How to Open a Marijuana Dispensary in California

State Regulations

• 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

Federal Regulations

• Controlled Substances Act (21 U.S.C. sections 801-971)
• Internal Revenue Code (26 U.S.C. 280E): Prevents tax deductions for cannabis businesses

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

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)

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

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.

• 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

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.