Here is my complete pasting of the collective law from AUG GuideLines
of ATTNY General Brown.
THX
LR_Shedwood
Pro 215 Patient Collective
Page 8
IV. GUIDELINES REGARDING COLLECTIVES AND COOPERATIVES
Under California law, medical marijuana patients and primary
caregivers may “associate
within the State of California in order collectively or cooperatively
to cultivate marijuana for
medical purposes.” (§ 11362.775.) The following guidelines are
meant to apply to qualified
patients and primary caregivers who come together to collectively or
cooperatively cultivate
physician-recommended marijuana.
A. Business Forms: Any group that is collectively or cooperatively
cultivating and
distributing marijuana for medical purposes should be organized and
operated in a manner
that ensures the security of the crop and safeguards against
diversion for non-medical
purposes. The following are guidelines to help cooperatives and
collectives operate within
the law, and to help law enforcement determine whether they are doing
so.
1. Statutory Cooperatives: A cooperative must file articles of
incorporation
with the state and conduct its business for the mutual benefit of its
members.
(Corp. Code, § 12201, 12300.) No business may call itself a
“cooperative” (or “co-
op”
unless it is properly organized and registered as such a
corporation under the
Corporations or Food and Agricultural Code. (Id. at § 12311(b).)
Cooperative
corporations are “democratically controlled and are not organized to
make a profit
for themselves, as such, or for their members, as such, but primarily
for their
members as patrons.” (Id. at § 12201.) The earnings and savings of
the business
must be used for the general welfare of its members or equitably
distributed to
members in the form of cash, property, credits, or services.
(Ibid.) Cooperatives
must follow strict rules on organization, articles, elections, and
distribution of
earnings, and must report individual transactions from individual
members each
year. (See id. at § 12200, et seq.) Agricultural cooperatives are
likewise nonprofit
corporate entities “since they are not organized to make profit for
themselves, as
such, or for their members, as such, but only for their members as
producers.”
(Food & Agric. Code, § 54033.) Agricultural cooperatives share many
characteristics with consumer cooperatives. (See, e.g., id. at §
54002, et seq.)
Cooperatives should not purchase marijuana from, or sell to, non-
members;
instead, they should only provide a means for facilitating or
coordinating
transactions between members.
2. Collectives: California law does not define collectives, but the
dictionary
defines them as “a business, farm, etc., jointly owned and operated
by the members
of a group.” (Random House Unabridged Dictionary; Random House, Inc.
© 2006.) Applying this definition, a collective should be an
organization that
merely facilitates the collaborative efforts of patient and caregiver
members –
including the allocation of costs and revenues. As such, a
collective is not a
statutory entity, but as a practical matter it might have to organize
as some form of
business to carry out its activities. The collective should not
purchase marijuana
from, or sell to, non-members; instead, it should only provide a
means for
facilitating or coordinating transactions between members.
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B. Guidelines for the Lawful Operation of a Cooperative or Collective:
Collectives and cooperatives should be organized with sufficient
structure to ensure
security, non-diversion of marijuana to illicit markets, and
compliance with all state and
local laws. The following are some suggested guidelines and
practices for operating
collective growing operations to help ensure lawful operation.
1. Non-Profit Operation: Nothing in Proposition 215 or the MMP
authorizes
collectives, cooperatives, or individuals to profit from the sale or
distribution of
marijuana. (See, e.g., § 11362.765(a) [“nothing in this section
shall authorize . . .
any individual or group to cultivate or distribute marijuana for
profit”].
2. Business Licenses, Sales Tax, and Seller’s Permits: The State
Board of
Equalization has determined that medical marijuana transactions are
subject to
sales tax, regardless of whether the individual or group makes a
profit, and those
engaging in transactions involving medical marijuana must obtain a
Seller’s
Permit. Some cities and counties also require dispensing collectives
and
cooperatives to obtain business licenses.
3. Membership Application and Verification: When a patient or primary
caregiver wishes to join a collective or cooperative, the group can
help prevent the
diversion of marijuana for non-medical use by having potential
members complete
a written membership application. The following application
guidelines should be
followed to help ensure that marijuana grown for medical use is not
diverted to
illicit markets:
a) Verify the individual’s status as a qualified patient or primary
caregiver.
Unless he or she has a valid state medical marijuana identification
card, this
should involve personal contact with the recommending physician (or
his or
her agent), verification of the physician’s identity, as well as his
or her state
licensing status. Verification of primary caregiver status should
include
contact with the qualified patient, as well as validation of the
patient’s
recommendation. Copies should be made of the physician’s
recommendation or identification card, if any;
b) Have the individual agree not to distribute marijuana to non-members;
c) Have the individual agree not to use the marijuana for other than
medical purposes;
d) Maintain membership records on-site or have them reasonably
available;
e) Track when members’ medical marijuana recommendation and/or
identification cards expire; and
f) Enforce conditions of membership by excluding members whose
identification card or physician recommendation are invalid or have
expired, or who are caught diverting marijuana for non-medical use.
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4. Collectives Should Acquire, Possess, and Distribute Only Lawfully
Cultivated Marijuana: Collectives and cooperatives should acquire
marijuana
only from their constituent members, because only marijuana grown by
a qualified
patient or his or her primary caregiver may lawfully be transported
by, or
distributed to, other members of a collective or cooperative. (§§
11362.765,
11362.775.) The collective or cooperative may then allocate it to
other members of
the group. Nothing allows marijuana to be purchased from outside the
collective or
cooperative for distribution to its members. Instead, the cycle
should be a closed-
circuit of marijuana cultivation and consumption with no purchases or
sales to or
from non-members. To help prevent diversion of medical marijuana to
non-
medical markets, collectives and cooperatives should document each
member’s
contribution of labor, resources, or money to the enterprise. They
also should track
and record the source of their marijuana.
5. Distribution and Sales to Non-Members are Prohibited: State law
allows primary caregivers to be reimbursed for certain services
(including
marijuana cultivation), but nothing allows individuals or groups to
sell or distribute
marijuana to non-members. Accordingly, a collective or cooperative
may not
distribute medical marijuana to any person who is not a member in
good standing
of the organization. A dispensing collective or cooperative may
credit its members
for marijuana they provide to the collective, which it may then
allocate to other
members. (§ 11362.765(c).) Members also may reimburse the
collective or
cooperative for marijuana that has been allocated to them. Any monetary
reimbursement that members provide to the collective or cooperative
should only
be an amount necessary to cover overhead costs and operating expenses.
6. Permissible Reimbursements and Allocations: Marijuana grown at a
collective or cooperative for medical purposes may be:
a) Provided free to qualified patients and primary caregivers who are
members of the collective or cooperative;
b) Provided in exchange for services rendered to the entity;
c) Allocated based on fees that are reasonably calculated to cover
overhead costs and operating expenses; or
d) Any combination of the above.
7. Possession and Cultivation Guidelines: If a person is acting as
primary
caregiver to more than one patient under section 11362.7(d)(2), he or
she may
aggregate the possession and cultivation limits for each patient.
For example,
applying the MMP’s basic possession guidelines, if a caregiver is
responsible for
three patients, he or she may possess up to 24 oz. of marijuana (8
oz. per patient)
and may grow 18 mature or 36 immature plants. Similarly, collectives
and
cooperatives may cultivate and transport marijuana in aggregate
amounts tied to its
membership numbers. Any patient or primary caregiver exceeding
individual
possession guidelines should have supporting records readily
available when:
a) Operating a location for cultivation;
b) Transporting the group’s medical marijuana; and
c) Operating a location for distribution to members of the collective or
cooperative.
8. Security: Collectives and cooperatives should provide adequate
security to
ensure that patients are safe and that the surrounding homes or
businesses are not
negatively impacted by nuisance activity such as loitering or crime.
Further, to
maintain security, prevent fraud, and deter robberies, collectives
and cooperatives
should keep accurate records and follow accepted cash handling
practices,
including regular bank runs and cash drops, and maintain a general
ledger of cash
transactions.
C. Enforcement Guidelines: Depending upon the facts and circumstances,
deviations from the guidelines outlined above, or other indicia that
marijuana is not for
medical use, may give rise to probable cause for arrest and seizure.
The following are
additional guidelines to help identify medical marijuana collectives
and cooperatives that
are operating outside of state law.
1. Storefront Dispensaries: Although medical marijuana “dispensaries”
have been operating in California for years, dispensaries, as such,
are not
recognized under the law. As noted above, the only recognized group
entities are
cooperatives and collectives. (§ 11362.775.) It is the opinion of
this Office that a
properly organized and operated collective or cooperative that
dispenses medical
marijuana through a storefront may be lawful under California law,
but that
dispensaries that do not substantially comply with the guidelines set
forth in
sections IV(A) and (B), above, are likely operating outside the
protections of
Proposition 215 and the MMP, and that the individuals operating such
entities may
be subject to arrest and criminal prosecution under California law.
For example,
dispensaries that merely require patients to complete a form
summarily designating
the business owner as their primary caregiver – and then offering
marijuana in
exchange for cash “donations” – are likely unlawful. (Peron, supra, 59
Cal.App.4th at p. 1400 [cannabis club owner was not the primary
caregiver to
thousands of patients where he did not consistently assume
responsibility for their
housing, health, or safety].)
2. Indicia of Unlawful Operation: When investigating collectives or
cooperatives, law enforcement officers should be alert for signs of
mass production
or illegal sales, including (a) excessive amounts of marijuana, (b)
excessive
amounts of cash, (c) failure to follow local and state laws
applicable to similar
businesses, such as maintenance of any required licenses and payment
of any
required taxes, including sales taxes, (d) weapons, (e) illicit
drugs, (f) purchases
from, or sales or distribution to, non-members, or (g) distribution
outside of
California.