What’s Legal When It Comes to CBD in Edibles and Alcohol
As new trends and topics in the alcohol industry emerge, the OLCC strives to keep current on these issues. Recently, there has been significant interest throughout the industry in the use and sale of cannabidiol (CBD) items on liquor-licensed premises. The Agriculture Improvement Act of 2018 (also referred to as the 2018 Farm Bill) was partially responsible for generating this interest because a part of the bill removed “hemp” and its derivatives from the definition of “marihuana” in the Controlled Substances Act. Although the 2018 Farm Bill established some regulatory authority for hemp under the U.S. Department of Agriculture (USDA) and the Federal Food and Drug Administration (FDA), this piece of legislation did little to explain or clarify the legal status of CBD and CBD products. Due to this uncertainty, the next few paragraphs will attempt to explain the complexities of this issue and help to answer a few questions about CBD products and OLCC liquor licensees.
What is CBD?
First, it is important to understand what CBD is and where it comes from. CBD is a non-intoxicating chemical compound (called a cannabinoid) that can be derived from cannabis plants. Because both hemp and marijuana come from the same plant (cannabis) they are both interchangeably referred to as cannabis, but there is an important legal distinction. Whether a cannabis plant is considered hemp or marijuana depends upon the amount of tetrahydrocannabinol (THC) the plant contains. THC is, of course, the cannabinoid responsible for the psychological effects associated with marijuana consumption. For a cannabis plant to be considered hemp, it must contain less than 0.3 percent THC, otherwise the plant is considered marijuana. Because marijuana is still considered to be a Schedule I controlled substance by the federal government, the source of the CBD is important. Even if a finished CBD product contains 0 percent THC, if the CBD was derived from a plant that contained more than 0.3 percent THC and is therefore marijuana, the CBD is considered a marijuana derivative. In Oregon, marijuana and all marijuana derivatives may only be sold by a licensed recreational marijuana retail store or medical marijuana registrant. For OLCC liquor licensees, the source of the CBD is also important because permitting the use or sale of a marijuana item on a liquor-licensed premises is a violation that could result in a license suspension or civil penalty.
Although the CBD must be derived from hemp, not all hemp products contain CBD. Hemp stalks and seeds contain only trace amounts of CBD and have been legally used in food and beverages prior to the passage of the 2018 Farm Bill. The CBD used in many popular products is commonly extracted from the flowers and leaves of the hemp plant. The remainder of this article refers to CBD derived from hemp.
What Conduct is Prohibited?
Despite the current lack of legal clarity, federal agencies have provided guidance on two types of conduct that are prohibited. First, the FDA, which regulates food products and food safety, has determined that selling or offering to sell a food or beverage item containing CBD in interstate commerce is illegal. For OLCC liquor licensees to comply with federal law, they should not purchase CBD products that were produced in another state.
Second, the Alcohol and Tobacco Tax and Trade Bureau (TTB), which regulates the manufacture and sale of alcoholic beverages, has determined it will not approve any alcoholic beverage formulas that contain CBD. Because obtaining formula approval is required to produce an alcoholic beverage with a non-traditional ingredient (such as hemp), all alcoholic beverages manufactured with CBD are prohibited. This means that all OLCC licensees that manufacture alcoholic beverages are prohibited from adding CBD during the production of the beverage or prior to bottling. To help clarify the agency’s position, the OLCC has proposed a rule change that would make it a violation for any OLCC liquor licensee to manufacture, store, or sell any alcoholic beverage that contains cannabinoids or any substance derived from cannabis, including cannabis terpenes. If adopted at the December Commission Meeting, the rule would apply to all license types and be effective January 1, 2020.
What about Non-Alcoholic CBD Products?
The two other common questions received by the OLCC on this issue involve non-alcoholic CBD products. Licensees are particularly interested in mixing non-alcoholic CBD beverages with alcohol in a mixed drink for on-premises consumption and are also interested in selling non-alcoholic CBD products on liquor-licensed premises.
In Oregon, hemp production is regulated by the Oregon Department of Agriculture (ODA). The ODA has adopted rules that govern products made with hemp, including items intended for human consumption. Under ODA rules, those food and beverage items made with hemp are required to be tested in the same manner that marijuana food items are tested in Oregon. This means that an OLCC licensed laboratory or equivalent lab must receive samples from each process lot of the hemp items and the lab must test those products to ensure they meet certain standards regarding pesticides, solvents, and potency. Because people are going to be consuming these products, it is extremely important to make sure that these items have been tested.
Because the effect of mixing CBD and alcohol is currently unknown, the OLCC recommends that licensees do not mix CBD and alcohol together into mixed drinks for on-premises consumption. If a licensee chooses to do so, it is done at the licensee’s own risk. If a licensee would like to sell a non-alcoholic CBD item on a liquor-licensed premises, the licensee must obtain a copy of the lab report showing that the product was properly tested according to the ODA’s rules. If any licensee is currently selling any CBD products that have not been properly tested, the licensee should have removed all non-compliant products from their inventory by December 31, 2019.
The OLCC is publishing guidance documents on the OLCC website to help explain what types of activities may occur on a liquor-licensed premises. The guidance is split into five categories: alcohol manufacturing, wholesale and distribution, liquor store sales, sale of alcohol at retail, and testing requirements. The guidance is meant to help provide clarity for a very complex issue. These documents are scheduled to be available by the end of December and will be updated if rules or policies change. If you have questions, please visit the OLCC website at Oregon.gov/OLCC or contact the OLCC. | Jamie Dickinson, Oregon Liquor Control Commission
This article originally published in the Oregon Restaurant & Lodging Association Magazine - Winter 2020
Oregon Restaurant & Lodging Association to Honor Six Restaurant Industry Members
[Wilsonville, OR] – Oregon Restaurant & Lodging Association (ORLA) is proud to announce the 2020 state winners of the National Restaurant Association Educational Foundation’s (NRAEF) Restaurant Industry Awards. Two restaurants, Elephants Delicatessen (Portland) and Sybaris Bistro (Albany) were named state winners for the Restaurant Neighbor Award. Loretta Guzman (Bison Coffee House, Portland), Jason Devrouax (First Burger, Albany), and Lauro Romero (Kimpton Hotel & Restaurant Group, Portland) were named state winners for the Faces of Diversity Award. Paul Paz (WaitersWorld, Portland) was named state winner for the Ambassador of Hospitality Award.
“The involvement and dedication these restaurants have shown in support of local philanthropy is commendable and exemplifies the spirit of our industry and our state,” said Jason Brandt, ORLA President & CEO. “It’s an honor to recognize these restaurants as well as four individuals who have achieved success through perseverance and passion.”
Nine out of 10 restaurants give back to their communities through charitable activities. Restaurants also play an important role in providing a ladder of opportunity for millions of Americans to achieve the American Dream.
Each year, the NRAEF recognizes restaurants around the country for outstanding community service, diversity and leadership. These prestigious national awards honor restaurants that go above and beyond in supporting their community and inspiring others with their stories of success.
All state winners were forwarded to NRAEF in consideration for national awards to be announced early March. Three national Restaurant Neighbor Award winners will receive a $10,000 award to help support their favorite charity or community project. Three national winners of the Faces of Diversity Award will have a $2,500 scholarship awarded in their name to an aspiring student from their state. In addition, all national winners will be flown to Washington, DC to receive the award at a special banquet on March 4, 2020.
Oregon’s award recipients will be formally recognized among their peers during the ORLA Hospitality Conference, this year in Ashland, September 28-29, 2020.
For more information on Oregon's restaurant awards, visit OregonRLA.org/restaurant-awards.
ProStart Teacher's Education Session Fall 2019 Resources
In November 2019, Metro's Sustainability and Food Waste team gave a presentation to ProStart teachers on food systems, food waste and climate change. The following resources are made available to teachers for use in their culinary classrooms.
Plan, Shop, Chop (PSC)
In this interactive simulation, students plan and shop for a meal of their choosing and then calculate and discuss the impact when an average of 40% of food is wasted in the United States. Topics include greenhouse gas emissions, use of landfill space, and loss of natural resources, human labor, and money, as well as generating solutions to prevent food waste at home. The lesson includes optional extensions to investigate the food waste hierarchy and examine the supply chain of a common food item, the banana.
Plan, Shop, Chop Lesson:
Banana Supply Chain:
Living with Food in the 21st Century
This two-part lesson guides participants through a new story of climate change using a lens of hope, equity, community resilience, and increased quality of life. After discussing the basics of climate science with graphs and personal stories, participants will use an interactive concept map and short video series to understand the link between consumer culture and climate disruption. They will then investigate a range of individual and collective actions to combat climate change through a ranking activity with drawdown solutions and a climate justice mixer.
Additional Resources from the Oregon Department of Education (ODE)
At their most recent meeting, the Oregon Restaurant & Lodging Association (ORLA) Board of Directors voted unanimously (with 1 abstention) to support a legislative bill which will originate from Governor Brown’s office in support of a permanent 1.8% statewide lodging tax rate during the 2020 Oregon Legislative Session. Revenue raised by the statewide lodging tax is invested in Travel Oregon’s efforts to strengthen the economic impact of our state’s tourism industry. Oregon’s statewide lodging tax is currently collected at a rate of 1.8% with a reduction in the rate scheduled to take effect as of July 1, 2020 to a permanent rate of 1.5%.
“We appreciate Governor Brown’s proactive outreach to meet with ORLA and some of our key lodging stakeholders in person to discuss the merits of keeping the statewide lodging tax rate at 1.8% permanently,” said Jason Brandt, President & CEO of ORLA. “Our goals for lodging tax rate structures in Oregon are two-fold – protecting all statewide lodging tax resources to create return on investment for the industry through the efforts of Travel Oregon and protecting local lodging tax reforms passed in the 2003 Legislative Session.”
Oregon continues to experience healthy growth in tourism spending logging our ninth consecutive year of industry growth in 2018. Compared to 2017, visitor spending was up 4.2% reaching a record $12.3 billion. Industry employment was also up year over year by 2.9% to approximately 115,400. Year over year, hotel room revenue increased by 4.4% as well.
“We have seen firsthand what strategic investments in tourism promotion can do when industry tax dollars are put to their most effective use,” said Brandt. “With many other competing priorities in the Capitol, it is essential the association protects the appropriate use of these dollars at both the local and state levels. The economic impacts we are seeing are significant not just for our industry but for our public sector partners as well.”
The U.S. Travel Association tracks statewide economic impact throughout the country and assists states in quantifying the value of year over year tourism growth. The most recently available data notates Oregon’s tourism growth at 5.3% when comparing 2016 to 2017, further substantiating the value of healthy tourism growth for Oregon’s public sector. From 2016 to 2017, Oregon experienced visitor spending growth of $652 million. That increase in spending and associated payroll income tax increases equates to as many as 410 firefighter positions, 380 police officer positions, or 380 teacher positions.
ORLA continues to focus on the protection of local lodging tax dollars for tourism promotion and tourism related facilities in addition to support given to Governor Brown’s upcoming legislative bill for the statewide resource. Oregon’s local lodging tax structure can be complicated with over 110 different city and county jurisdictions collecting a transient lodging tax outside of the 1.8% statewide tax. Important guidelines have been in place for the past 16 years for how local lodging tax dollars can be spent. To clarify those parameters, ORLA recently produced a new instructional video to assist all stakeholders and the general public in better understanding the rules which govern local lodging tax resources.
The new video specific to local lodging taxes (not to be confused with Oregon’s 1.8% statewide lodging tax) can be viewed here:
For more information about the Oregon Restaurant & Lodging Association’s policies on transient lodging taxes, please reach out to Greg Astley, ORLA’s Director of Government Affairs, at email@example.com via email.
Commercial Activity Tax (CAT)
The new Commercial Activity Tax is imposed only after a taxpayer exceeds $1 million of taxable commercial activity. Once they pass that threshold, the tax is $250 plus 0.57% on gross receipts greater than $1 million after subtractions. Proceeds of the tax are directed by statute to boost funding for public schools. The Department of Revenue's website includes a list of frequently asked questions (FAQs) for tax payers to better understand what the tax is and who is subject to the tax.
Announcements from ORLA:
Apr. 22, 2020 - In a brief statement yesterday, the Governor announced she does not support delaying the CAT, despite having heard from several small- and medium-sized businesses that they face severe cash-flow and liquidity issues. However, she said the state will waive all penalties related to first quarter CAT payments.
Mar. 26, 2020 - Oregon Restaurant & Lodging Association joined 48 other Oregon businesses and organizations in signing a letter to legislators urging temporary relief from the Commercial (Corporate) Activity Tax. Oregon’s hospitality businesses are critically challenged with this crisis and a new tax could hurt their ability to pay employees, potentially leading to more layoffs. Read the letter.
Latest Updates / Announcements from the Department of Revenue and ORLA:
June 30 - In its recent special session, the Oregon Legislature made a series of clarifications to the Student Success Act which governs the Corporate Activity Tax (CAT). Visit the DOR website for more information on technical and policy clarifications in House Bill 4202.
June 9 - DOR will hold a public hearing for the second set of permanent rules for the Corporate Activity Tax via conference call 9 to 11 a.m. Tuesday, June 23. The rules and additional information about the hearing can be found on the administrative rules page of the Revenue website.
May 6 - Oregon DOR has determined that certain federal assistance to businesses under the Coronavirus Aid, Relief, and Economic Security (CARES) Act is not commercial activity under Oregon statute and will not be subject to the Corporate Activity Tax. The exempt assistance includes forgiven Paycheck Protection Program (PPP) loans, Economic Injury Disaster Loan (EIDL) advances, and Small Business Administration (SBA) loan subsidies. More information can be found in the Beyond the FAQ section of the CAT page on the department’s website.
Apr. 29 - The Department of Revenue has revised OAR 150-317-1300 to reflect a change in the threshold for making estimated tax payments from $5,000 of annual tax liability to $10,000 of annual tax liability for the first year of the tax. This means businesses that will owe less than $10,000 are not required to make quarterly estimated tax payments during 2020. DOR also won’t assess penalties for underestimated quarterly payments or for not making a quarterly payment, if businesses don’t have the financial ability to make the estimated payment.
Apr. 17 - First Quarter Corporate Activity Tax payments due April 30; Good faith effort will prevent underpayment penalties. The department will not assess underpayment penalties to taxpayers making a good faith effort to estimate their first quarter payments for the CAT.
Apr. 10 - DOR has begun the process of converting 16 temporary administrative rules for the CAT into permanent rules. The process will include a public comment period and a hearing on the rules, giving business taxpayers and tax professionals additional opportunities to provide input into the rules before they become permanent. Click here to sign up to receive rulemaking notices from the department.
Mar. 20 - DOR posted a link to a video of the March 10 CAT update meeting in Ashland on the agency’s website. The department has also posted a copy of the presentation used in the update meetings. Business taxpayers can send questions to firstname.lastname@example.org.
Mar. 13 - DOR has suspended its series of Commercial Activity Tax (CAT) update meetings due to concerns about the spread of the novel coronavirus, or COVID-19. In the coming days, the department will announce alternatives to the in-person meetings for providing CAT update information to business taxpayers and tax professionals.
Mar. 6 - Two new administrative rules governing Oregon’s new Corporate Activity Tax (CAT) have been officially filed with the Secretary of State effective March 6. Twelve rules for the CAT became effective Jan. 1 with four others taking effect Feb. 1.
Feb. 6 - The Oregon Department of Revenue (DOR) will host a series of meetings across the state in March to provide information to business taxpayers about the administrative rules for the new Commercial Activity Tax. Complete schedule available online.
Jan. 27 - Three new draft rules have been posted on DOR's CAT page, allowing business taxpayers time to review the rules and use them as guidance on how to proceed and offers them an additional opportunity to have input into the rules.
Jan. 13 - A new draft administrative rule has been added to the CAT page on the DOR website and is the first of the second group of temporary rules which will be officially filed with the Oregon Secretary of State February 1.
Jan. 6 - General guidance on how to calculate a business’s CAT liability has been added to the FAQ page of DOR's website. The guidance includes information on how to use the labor or cost subtraction.
Jan. 2 - The first group of 12 temporary administrative rules governing the new CAT have been officially filed with the Secretary of State, found on the Secretary of State’s website under current rules for Chapter 150, Division 317. Permanent rulemaking begins April 1.
Resources & Webinars to Help You Understand the CAT
The Commercial Activity Tax is complicated and calculating your potential tax can be confusing. Therefore, ORLA has created a CAT calculator example to help our members understand how to calculate the tax. This exercise is only meant to help you project what your tax liability could be; as always, be sure to consult your tax advisors.
ORLA hosted two members-only informational webinars on Nov. 19 and Dec. 3 that explained the new tax, the Department’s implementation plans and what you can expect as a business owner. Tax experts with accounting firm Moss Adams LLP in Portland also provided some best tax practices for the hospitality industry. ORLA members can access the slide deck from the presentation by logging into the Member Portal on ORLA's website and clicking the Resource Library.
FAQ: Can we include the CAT tax on our customers’ bill?
A. The legislation that established the CAT (Oregon Laws 2019, Chapters 122 and 579) does not specifically prohibit a business from passing on additional cost of the tax. If you do choose to add a new line item to the receipt, the line item itself still counts as “commercial activity” when determining your tax liability. Consult with an attorney or financial advisor before making any final decisions.
How the Commercial Activities Tax Came About
This was one of the 2019 Legislative Session bills having the biggest impact on businesses. ORLA was opposed to this bill as it raised taxes on commercial activity for businesses with gross revenues of over one million dollars. ORLA, along with others in the business community, was able to amend the original bill to include a deduction for labor or cost of goods sold. The association will work during the rule making session to ensure hospitality businesses will be able to include the tax increase on receipts so customers can see the impact of the tax.
Additional Information and Timeline for the CAT
DOR Sought Industry Input in CAT Rule Making
The Department of Revenue (DOR) held a series of town hall meetings across the state in September-October to seek input from business taxpayers about the administrative rules for Oregon’s new Commercial Activity Tax (CAT). Nearly 900 business taxpayers and tax professionals took part in these public forums or participated in video conferences and conference calls. More information is now available on the CAT page of DOR website.
If you have any questions, please email Greg Astley, Director of Government Affairs, at Astley@OregonRLA.org.
This is for general informational purposes only. The information is not, and should not be relied upon or regarded as, legal advice. Please consult with your legal advisors.