The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) continues to receive questions that focus on the rapid growth of the cannabis industry during the past several years. Although this seems like a relatively new industry, cannabis operations have existed in California for more than 20 years, starting with the legalization of medicinal marijuana in 1996. In 2016, California became the fifth state to legalize adult use of non-medical/recreational marijuana.
The classifications applicable to medical marijuana growing, processing and sales and the manufacture of medical marijuana products are similar to operations pertaining to recreational marijuana. This is a rapidly growing and changing industry, and it’s possible that new operations or business models may emerge. However, the most common classification assignments applicable to medical cannabis operations also apply to equivalent recreational marijuana operations.
Cannabis or marijuana cultivation can occur indoors or outdoors, using conventional or hydroponic methods. Cannabis cultivation is assigned to Classification 0035, Florists – cultivating or gardening, as the cannabis buds are, in fact, flowers. Classification 0035 was amended effective January 1, 2016 to specifically include the cultivation of marijuana. This classification was subsequently amended effective January 1, 2021 to replace “marijuana” with “cannabis,” the industry’s preferred term.
In some cases, growers send the product to trimming specialists for processing and packaging. If the buds are only trimmed but not packaged for individual sale, Classification 0035 is assignable. If the trimming specialist also packages the product for individual sale, Classification 4611, Drug, Medicine or Pharmaceutical Preparations Mfg. – compounding, blending or packaging only – not manufacturing ingredients, is assignable because it includes the production (compounding, blending or packaging) of drugs.
The production of cannabis cigarettes or pre-rolls, extracts and concentrates – including but not limited to hashish, hash oil, tinctures and products for vaporizing – is assigned to Classification 4611. This classification also applies to the manufacture of cannabidiol (CBD) products and oil extraction.
Cannabis trimming operations can generate a large amount of green waste. Employers that specialize in the processing of cannabis trimmings and other green waste are assignable to Classification 9424(1), Garbage or Refuse Landfill, Transfer Station and Material Recovery Facility Operations.
To be sold legally in California, all cannabis must be tested for both potency and purity to ensure it does not contain harmful pesticides or contaminates. Laboratories that specialize in the independent testing of cannabis and cannabis products for potency and/or purity are classified as 4511, Analytical or Testing Laboratories – including outside operations and sample collection.
The manufacture of cannabis-infused food products (“edibles”) that are not baked goods is classified as 6504, Food Products Mfg. or Processing. Examples include infused candies, butter for home baking and coffee mixes. This classification has also been assigned by analogy to the manufacture of flavorings used in vape pen “juice.”
The manufacture of cannabis-infused baked goods such as cookies or brownies is classified as 2003, Bakeries or Cracker Mfg.
The manufacture of cannabis-infused beverages is classified as 2163, Bottling – beverages – no spirituous liquors, wine or beer.
Retail cannabis dispensaries are classified as 8017(1), Stores – retail. This is consistent with other retail pharmacies and drugstores. Retail outlets may also perform packaging of individual orders, final trimming, cigarette rolling and similar operations to prepare the product for retail sale. Many cannabis dispensaries sell a minor amount of marijuana plants or clones in addition to marijuana and cannabis-infused products. Classification 8017(1) also applies to cannabis delivery sales companies that may not operate a walk-in retail store.
Classification 8018, Stores – wholesale, applies to the wholesale distribution of purchased and prepackaged cannabis products. Sales are primarily made to cannabis dispensaries or other dealers for resale and not to the general public.
View the complete classification phraseology and footnotes for each classification mentioned in this article using the Classification Search tool in the Learning Center of wcirb.com or through the following links: