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How to Open a Marijuana Dispensary in California

In 2016, California joined the growing number of states that have legalized cannabis for recreational sale and use. This legalization of recreational marijuana generated incredible excitement. California has been and will continue to be the largest marijuana market in the world. With that kind of market available, it is not surprising that entrepreneurs are lining up to open marijuana dispensaries.

How Do I Take Advantage of California's Market and Open a Marijuana Dispensary?

California has created the Bureau of Cannabis Control for the specific purpose of regulating commercial cannabis licenses for medical and adult use. If you are seeking to open a marijuana dispensary, you need to apply for a license through their website. Licenses must be approved at the state and local level. There are also requirements to comply with the California Environmental Quality Act.

Guide to Understanding California's Commercial Marijuana Laws

It is not surprising that a product like cannabis would be intensely regulated. There are regulations on who can smoke, purchase, and sell marijuana. To help you understand the various permit and license requirements, we have provided a summary in table format.

What are the relevant statutes?

State Regulations

Federal Regulations

What are the restrictions on selling and purchasing marijuana?

In California, it is lawful to possess, process, transport, purchase, obtain, and give away marijuana, but only if:

  • The person is 21 years of age or older
  • The amount of unconcentrated cannabis is not more than 28.5 grams
  • The amount of concentrated cannabis is not more than 8 grams
  • The person owns no more than six living cannabis plants
How do I get a license to sell marijuana?

You need a retail license from the state to legally sell marijuana in California. Licenses are issued by the Bureau of Cannabis Control. In addition, you will need approval from the local jurisdiction (city or town), where the retail operation is located before you can receive a license.

There are two types of licenses:

  • Adult-Use Retail (A-License)
  • Medicinal Retail (M-License)

California allows for two types of retail:

  • Retail sales that are delivery only
  • Retail sales from a storefront

You need to provide this information on your license application:

  • Business organization structure
  • Valid Social Security Number or Federal Employer Identification Number
  • Primary contact person
  • Seller's permit from the California Department of Tax and Fee Administration (CDTFA)
  • A declaration that location is not within 600 feet of a school or youth center
  • Evidence of compliance with the California Environmental Quality Act (CEQA)
What information must owners provide?

Each owner is required to provide an individual profile in the Manufactured Cannabis Licensing System. The information required to be disclosed includes:

  • Identifying information: SSN, DOB, address, email, phone number
  • Criminal convictions
  • Fingerprint through Live Scan
  • Ownership of a financial interest in any other cannabis business
What are the restrictions to opening a marijuana dispensary?

Opening a marijuana dispensary is not quite like opening any other business. While marijuana may be legal in California, it is still illegal under federal law. That dichotomy presents certain problems.

Banking Restrictions

The banking industry, which is federally regulated, is reluctant to offer checking accounts to marijuana businesses, so your cannabis business may need to be an all-cash industry. Having large amounts of cash to operate a business will present certain security concerns.

Tax Considerations

Even though a cannabis business is not considered legal by the federal government, you must still pay income taxes. A regular business would be able to deduct certain operating expenses, but a cannabis business cannot. Federal income tax will be on the gross income amount, which will make taxes higher for your cannabis business.

Restrictions on Sourcing and Distributing

Federal law prohibits the transport of marijuana across state lines. Most businesses can sell their products and ship them to persons in other states. Marijuana businesses are restricted to sales within California. In addition, a marijuana business has to source its raw materials and products from within the state.

What are the required license fees?
  • Non-refundable application fee: $1000
  • License fees are based on an estimated gross annual revenue. The minimum fee is $2,500 for an estimated $500,000 or less annual gross revenue.
  • Licenses are renewed annually
What are the grounds for a license denial?

A cannabis license can be denied for several reasons which include B&P Code sec. 26057:

  • Errors or incomplete application
  • Premises do not comply with regulations
  • Failure to pay owed income taxes
  • Violent felony conviction
  • Felony conviction involving fraud, deceit, or embezzlement
  • Felony conviction for sale of a controlled substance to a minor

While a felony conviction can be grounds for denial, it is possible under certain conditions that an applicant can be considered to be rehabilitated.

Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.

Cautions for Opening a California Dispensary

While dollar signs may dance in the minds of would-be marijuana dispensary owners, there are cautions to consider. Before you open your marijuana dispensary, you may need to consider and investigate some of the impediments and competition that you will face.

Established Black Market

The biggest threat to opening a marijuana dispensary is the competition from the black market. Marijuana has long been grown in California. There has been a thriving black market for cannabis since the 1960s. New legal retail shops face stiff competition from established illegal marijuana suppliers.

Local Governments Refuse to License Retail Sales

California allows local communities to decide if they want a retail marijuana operation within their cities. Few cities in California allow licensed dispensaries. The state is trying to correct these problems with new regulations and prohibitions about transporting marijuana through local jurisdictions. However, there continue to be problems with obtaining local permission.

Related Resources

Need Legal Help With Your Marijuana Dispensary?

A marijuana dispensary can be very lucrative. No doubt you may be itching to get your business going, but the sheer number of regulations and requirements is a little intimidating. You can get help with the details from a local California cannabis business lawyer. They can explain the steps that you need to take and offer legal assistance along the way. Get help opening your marijuana dispensary today.

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