Cannabis Business in Texas

The Texas cannabis market is currently limited to cannabis and hemp-derived products, which may not contain more than 0.3% concentration of THC.

• Low-THC cannabis products are available for medical patients with approved, medically certified conditions at various dispensary locations across Texas.
• Hemp industry is represented by over 50 processors and more than 9,000 licensed consumable hemp retailers and online platforms.
• CBD products in Texas are available in both open retail and medical formulations, with medical CBD requiring a prescription.

Types of Cannabis Industry Businesses in Texas

Most cannabis and hemp businesses that require licensing in Texas fall into five primary categories:

1. Cannabis Dispensing Organizations (Medical Dispensaries)
2. Medical Cannabis Processors
3. Industrial Hemp Processors
4. THC-Testing Laboratories
5. Hemp Dispensaries

The rest of the industry comprises various ancillary products and B2B service providers that support these core businesses.

Cannabis-Touching Businesses

Cannabis-touching businesses are directly involved in the cultivation, processing, distribution, and retail sale of cannabis products. In Texas, these businesses manage the entire production cycle, from cultivation to final sales. Licensed businesses, referred to as "Medical Cannabis Dispensing Organizations," are vertically integrated, overseeing all aspects of the process under strict state regulations to ensure compliance and maintain product quality.

Examples of Cannabis-Touching Businesses:

• Cultivators: Cultivators grow cannabis plants either indoors or outdoors, following state-mandated procedures to guarantee quality and regulatory compliance. They may focus on breeding new strains or growing established ones.
• Processors: These businesses convert raw cannabis into various consumable forms, such as oils, edibles, and concentrates, adhering to rigorous safety and consistency standards set by the state.
• Dispensaries and Retailers: Licensed dispensaries provide patients with cannabis products through in-store purchases or delivery. As of 2024, only three dispensaries have been licensed under the Department of Public Safety (DPS), as per Texas Health and Safety Code Chapter 487. These organizations ensure access to low-THC cannabis by offering delivery services and limited in-store purchases.
• Testing Facilities: Although Texas does not require separate licensing for testing labs, only licensed dispensing organizations are permitted to conduct testing on low-THC products. This ensures that the products meet safety standards and are free from harmful contaminants.

Distributors: Distributors transport cannabis products from producers to retailers, ensuring secure movement within the state in compliance with Texas's tracking and security regulations.

Ancillary Cannabis Businesses

Ancillary cannabis businesses support plant-touching businesses by providing essential services without directly handling the cannabis plant. In Texas, these businesses include a range of B2B service providers and consultants.

Examples of Ancillary Cannabis Businesses:

• Cannabis Attorneys: Legal professionals specializing in cannabis laws assist businesses in navigating the evolving regulatory landscape in Texas. They help companies start and operate while complying with both state and federal laws, reducing the risk of legal issues.
• Banking and Payment Processing: Due to federal restrictions, access to traditional financial services remains limited for cannabis businesses. Many rely on specialized banking solutions, including payment processing, loans, and other financial services, to operate within the legal framework. Several banks in Texas offer cannabis-friendly banking options.
• Accounting Services and Fractional CFOs: Cannabis businesses face unique financial and regulatory challenges, requiring CPAs familiar with Texas cannabis accounting. Hiring a CPA as a part-time Chief Financial Officer is a common way for cannabis businesses to save money and maintain financial compliance.
• Insurance Providers: Comprehensive insurance is critical for cannabis businesses, covering operations, staff, and product liability. Working with insurance agents knowledgeable about the cannabis industry ensures adequate coverage at every stage of the business.
• Consulting and Management: Consulting firms assist start-up and existing cannabis companies with compliance, licensing, and operational strategies. These services help streamline business processes and ensure long-term competitiveness in the market.

Hemp Businesses in Texas

The Texas Department of Agriculture (TDA) issues licenses for growing and processing hemp. Those who hold a license can participate in the Texas hemp industry. Licensees are required to register each facility where hemp will be cultivated or produced. Before harvesting hemp, an official sample must be taken by a TDA-licensed handler sampler and submitted to a TDA-registered laboratory.

Hemp vs. THC and CBD

• Hemp is Cannabis sativa cultivated for industrial or medical purposes.
• THC is a chemical found in hemp and marijuana. Hemp plants contain low levels of THC - usually 0.3%.
• CBD is a non-psychoactive compound in cannabis plants, and hemp plants contain high levels of CBD.

If someone is looking for a cannabis business for sale, they should know that Texas allows businesses with proper licenses and permits to sell hemp-derived CBD oil. This is allowed because it only contains trace amounts of the psychoactive compound THC. Smokable hemp flowers are also legal in Texas. However, the state doesn't allow the production of smokable hemp flowers within its borders.

CBD Business in Texas

The Texas Department of State Health Services (DSHS) licenses consumable hemp manufacturers and distributors, as well as registers retailers of consumable hemp products. Consumable hemp products (CHPs) contain hemp and were manufactured or produced for consumption. This includes products like CBD oil, CBD gummy bears, foods and drinks infused with CBD, over-the-counter drugs containing CBD, and topical lotions and cosmetics containing CBD. CHPs cannot have more than 0.3% delta-9 THC. In addition to CHPs, products that contain hemp ingredients on the U.S. Food and Drug Administration’s Generally Recognized as Safe (GRAS) list (hulled hemp seeds, hemp seed protein, and hemp seed oil) are not considered CHPs in Texas.

DSHS Licensing Requirements

The DSHS issues two types of licenses for CBD businesses.

• Retail Hemp Registration: This is required if someone is selling CHPs and isn't making any changes to the product or packaging. This includes online retailers. Applicants do not have to undergo a Federal Bureau of Investigation fingerprint criminal background check.
• Consumable Hemp Product License: This is required if CHPs are manufactured, which includes labeling, relabeling, packaging, repackaging, processing, compounding, and preparing. A retailer must obtain a license if they are white labeling (using their own label on a product manufactured by another business) or repackaging CHPs.

Restrictions on Consumable Hemp Products for Smoking

While the retail sale and wholesale distribution of consumable hemp products for smoking are permitted, they must be manufactured outside of Texas. Manufacturing of these products, including white labeling, is not allowed within the state. The Texas Supreme Court upheld a prohibition on manufacturing and processing consumable hemp products for smoking in Texas.