The legalization of recreational cannabis in January 2018 generated mass excitement among Californian entrepreneurs looking to capitalize on the upcoming boom of the Marijuana industry. Recent developments and the increasing popularity of the drug seem to suggest that opening a dispensary is a million, if not billion dollar idea. However, despite the recreational legality of the herb, there are still a number of laws and regulations one should be aware of before opening a dispensary. In order to thoroughly answer the question of “how to open a dispensary in California?” we have put together a list of laws, regulations, and steps to assist the perspective pot merchant.
That being said, please note that while this guide provides a basic overview of the process, it should not be used as a substitute for legal consultation. To stay up to date with the legalities of opening a marijuana dispensary, we recommend meeting with a specialized local attorney.
How to open a dispensary in California?
According to the Shouse California Law Group, opening a dispensary in California requires several legal steps, both on the state and local level. Furthermore, despite the recent approval of the Adult Use of Marijuana Act, several state, and local agencies have yet to set up adequate systems of pot regulation. While the use and distribution of recreational marijuana are now technically legal in California, much of the new law must be ironed out to better accommodate both individuals and businesses. Therefore, it is recommended that perspective distributors focus on the sale of medical marijuana when first starting out.
On a State Level
The first step to opening a dispensary requires the registration of the business as a collective or cooperative. Interestingly, there is no legislation that recognizes marijuana “dispensaries.” Instead, a medical marijuana business must be set up as a non-profit organization. One needs a Seller’s permit in order to get started, which can be obtained from the California State Board of Equalization. You must also file the necessary tax permits by consulting with the Franchise Tax Board. Furthermore, In order to hire staff to work at the dispensary, you must also apply for a Federal EIN Number. Once these steps have been completed, you must submit your documentation to the EDD, or Employment Development Department.
On a Local Level
Once you have filed the necessary paperwork on a state level, you must consider which cities and counties you want to operate in. Be sure to research about specific locations, as not every county in California allows marijuana dispensaries. Each county application is different in that each one has its own specific set of regulations that you must abide by. For example, while most counties require that a dispensary be set up at least 600 feet away from a school, Los Angeles requires a distance of at least 1000 feet. In order to be approved to open a dispensary, it is important to take these regional difference into account.
Keep in mind that a local assembly must be convinced that your business is legitimate and beneficial to the community before they grant you land. Be Green Legal recommends developing a thorough knowledge of land use permits, having a solid business, floor, site, security, and community relations plan, as well as presenting a good financial analysis that presents a deep understanding of the financial ins and outs of operation. For more information, we recommend reading Be Green Legal’s article, How to Convince Your Local Government that You Deserve a Medical Marijuana Dispensary License.
Now, let’s go over how to get a dispensary license in California.
How to get a dispensary license in California?
According to Be Green Legal, there are 2 types of dispensary licenses. Retailers, distributors, microbusinesses and testing labs must apply for licenses with the Bureau of Cannabis Control, while cultivators must obtain separate licenses from the Department of Food and Agriculture. Clearly, if you are both a distributor and cultivator, you must obtain both licenses.
Furthermore, after having attained local approval and acquired land to set up your business, you must be mindful of environmental laws and restrictions. If your dispensary in some way causes changes to the environment through land development, you will need one or more of the following waivers: Water Board, 1602 Permit, and/or Environmental Assessment.
Before applying, we recommend reviewing California dispensary laws and their impact on business operation since their implementation.
California Dispensary Laws
The Compassionate Use Act (CUA) – Approved in 1996, otherwise known as Proposition 215. In brief, the law exempts patients from prosecution for possession of a controlled substance is obtained from a medical professional.
The Medical Marijuana Program Act (MMP) – Approved in 2004, this law allows patients to possess up to eight ounces of marijuana or cultivate six mature or twelve immature plants unless more is authorized by a doctor or local ordinance. An additional white paper issued by Jerry Brown in 2008 further added that a collective or cooperative is only legal if it is incorporated as a California mutual benefit non-profit corp. It was also further stated that providers must obtain seller permits and pay sales taxes for retail transactions under this act.
The Medical Cannabis Regulation and Safety Act (MCRSA) – Approved in 2015, this law mandated that all cannabis businesses must obtain first a local license and then a subsequent state license to operate.
The Adult Use of Marijuana Act (AUMA, Proposition 64) – Approved in 2016, this law created a distinction between medical and recreational use of marijuana and allowed users to purchase and possess up to one ounce of weed or eight grams of concentrates.
The Medical and Adult Use of Cannabis Regulation and Safety Act (MAUCRSA) – Approved in 2017, this law streamlined the regulation of both medical and recreational marijuana by combining them into one system.
The U.S. Controlled Substances Act (CSA) – This law, which has remained in effect since 1971, criminalized marijuana on the Federal Level, despite the legalization of the drug in half the country.
The Cole Memo and Farr Rohrabacher Amendment – These two amendments provide some degree of protection from Federal prosecution to local businesses if they abide by state medical and recreational laws.
More Rules to Keep in Mind
Aside from standard California dispensary laws, there are also some regulations that will likely be around for a while, so it’s important to note them. The following information is provided by The Fresno Bee. Refer to the link for more detailed explanations.
Distribution amount – By law, dispensaries can sell no more than 8 ounces of cannabis to a single patient. However, more can be sold if a patient has a valid doctor’s recommendation.
Business hours – Dispensaries can only be operational from 6 am to 9 pm. When not open, all cannabis products must be stored in a safe or vault.
Visitor logs – Dispensaries are required to keep logs of non-employees entering the building at all times.
Free samples – Free samples of any marijuana product are prohibited.
Transportation – Air, water, rail, human-powered vehicle (bicycle, skateboard, etc), and unmanned vehicle transportation of cannabis is prohibited. Also, drivers cannot carry more than $3,000 worth of cannabis at any time.
Unions – While unionization is not clearly stated in the legislation surrounding marijuana, dispensaries with more than 20 employees can include what are referred to as “labor peace agreements.”
Police – While law enforcement officers are prohibited from getting licenses if their duties involve the enforcement of state marijuana laws, they can open pot businesses outside of their county of employment.
Local control – Proof must be attained of compliance with city or county government agencies indicating that the business is in good standing with their local jurisdiction.
Distance from schools – Dispensary applicants must provide proof that their businesses are at least 600 feet from local schools. (as stated before, this distance may vary from county to county).
Packaging – Packaging must be child-safe and be opaque, effectively hiding the contents. The packaging must also be resealable if intended for multiple uses.
Background checks – An individual who owns 5% of a public company or 20% of a private company may be subject to a background check. (note that banks and financial institutions who provide loans are not considered owners).
Opening and operating a marijuana dispensary is an extensive process and requires a thorough knowledge of the rules and regulations surrounding both cultivation and distribution. Moreover, despite the legality of the drug in California, marijuana is still illegal under federal law and applicants do run the risk of indictment even if they abide by state and local laws.
That being said, most federal agencies have begun to turn a blind eye to marijuana dispensaries operating legally. If you are interested in opening a dispensary, be sure to research the subject fully before committing to any financial or legal venture.
While the information provided herein provides a good overview of the steps necessary for establishing a business, it should not be taken as a definitive or comprehensive guide. As stated earlier, be sure to consult with a legal attorney to discuss marijuana laws in greater depth before getting started.
None of the authors, administrators, or anyone else connected with GreenMed, in any way whatsoever, can be responsible for your use of the information contained in or linked from these web pages.
Laws regarding recreational marijuana are constantly changing! Always consult your local authorities or attorney for professional advice!