CBD Legality 101 for Business Owners

A gavel and a hemp leaf

CBD Legality 101 for Business Owners

The CBD market has increased in value at a staggering rate over the last several years! Of course none of its popularity and profitability would have been possible without the transformation of hemp laws in our country. Because of these relatively new laws regarding the hemp plant and its star compound cannabidiol (CBD), businesses have been able to thrive both in-person and online. They’re providing enthusiasts with a rich array of quality formulas that all deliver the compounds of the hemp plant into the body in a unique way.

But even after all these years, there remains quite a bit of confusion regarding the specifics of hemp laws in our country, especially when you examine them on a state level. As a CBD business owner, you know all too well the importance of adhering to both federal and state laws when it comes to selling hemp goods. With laws changing regularly in various regions of the country, it can be challenging just to keep up.

Federal Law vs. State Law

Most of us know that United States had passed the 2018 Farm Bill, which finally legalized the hemp plant including its derivatives so that business owners could legally sell CBD products to the masses, both in person and online. The law clearly states that all hemp products can be sold and purchased legally as long as a person is of age in their state, and as long as the hemp products being sold contain a maximum of 0.3% delta 9 THC. This amount is much higher than what naturally occurs in hemp extract products, which is what makes them federally legal.

Federal Law

Under federal law, there are no restrictions when it comes to possession amounts, nor are there restrictions on the types of hemp products that can be sold in terms of their formulations or how they are delivered into the body. CBD products can contain any strength that the manufacturer sees fit.

State Law

On the flip side, individual state laws can differ from federal law.  For instance, all hemp is completely banned in the state of Idaho, so you cannot operate a legal CBD business in the state.  Some states have even banned specific types of products, such as flower or vaping products.  Remember, each state may have their own laws regarding how old a person must be in order to purchase hemp, which you must stay on top of as you can risk serious legal repercussion for selling cannabidiol to minors.

Hemp laws in each state are also subject to change at any time.  Hemp is such a new industry in the United States that many state legislative bodies are still figuring out how it should be regulated in their own territories.  Therefore, as a business owner, it’s very important that you regularly check up on state laws to ensure that you are selling CBD as it is allowed.

Lab-Tested Hemp Products

One of the best ways to ensure that you’re purchasing CBD that is within the legal THC limit is to only carry brands that engage in third-party testing. Third-party testing has become an industry standard, in which hemp companies send away individual batches of hemp extract to be tested by a third-party facility that is licensed with the state’s department of agriculture. Here is where the potential for a beyond-the-legal-limit amount of THC will present itself, and these lab tests also give you important information about the quality of the hemp inside each formula, including the potential presence of impurities.

If you are a CBD business that produces your own hemp formulas, it’s absolutely essential that you engage in lab-testing through a third party with all of your products. It is equally important that you make these lab reports accessible to your customers, as they have every right to know whether or not they are getting high-quality, legal and pure hemp in their products. If you do not already engage in lab-testing, find a laboratory that has an ISO:17025 certification and is well-known for their skill in testing hemp specific products.

Additional Regulations

The FDA is still working out its regulations in regard to the hemp industry, and what this means is that there are a lot of gray areas when it comes to what you can and cannot legally do with the products that you sell.  Besides the regulations and restrictions discussed earlier, there are some rules that you absolutely must comply with, or you can risk losing your business. Of course, states can add further regulations and restrictions to the products that can be sold, and so as a business owner, you have a responsibility to stay on top of these changes as they happen so that you are always complying on both a federal and state level.

Until the FDA issues their final guidance on hemp products, it is best to work with a manufacturer who is compliant with the FDA’s CFR – Code of Federal Regulations – for supplement products. This compliance gives your products the best chance of being acceptable to the upcoming FDA standards, minimizing the need for changes when that guidance is released.

Obtain a Business License

First, you cannot sell CBD without a state business license. It is important that you register your business with your local government, or else you can get into serious trouble for selling hemp products. The process of obtaining a business license is different in each state, and you have to carefully read the information on the website for your state’s business department to follow the procedure correctly. You’ll also need to check local zoning laws to make sure that businesses that sell hemp are allowed in the municipality that you have your eye on. This may be less of a concern for e-commerce businesses doing strictly online fulfillment, however.

Follow Regulations on Packaging

One of the only regulations put forth by the FDA pertaining to CBD products involves the packaging.  The law is clear that the packages on all CBD products must contain specific pieces of information about what is inside. The information that is required is the list of ingredients inside the formula, the serving size per dose, and the instructions for dosing. A facts panel, identification of manufacturer, and relevant disclaimers are also necessary. Do not try to sell any hemp products that lack this information on the packaging, as this could get you into legal trouble. To tackle this challenge safely and effectively, work with a private label cbd manufacturer who can guide you toward compliant packaging.


One rule strictly enforced by the FDA and FTC pertains to how CBD products are marketed.  As of now, it is completely illegal to make medical claims regarding hemp. It is also illegal to state that it is 100% safe to take. What this means is that when marketing products you sell, or even speaking to customers on an individual basis, you cannot tell them that hemp products have the ability to address specific ailments, nor can you tell them that a product will be completely safe for them. What is allowed is suggesting that customers speak to a doctor for information about the safety and effectiveness of CBD.

There is a gray area in the current FDA guidelines where any product must be either a food or a supplement, in terms of its facts panel. Simultaneously, the FDA feels that CBD cannot be either of the two, making it completely illegal to sell. Most manufacturers have used their best judgement in the interim to manufacture hemp products to the supplement guidelines, assuming that the FDA will eventually apply that standard to them.

Selling CBD in a State in Which Marijuana is Legal

More and more states across the country are legalizing marijuana, so how does that affect one’s ability to sell CBD in one of these states? First of all, if marijuana is fully legal in the state in which you operate, then you can likely sell hemp products that contain more than 0.3% delta 9 THC, but again, it’s important to verify this with your state’s laws. Further, you can likely sell cannabidiol products derived from the marijuana plant. If you are going to do this, you will need to investigate with your state government about whether or not you need a separate license in order to sell marijuana-derived products as opposed to hemp-derived products.

Selling CBD Online

We have talked a lot about selling hemp products in a brick-and-mortar store, but there is a whole other avenue for selling cannabidiol, which is the online marketplace. It is safe to say that the majority of hemp enthusiasts purchase CBD online, because of its convenience as well as the wider selection of products that can be found.

If you plan to sell CBD online, the first thing that you need to do is make sure that you continue to follow all of the rules, regulations and restrictions that apply to selling hemp in person. State and federal law does not change just because you’re operating a CBD retail website. You still need to make sure that you are selling products containing no more than 0.3% THC, which are derived from industrial hemp. You also need to make sure you have obtained a license, engage in lab-testing, offer the critical information found on product labels and avoid making health claims entirely.

There are additional hurdles to selling online that pertain to what you can sell to which states. Each of the 50 states has their own hemp laws. Most of the states strictly adhere to federal law, which allows for CBD in any product form, as long as it is a hemp derivative, and has a maximum of 0.3% delta 9 THC. However, some states prohibit specific types of hemp products, as mentioned earlier, which means that you cannot legally sell certain types of products to certain states. For instance, a number of states have outlawed CBD edibles, and so you could lose your business if you ship CBD edibles to these specific states.

Finally, although it’s not technically illegal to not do so, you should always include third-party lab reports of the products that you sell online, and you should be as detailed as possible in your product descriptions for the sake of transparency, so that customers know that what they are getting is a legal and generally safe product. Although this isn’t a federal law yet, many individual states are requiring this lab testing and it’s an easy way to distinguish yourself from your competition.

Running a Successful Hemp Business, the Legal Way

Whether in a physical store or online, due to growing demand for all things hemp-derived, running a CBD shop can be worth the investment. Still, if you’re not staying on top of your state’s laws as well as federal laws regarding hemp, then you are at risk fine or closure for violating regulations or restrictions. We encourage you to keep your monitor any changing laws, both in your state and around the country (if selling online), to ensure that you are always selling CBD in a way that is completely legal.

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