of the product, including the levels of tetrahydrocannabinol and cannabidiol;
  • a statement that the product has been tested for contaminants with specific indications of all findings, and the date of testing in accordance with Code of Federal Regulations, Title 16, Part 1107; and
  • a statement, in bold print, stating that the product is for medical use only and is intended for the exclusive use of the patient to whom it is prescribed (37 Texas Administrative Code § 12.7 (2017)).

Moreover, it is illegal to use, possess with the intent to use, or deliver or manufacture with intent to deliver:

Drug paraphernalia to plant, propagate, cultivate, grow, harvest, manufacture, compound, convert, produce, process, prepare, test, analyze, pack, repack, store, contain, or conceal a controlled substance in violation of [the Texas Controlled Substances Act] or to inject, ingest, inhale, or otherwise introduce into the human body a controlled substance in violation of [the Texas Controlled Substances Act]. (Sections 481.125(a) to (b) of the Texas Statutes & Codes Annotated (West 1994)).

Therefore, cannabis accessories are illegal, and no labelling requirements apply to cannabis accessories in Texas.

Advertising and marketing

What rules and restrictions govern the advertising and marketing of cannabis products and accessories (including online)?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 122 of the Texas Statutes & Codes Annotated (West 2001); 43 TexReg 2825 (2018)). Therefore, no specific advertising or marketing rules apply to cannabis products in Texas. Further, it is illegal to use, possess with the intent to use or deliver or manufacture with intent to deliver:

Drug paraphernalia to plant, propagate, cultivate, grow, harvest, manufacture, compound, convert, produce, process, prepare, test, analyze, pack, repack, store, contain, or conceal a controlled substance in violation of [the Texas Controlled Substances Act] or to inject, ingest, inhale, or otherwise introduce into the human body a controlled substance in violation of [the Texas Controlled Substances Act] (Sections 481.125(a) to (b) of the Texas Statutes & Codes Annotated (West 1994)).

Therefore, cannabis accessories are illegal, and no specific advertising or marketing rules apply to cannabis accessories in Texas.

Branding

What rules and restrictions govern the branding and trademarking of cannabis products and accessories? Are there any other special branding considerations for cannabis businesses?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 122 of the Texas Statutes & Codes Annotated (West 2001); 43 TexReg 2825 (2018)). Further, it is illegal to use, possess with the intent to use or deliver or manufacture with intent to deliver:

Drug paraphernalia to plant, propagate, cultivate, grow, harvest, manufacture, compound, convert, produce, process, prepare, test, analyze, pack, repack, store, contain, or conceal a controlled substance in violation of [the Texas Controlled Substances Act] or to inject, ingest, inhale, or otherwise introduce into the human body a controlled substance in violation of [the Texas Controlled Substances Act]. (Sections 481.125(a) to (b) of the Texas Statutes & Codes Annotated (West 1994)).

However, Texas does allow individuals to obtain state trademarks under certain situations (Sections 16.001 et seq. of the Texas Business & Commerce Code Annotated). While the statute does not address cannabis or cannabis accessories, it does state that a mark cannot be registered if it consists of or comprises an immoral matter (Id. at Section 16.051(a)(1)). Further, the U.S. Patent and Trademark Office (USPTO) requires a mark to be used lawfully in commerce in order to be trademarked, and therefore does not register marks for cannabis. Consequently, because cannabis and cannabis accessories are illegal in Texas, the state would likely not register a cannabis or cannabis accessory trademark, especially since the USPTO refuses to do the same. There are otherwise no rules or restrictions governing the branding or trademarking of cannabis products and accessories in Texas.

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