Starting a CBD Business in Austin

Starting any business can have its complications but walking into a brand new industry can be even more daunting. Texas recently legalized the hemp-derived cannabinoid, CBD and consumers have been asking “Is CBD legal in Austin”? If you’ve been thinking about creating a CBD startup in Austin for people to buy CBD in Austin, there are some steps you’ll need to take before you can start selling any products. Let’s break down the steps of how to start a CBD business in Austin to get you on your way.

Step 1: Lay the groundwork

Before you start the registration and licensing process for your CBD startup in Austin, you should flesh out your business plan. You should know your “why”, your target market and develop a marketing/advertising strategy. Before you launch, you will want to consider what your business’ name will be and get started on logos, branding and confirm that your business name has an available web domain. 

This is also the time you’ll want to look into investors if you need startup funds and determine whether or not you’ll need a Federal Employer ID number (or if you’ll be using your social security number) for the business’ Tax ID. Location details will be required in the process, so having a well-rounded plan as to where your business will operate is important before you take the next steps.

Step 2: Determine your license or registration category 

If you’re interested in starting your own CBD or hemp business in Austin, it’s important to know which category you fit into first before you can get registered or licensed. The Department of State Health Services breaks business into two categories, Retail and Consumable Hemp. 

Your business fits into the Retail category if you sell consumable hemp products, referred to as CHPs, in store or online, and do not make any changes to the hemp product, its packaging or it’s company name. This means if you plan on white labeling any products, you will not fit into this category. The fee for an initial one-year registration for retail CBD businesses is $155 per location. 

Your business will fit into the Consumable Hemp Product category if you manufacture CHPs. The definition of manufacturing in this instance includes preparing, compounding, processing, packaging, repackaging, labeling or relabeling hemp products. Additionally, if your business sells consumable hemp products wholesale, the business will fall under this category. If a business has one or more locations that do both activities, they will need to obtain a Consumable hemp product license. The first-year fee for an initial CHP license is $258 per facility. 

Although the title “CHP” contains the word hemp, it has more to do with consumable CBD than consumable hemp. In fact, the state of Texas’ hemp program defines a CHP as any product processed or manufactured for consumption that contains hemp, including food, a drug, a device and a cosmetic; however, it does not include hemp seeds or hemp seed-derived ingredients. Rather, the examples provided include CBD, CBD gummies, CBD-infused foods and drinks, and topical lotions or cosmetics containing CBD. 

Step 3: Submit your Application Online

Once you’ve determined which category your business belongs in you can apply for your registration or license on the Texas Department of State and Health Services Online Licensing Services site. Reviewing the registration guide is important to know the proper steps in the registration process. Create an account and fill out the form. Once you’ve finished submitting your application for registration, be sure to print a copy and have it present at the location where you’ll be operating your business. 

Step 4: Contact DSHS to open additional locations 

Now that you know CBD is legal in Austin and have your license number, you can open additional locations by providing DSHS (512-834-6626) with your license number, the business name of the new location and the address of the new location. 

Step 5: Adhere to the laws and codes to buy CBD in Austin

Now that you’re well on your way to operating your CBD business, it’s your responsibility to ensure the products you manufacture or sell are properly tested, packaged,\ and labeled (per HSC 443 and 25 Texas Administrative Code 300). That means it’s your responsibility to know if your products are safe for consumption and are free of harmful microorganisms, heavy metals, residual solvents and pesticides, and that they are within the legal limit of Delta-9 tetrahydrocannabinol (THC).

It may seem like a challenging task, but it’s one of the most important and active requirements of your business. The Texas Department of Public Safety will randomly test CHPs containing CBD at retail locations, so don’t cut corners here. If you really want to be seen as a reputable and trustworthy business, make it a practice to only do business with brands that provide their lab results and certificate of analysis’ – and then double check each and every one. Want to go one step further? Take a tour of their production facility yourself to confirm their practices align with your values and standards. These efforts protect you, your customers and your business. 

These steps are required by the state to operate your CBD business and to buy CBD in Austin, but there may be additional steps to take to ensure your business is set up properly. This may include determining what type of business you want to register as (an LLC, an S Corp, a Non-profit, etc.) which will require some additional time and effort. Doing your research and tapping into experienced resources is a smart step in the process of starting your Austin-based CBD company. 

So, is CBD legal in Austin? Can you have a CBD startup in Austin? For more information on additional requirements and for FAQs, check out the Texas Health and Human Services website. If you’re a CBD business or potential CBD business, consider attending Lucky Leaf in Austin!