How to Open a Dispensary in California: Licensing and Permitting
With a population of just under 40,000,000, California is the world’s largest cannabis market. But that’s not to suggest it’s a free-for-all.
Not only does the state impose strict licensing and permitting rules, but many municipalities outlaw the sale of cannabis products within their jurisdictions. So being on top of applicable laws isn’t optional; it needs to be part and parcel of your approach.
Which laws apply? Lets begin with a list of statewide and federal statutes. Remember, your municipality may have its own laws as well.
That’s why it’s always a good idea to consult with an attorney with experience in cannabis laws. You think a parking ticket hurts? Don’t get hit with a costly citation for non-compliance!
- Controlled Substances Act (21 U.S.C. sections 801-971)
- Internal Revenue Code (26 U.S.C. 280E): Prevents tax deductions for cannabis businesses
- Uniform Controlled Substances Act-Cannabis (Health & Safety Code sections 11357-11362.9)
- Business and Professions Code: Sections 26000-26250
- California Code of Regulations Title 16 Division 42 Bureau of Cannabis: Sections 5000-5905
What are the restrictions on the purchase, possession, processing, transport, obtaining and giving away of cannabis in California?
- The person involved must be 21 years of age or older
- The amount of unconcentrated cannabis must not more than 28.5 grams
- The amount of concentrated cannabis must not more than 8 grams
- The person involved must own no more than 6 living cannabis plants
How do I get a license to sell cannabis in California?
Licenses are issued by the Bureau of Cannabis Control (BCC). In addition, you’ll 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)
In addition, California allows for two types of retail: From a storefront (dispensary) or delivery-only. It’s important to note that as of 2019, cannabis delivery is legal everywhere in the state, including jurisdictions that prohibit the operation of storefront dispensaries.
Naturally, it’s crucial that you have a dispensary business plan in place (need help? just ask!). In addition, you’ll need to provide the BCC documentation such as:
- Your business organization structure
- Valid Social Security Number or Federal Employer Identification Number
- A seller’s permit from the California Department of Tax and Fee Administration (CDTFA)
- A declaration that the dispensary is not within 600 feet of a school or youth center
- Evidence of compliance with the California Environmental Quality Act (CEQA)
Each dispensary owner is required to provide an individual profile in the Manufactured Cannabis Licensing System.
Required information includes:
- Identifying information: SSN, DOB, address, email, phone number
- Any criminal convictions
- Fingerprint obtained through Live Scan
- Disclosure of ownership of a financial interest in any other cannabis business
What kinds of fees are required to open a dispensary?
Non-refundable application fee: $1000
Applicants must post a $5,000 bond payable to the state
License fees are based on estimated gross annual revenue; the minimum fee is $2,500 for an estimated $500,000 or less annual gross revenue
Licenses are renewed annually
Can my application be denied?
It can; reasons include those spelled out in B&P Code sec. 26057. Principal ones include:
- An application that contains errors or is incomplete
- 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
How to Open a Dispensary in CA: Banking, Tax and Other Considerations
We sincerely hope you’re not daunted by the list of licensing requirements we just shared. But we’re not quite done with the hard stuff yet. In addition to all the state and local statutes to contend with, there are other considerations to take into account:
The banking industry, which is federally regulated, has historically been reluctant to offer checking accounts to cannabis businesses. That said, there are hopeful signs this is changing. But depending upon your banking situation, your business may need to operate on an all-cash basis, and this will inevitably present certain logistical and security concerns.
Even though cannabis businesses are not considered legal by the federal government, you are still required to pay income tax. And while most businesses are able to deduct normal operating expenses, cannabis businesses cannot. And federal income tax will be on the gross income amount, which will pencil out to higher taxes for your cannabis business. We encourage you to consult the Tax Guide for Cannabis Business maintained by the California Department of Tax and Fee Administration.
Restrictions on Sourcing and Distributing
While most businesses can sell and ship their products to persons in other states, federal law prohibits the transport of cannabis across state lines. This also means that every dispensary has to source its raw materials and products in-state.
How to Open a Dispensary in CA: The Fun Stuff
Because for all the layers of red tape, expensive licensing fees, and nail-biting property inspections, there really aren’t many thrills that compete with the feeling you get when you step back to take in what you’ve built.
Fortunately for us, we get to be right next to this moment time and time again as our clients see their dreams take flight. And over the years spent helping that achieve those dreams, we’ve compiled quite a library of tips, tricks, and best practices you’ll need when you’re preparing to open your dispensary in California. Things like:
- The 4 Essential Hires You Need when Opening a Dispensary
- How to Write a Great Press Release to Announce Your Opening
- Webinar on How to Open a Dispensary with Gary Cohen, CEO of Cova
- Stay in the Loop: Important Cannabis Publications to Follow
Of course, you also want to make sure you are ready to market your new dispensary, too!