Cannabis Business in Hawaii

By August 2024, Hawaii had almost 31 thousand registered patients in its medical cannabis program. Despite the presence of an illicit market, the legal sector was valued at over $240 million, with 2022 dispensary sales topping $50 million. Medical cannabis is subject only to Hawaii’s standard excise tax of 4% (4.5% in Oahu), without additional cannabis-specific taxes.

Legal Framework

Medical cannabis is allowed for patients with eligible conditions who enroll in the Medical Cannabis Patient Registry Program and receive a 329 ID card. Recreational use remains banned, though possessing up to 3 grams was decriminalized in 2019, carrying a maximum fine of $130.

Legislative Milestones

Medical cannabis was legalized in 2000 under Act 228, the first state law to achieve this through legislation. The Medical Cannabis Dispensary Program was later established in 2015, setting up a regulated market.

Plant-Touching Cannabis Businesses in Hawaii

Hawaii's legal cannabis market is limited to medical use, with two types of licenses available for medical cannabis operations as of early 2024:

• Medical Cannabis Dispensary License: This license permits businesses to grow, manufacture, and distribute cannabis products to registered patients and caregivers in compliance with Chapter 329D of the Hawaii Revised Statutes. License holders may operate up to two dispensaries and two cultivation sites, with each cultivation site restricted to a maximum of 3,000 cannabis plants. Currently, there are 24 licensed dispensaries operating across the state.
• Medical Cannabis Testing Laboratory License: This license authorizes laboratories to conduct tests on cannabis and cannabis products to ensure quality and safety before they reach dispensaries.

Hawaii ceased accepting applications for dispensary licenses on January 29, 2016, and has not issued new licenses since then. Licensees are allowed two dispensary outlets and two cultivation facilities. The initial licensing fee was set at $75,000, with a renewal cost of $50,000.

Ancillary Cannabis Businesses in Hawaii

Hawaii's medical cannabis industry relies on a range of essential services. Regulatory advisors assist with legal compliance, while financial planning experts handle tax and accounting needs. Cannabis-friendly banking solutions offer secure financial options, and security specialists provide surveillance and protection. Although Hawaii currently restricts its legal market to medical use, there is potential for expansion, making it worthwhile for entrepreneurs to consider a future cannabis business for sale in the state.

Brand management teams focus on compliant marketing strategies, and coverage providers offer tailored insurance plans. Additionally, sales and inventory systems streamline dispensary operations, while industry consultants lend expertise on licensing, operations, and regulatory compliance.

Hemp in Hawaii

Hawaii legalized hemp in 2018 and transitioned the existing temporary industrial hemp pilot program into a permanent one. Furthermore, Act 14, which was enacted in August 2020, legalized the cultivation of hemp in Hawaii under the United States Department of Agriculture (USDA) Domestic Hemp Production program. Starting November 1, 2020, individuals in Hawaii who want to cultivate hemp are required to get hemp production licenses from the USDA and adhere to the regulations associated with hemp farming.

Hemp Transportation

The 2018 Farm Bill permits the transportation of hemp and hemp products across state lines. As a result, hemp and hemp products in Hawaii can be transported between islands, within an island, or exported. However, according to state law, only hemp producers who have a license from the USDA are permitted to move hemp outside of a legally authorized growing area for commercial purposes. The components of hemp that are allowed to be transported include:

• Live hemp plants, parts of the plant used for propagation, and seeds that are capable of growing
• Raw botanical hemp leaf material that has been harvested, including dried material
• Hemp floral material in its unprocessed botanical form, including dried material, that has been harvested

It is mandatory to submit a transportation report in advance using the HP-1 Transportation Report form. Certain hemp materials are exempt from the reporting requirement when being transported:

• Fiber that has been retted
• Seed that is not viable
• Mature stalk material from hemp plants
• Products made from hemp or hemp that has undergone processing

Any hemp transportation in Hawaii must comply with all relevant laws and regulations, including those related to the import, inter-island transit, and export of live plants, seeds, and cut flowers.

Hemp Products

In Hawaii, hemp products are only permitted to be sold in specific forms such as tablets, capsules, soft gels, gelcaps and liquids, powders, tinctures, and topicals. The state's hemp regulations forbid vape liquids containing cannabinoids derived from hemp, gummies made with CBD, and beverages. Hemp products that can be introduced into the body through non-oral routes like the ears, eyes, or nasal cavities are banned in Hawaii. Products containing hemp derivatives such as CBD and other cannabinoids, including food, drinks, and bottled water, are prohibited. In Hawaii, it is against the law to smoke hemp or sell hemp products intended for consumption.

Business Licenses for Hemp Production in Hawaii

Anyone or entity intending to cultivate or process hemp in Hawaii is required to obtain a hemp production license from the USDA. To qualify for this license, applicants need to satisfy specific state prerequisites. For instance, applicants or key participants in an applying entity must not have been convicted of a felony involving a controlled substance under federal or state law within a 10-year period preceding the application date. Other requirements include:

• Cultivation must be restricted to designated agricultural zones within the state.
• Hemp cultivation is not allowed within 500 feet of any existing property that includes a school, playground, or childcare facility.
• Cultivation is prohibited within 500 feet of any pre-existing house, dwelling unit, residential apartment, or other residential structure unless the applicant owns or controls the property.
• Growing hemp inside any residential building, including houses, apartments, or other residential structures, is strictly forbidden.

Applications for a USDA hemp production license can be submitted year-round on a rolling basis through the USDA Hemp eManagement Platform (HeMP). Before accessing USDA programs like HeMP, applicants need to create a Login.Gov account to verify their identity. They can then use these credentials to create a HeMP account. Applicants are required to provide a recent FBI criminal history report (not older than 60 days from the application submission date) for themselves and any key participants involved in the application. More information regarding obtaining a USDA hemp production license can be found in the USDA Producer HeMP User Guide or by contacting the USDA.

The USDA, being the agency that issues licenses for hemp cultivation in Hawaii, does not charge a fee for the hemp production license itself. However, upon successful application through the USDA HeMP portal and receiving notification from the Hawaii Department of Agriculture (HDOA), applicants seeking hemp processor registration must pay a nonrefundable fee of $500. This fee, payable to the "Hawaii Department of Health," should be made via business check or cashier's check. It is important to note that while the USDA-issued hemp production license remains valid for three years, the $500 HDOA hemp processor registration fee must be paid annually to maintain the eligibility for processing hemp in the state.