Overview

This guidance memo provides updated instructions to licensed hemp or cannabis businesses on how to transfer product to a third-party processor for processing services, such as remediation.

Background

Previously, when cannabis businesses wanted to engage in paid or contracted manufacturing or to remediate product after failed testing, they had to conduct a small transaction (sometimes called a penny sale) to transfer product to a third-party in exchange for processing services. This process involved selling the product to the processor then buying it back after the service was completed. This work around was necessary because Minnesota Statutes, section 342.23, subd. 5(a), prohibited cannabis and hemp businesses from giving away cannabis flower or products, which meant that every transfer had to be connected to a sale. The Minnesota Legislature has since updated Minnesota Statutes, section 342.23, subd. 5, to allow for any transaction entered into in good faith by a cannabis business or hemp business for the sale of goods or services at fair market value.

Authority

• Minnesota Statutes, section 342.23, subdivision 5(g)

Definitions

• Pre-treatment – a process that removes or reduces the level of potential contaminant in a batch of regulated product prior to compliance testing.
• Remediation – a process that removes or reduces the level of contaminant or excess cannabinoid in a batch of regulated product.
• Tolling or toll processing – an industry term for when one cannabis or hemp business provides processing services to another business without a transfer of ownership of the product.

Guidance

Due to 2026 legislative changes to chapter 342, cannabis and hemp businesses no longer have to sell and buy back their product to and from third-party processing service providers. Effective May 26, 2026, good faith transactions for the sale of goods or services at fair market value between cannabis or hemp businesses are allowed. All transfers must be recorded in Metrc and include a completed /ocm/assets/Service_Transfer_Form_Fillable_tcm1202-766376.pdfService Transfer Form to notify the Office of Cannabis Management (OCM) of product transfers for processing services, known as toll processing. The form must be submitted by the licensed cannabis business initiating the transfer in Metrc. In cases where product is moving for the purpose of remediation, the license holder must have a /ocm/businesses/resources/product-testing/remediation.jspremediation plan approved by OCM before initiating the transfer.

Metrc guidance

When creating a transfer manifest for transfer where a processing service will be performed, the business must record this using a Processing transfer type. To complete this type of transfer, it is required to include the /ocm/assets/Service_Transfer_Form_Fillable_tcm1202-766376.pdfServices Transfer Form as a PDF with the transfer manifest.

Metrc resources

• Metrc Support Bulletin 73: Transfer Type (9/4/2026)