California Small-Farm Cannabis Direct Sales Policy Proposal

Policy Proposal: Direct Access for Small Farms

A regulated path for licensed small farms to sell and ship their own cannabis products directly to California consumers.

The pilot should be limited, taxable, trackable, age-verified, and auditable.

This proposal is not a replacement for the existing retail system. It is a controlled access channel for small farms that are already licensed, regulated, and compliant, but often lack a practical way to reach consumers.

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Small Farm Direct Access Pilot

Eligible: Licensed California cultivators with 10,000 sq. ft. or less of total canopy ownership

Product: Farm-origin only flower and non-manufactured goods

Market: California consumers only

Safeguards: Tested, taxed, tracked, age-verified, and auditable

Transport: California Common Carrier ground delivery services within state lines (not USPS)

Pilot review: DCC report after two years with recommendations for continuation, adjustment, or expansion

Eligibility: Who Should Qualify?

Eligible farms would be licensed California cultivators with 10,000 sq. ft. or less of total affiliated canopy. The pilot should target genuinely small producers, not pick winners between outdoor, mixed-light, and indoor cultivation.

Common-Control and Affiliation

To prevent ownership stacking, eligibility aggregation must include:

Beneficial owners and financial-interest holders
Parent and subsidiary entities
Common management and shared operational control
Brand-control and exclusive licensing agreements
Purchase options and debt arrangements conferring control
Shared inventory, employees, premises, or bank accounts

Required: Annual certification and change-of-control reporting.

Phased Product Eligibility

Initial Eligibility:

Dried cannabis flower cultivated by the participant
Packaged flower traceable to the operator’s cultivation batch
Non-infused pre-rolls made exclusively from the participant’s cannabis (under appropriate manufacturing license)

Initially Excluded:

Infused pre-rolls, edibles, concentrates, and vape products
Products containing cannabis from unaffiliated cultivators

Open Policy Question: Determining finished-product UID traceability for contract manufacturing.

Seller of Record

An eligible cultivator would operate under a limited direct-access endorsement and remain the seller of record for its own eligible products. This ensures clear accountability for consumer safety and tax compliance.

Responsibilities

• Tax reporting and remittance
• Issuing consumer receipts and disclosures
• Handling refunds and product eligibility
• Recall management and record retention
• Track-and-trace reporting (METRC)
• Responding to regulatory inquiries

Unresolved Policy Note

Determine whether a marketplace may act as a disclosed payment or order-processing agent and what fee structures are appropriate.

Carrier Authorization and Chain of Custody

The pilot would require California to authorize a compliant intrastate delivery mechanism. Below are recommended design requirements for carriers and chain of custody.

Logistics and Security

• California-only routes; no interstate movement
• Carrier registration, licensing, and driver training
• Insurance, vehicle, and storage standards
• GPS route records and shipping manifests
• Package-level scan events (tender and acceptance)

Delivery Protocols

• Identity and age verification with recipient signature
• No unattended delivery or lockers
• Failed-delivery and return/quarantine procedures
• Theft, loss, and diversion reporting
• Record-retention and audit access

Consumer Protection

The pilot focuses initially on adult-use transactions limited to consumers 21 and older, with physical address requirements within California.

Safeguards

• Two-stage identity and age verification
• Purchase-limit aggregation and tamper-evident packaging
• Consumer receipts and refund/complaint process
• Recall notifications and data minimization
• Privacy protection and data retention policies

Phase 1 Scope

Medical transactions are excluded from the first phase unless separately designed.

Tax and Local Government

Direct sales may allow participating farms to retain a larger share of the final purchase price. Tax and local interaction rules must be clearly defined.

Unresolved Tax Decisions

• Allocation of Cannabis Excise and Sales Tax
• Applicability of local taxes and tax situs (origin vs. destination)
• Requirement for seller’s permits
• Local government notification and interaction with local bans

Transparency

The pilot should separately report where farm revenue, sales tax, excise tax, and local tax are allocated.

Program Administration and Enforcement

A successful pilot requires robust oversight by the DCC, including application, renewal, and enforcement procedures.

Operations

• Application/renewal fees (with small-farm waivers)
• Phased enrollment and technology-readiness milestones
• METRC track-and-trace implementation
• Audits, corrective notices, and cure periods
• Suspension, removal, and appeals process

Funding

Program implementation would require appropriate state appropriation and DCC rulemaking.

Strengthened Evaluation

The pilot is intended to shift a measurable share of consumer purchases from unlicensed to licensed channels. A quarterly dashboard and independent evaluation will track key metrics.

Key Metrics

• Net-new legal sales vs. retail displacement
• Estimated substitution from unlicensed purchases
• Farm revenue, margin, and compliance cost per farm
• Administrative cost per order and taxes collected
• Counties served, failed deliveries, and complaints
• Concentration of program sales among participants

Review Cycle

Two-year report and three-year sunset to ensure the program meets its intended goals without unintended market consequences.

Models From Other States

California does not need to copy another state exactly, but other regulated cannabis markets show that small operators can be allowed to sell their own products directly to consumers through narrow, controlled license types or endorsements.

New York

New York’s adult-use microbusiness license can authorize small operators to cultivate, process, distribute, sell, and deliver their own cannabis products.

New Mexico

New Mexico allows cannabis producer microbusinesses to operate at a smaller plant count and conduct certain activities involving their own products, including sales, transportation, retail, and courier activity.

Michigan

Michigan’s microbusiness model restricts operators to cannabis cultivated or processed by the microbusiness, supporting the farm-origin-only concept.

Massachusetts

Massachusetts has used delivery endorsements and microbusiness structures that allow smaller operators to participate in direct consumer access under regulated conditions.

These examples do not replace the need for a California-specific framework. They simply show that regulated direct access can be structured around small operators, own-product restrictions, delivery controls, and compliance reporting.

Draft Bill Framework

This framework is a policy concept for discussion and should be reviewed by legislative counsel, DCC, tax agencies, local governments, and industry stakeholders before introduction.

The Legislature finds and declares that:

California’s licensed cannabis market depends on safe, tested, regulated access.
Many licensed small cultivators lack practical access to consumer markets.
Many California consumers lack convenient access to licensed cannabis retailers.
A limited direct access pilot can support small farms, expand legal access, generate taxable sales, and preserve regulatory oversight.
The pilot should be narrow, measurable, enforceable, and subject to review.

The Department of Cannabis Control shall create a Small Farm Direct Access Pilot Program authorizing qualified small cultivators to sell farm-origin cannabis products directly to adult consumers in California, subject to eligibility, compliance requirements, tax collection, age verification, and reporting obligations.

“Qualified small cultivator” means a licensed California cannabis cultivator with no more than 10,000 square feet of total affiliated canopy.

“Total affiliated canopy” means the combined canopy held or controlled by the applicant and any commonly owned, commonly controlled, managed, affiliated, or related licensee or entity.

“Farm-origin cannabis product” means cannabis or a cannabis product cultivated by the qualified small cultivator.

“Direct access sale” means a sale by a qualified small cultivator to an adult consumer in California under the pilot program.

A licensee may participate in the pilot if the licensee:

Holds an active California cultivation license
Meets the total affiliated canopy limit
Is in good standing with state and local licensing requirements
Agrees to sell only farm-origin cannabis products
Agrees to comply with all testing, packaging, labeling, tax, track-and-trace, delivery, age verification, and reporting requirements
Has not been disqualified by the department for material violations

A qualified small cultivator may only sell cannabis or cannabis products cultivated by that licensee.

A qualified small cultivator may not use the pilot program to sell cannabis or cannabis products cultivated by another licensee.

All direct access sales shall comply with applicable requirements for:

Testing, Packaging, and Labeling
Tax collection
Track-and-trace
Age verification
Delivery or transfer records
Consumer purchase limits
Advertising and marketing restrictions
DCC reporting and inspection authority

A qualified small cultivator participating in the pilot shall collect and remit all applicable state and local taxes required by law.

The department may require additional reporting to verify taxable sales made through the pilot program.

The department shall submit a report to the Legislature after two years of program operation. The report should include:

Number of participating licensees
Total direct access sales and tax revenue generated
Number and type of compliance violations and enforcement costs
Consumer access impacts and retail market impacts
Recommendations for continuation, modification, expansion, or termination of the pilot

The pilot shall sunset after three years unless extended by the Legislature. Before sunset, the department shall submit findings and recommendations to the Legislature.

Download Draft Bill Framework Request a Policy Briefing Submit Feedback

Common Questions

Would farms need a retail license?

Under current California law, cannabis sales to the public generally require a retail license. This proposal asks California to create a narrow direct-access endorsement or pilot authorization for eligible small farms. A separate Type 9 or Type 10 retail license should not be required for this pilot because requiring a full retail license would recreate the same access barrier the policy is meant to solve.

Does federal rescheduling solve this?

No. Federal rescheduling may improve parts of the cannabis operating environment, especially around taxes, research, and medical cannabis, but it does not automatically create a California direct-access pathway. California would still need to authorize small-farm direct access under state law.

Farm-origin only?

Participating farms could sell only cannabis they cultivated, or products made from cannabis they cultivated. The pilot should not allow farms to buy bulk product from other operators and resell it through the direct-access channel.

Support a Practical Direct Access Pilot

California can expand consumer access, support small farms, and keep cannabis tested, taxed, tracked, and age-verified. A small-farm direct access pilot gives the state a narrow, measurable way to test that approach.

Support the Proposal Download One-Page Brief Request the Policy Packet Submit Policy Feedback

Research Lead Higher Origins Policy Team

Legal Status Proposal (Not Enacted)

Data Version 2026.06.A

Last Updated July 9, 2026

Policy research and drafting by Higher Origins. This proposal has not yet been enacted and does not constitute legal advice. Data is aggregated from DCC license records and Higher Origins proprietary research.

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Policy Proposal: Small-Farm Direct Access in California