How to Open a Marijuana Dispensary in Colorado

It's been over ten years since Colorado legalized adult-use recreational cannabis. As a result, Colorado's cannabis industry is well established. Starting a cannabis dispensary business in Colorado is, in some respects, just like starting any other business. However, there are some key differences.

Even though recreational marijuana and medical marijuana are legal in Colorado, marijuana is still illegal at the federal level. This article looks at starting a marijuana dispensary in Colorado and the legal roadblocks and hurdles that cannabis business owners may face while doing so.

Choosing a Name for Your Marijuana Dispensary

One of the first considerations of any business is selecting a name. Once you choose a name, you should go to the Colorado Secretary of State's website to see if it is available.

Colorado allows a marijuana business to register a trade name and a trademark at the state level. This prevents competitors within Colorado from copying your company name or the names of your company's cannabis products. However, you cannot register your trademark at the federal level. Federal law prohibits the U.S. Patent and Trademark Office from registering trademarks for marijuana businesses.

State and Federal Taxation

In general, paying state taxes on your Colorado marijuana business is not an issue. However, paying federal income tax is another matter.

Location of Your Marijuana Dispensary

In choosing the location of your marijuana business, you will have to comply with local county and city zoning restrictions and requirements. Colorado allows local jurisdictions to impose restrictions on the time, place, manner, and number of marijuana businesses.

Colorado Marijuana Dispensary Laws

Marijuana businesses are highly regulated. The Marijuana Enforcement Division is the Colorado marijuana industry's licensing authority. A number of permit and marijuana business license application requirements exist.

A plain-language summary is below in a table format for your easy reference.

What are the Relevant Statutes? State Regulations

• Colorado Constitution: Art. XVIII sec. 16 (Allows for the personal use and regulation of cannabis)

• Colorado Retail Marijuana Code: CSR 44-12-101 to 1101 (was CSR 12-434-101 to 1101)

• Retail Marijuana Rules: Code of Regulations, 1 CCR 212-3

• Colorado Medical Marijuana Code: Colorado Revised Statutes 18-18-406.3

• Medical Marijuana Rules: 1 CCR 212-3

• Colorado Medical Marijuana Registry

Federal Regulations

• Controlled Substances Act: 21 U.S.C. sec. 801-971

• Internal Revenue Code: 26 U.S.C. 280E (Prevents tax deductions for cannabis businesses)

What Permits and License Types Do I Need? The licensing body in Colorado is the Department of Revenue Marijuana Enforcement Division (MED). The MED handles the application process for dispensary licenses, cultivation licenses, medical marijuana business licenses, product manufacturer licenses, and more. As for local approval of licensing:

• The MED submits all applications and renewals to local jurisdictions for approval. Local jurisdictions may impose separate local licensing requirements. (CRS 44-10-301, formerly CRS 44-12-301 prior to 2020)

• After getting a state license, a licensee has forty-five (45) days to get a local license.

The number of owners in a Colorado marijuana business determines the amount of state licensing fees it must pay.

• Level 1 requires one to four controlling beneficial owners

• Level 2 requires five to nine controlling beneficial owners

• Level 3 requires ten or more controlling beneficial owners

State licensing for retail marijuana business:

• Cannabis retail store applications must go to Colorado's Department of Revenue

• Application fee: $5,000

• License fee: $2,850 for Level 1, $5,550 for Level 2, $8,200 for Level 3

• Annual license renewal application fee: $1,840

• Annual license renewal fee: $460

State licensing for medical dispensaries:

• Application fee: $6,440 for Level 1

• License fee: $1,610 for Level 1

• Annual license renewal application fee: $1,840

• Annual license renewal fee: $460

State licensing for marijuana cultivation facility: The license and application fees for cannabis cultivation facilities depend on the production capacity and size.

• Application fee: $2,440 for Level 1

• License fee: $610 for Level 1

• Annual license renewal application fee: $1,840 for Level 1

• Annual license renewal fee: $460 for Level 1

Do I Have to Allow the Inspection of Books and Records?

Inspection procedures (CCR 212-3-3-905)

• A complete set of all business transactions and point-of-sale records must be open at all times during business hours

• All areas of the licensed premises are subject to inspection during business hours.

• Records must be kept for the prior three tax years

Are There Special Location Rules? Limited Access Area

• A marijuana business is within a limited access area that is an enclosed building, room, or contiguous area. (CCR 212-3-3-205)

• All customers or visitors need an escort at all times in the retail marijuana establishment.

• All persons in limited access areas must have an identification badge. These people and their visit dates go into a visitor log. (CCR 212-3-3-205)

Who Can Own a Marijuana Dispensary in Colorado?

• Persons who have paid the license fees

• Persons of good moral character (CSR 24-5-101(2))

• Dispensary owners must be 21 years of age or older

• A resident of Colorado for at least one year or a U.S. citizen prior to the date of application

• After November 2019: publicly traded corporations; controlling and passive owners; indirect investment (HB19-1090)

Who Cannot Own a Marijuana Dispensary in Colorado?

• Law enforcement officers

• Employees of state or local licensing authority

• Those who failed to pay marijuana taxes or file taxes

• A person who has a deferred judgment or felony within the last three years unless exempt under Social Equity License

• A person applying for a license at a retail food establishment

• Someone whose criminal character or criminal record poses a threat to the regulation or control of marijuana in Colorado (CRS 44-10-307(2))

• A former primary caregiver who had their license revoked

• A doctor who makes medical marijuana recommendations

What Packaging and Labeling Do I Need? In a retail marijuana store the following information must be on every marijuana product container 1 CCR 212-2 (R1000 series):

• Active THC information

• The license number of the facility where it was grown

• The license number of the retail establishment

• Identity statement and graphic symbol of the retail marijuana store

• Harvest batch number

• Date of sale to the consumer

• Net weight in grams

• The universal symbol that the container holds marijuana

• Required state warnings

What Signs and Advertisement Can I Use? The rules for cannabis market signage and advertising are in the Code of Colorado Regulations 1 CCR 212-2 (R1100 series). It is important to note that Colorado cities may have different advertisement regulations than the state. For instance, the state of Colorado now allows cannabis businesses to advertise on billboards. However, the city of Denver does not.

• Television or radio advertising, but the business must prove the audience is not minors

• Cartoon characters cannot be in ads for medical marijuana or retail marijuana businesses

• Print ads limited to media that is not distributed to persons under 21 years of age (minors)

• Online marijuana ads, but the business must prove that 30% or less of the audience are minors

• Cannabis businesses cannot advertise out of state

• No signage on vehicles

• Outdoor billboards so long as not near schools, churches, or public playgrounds

• No handbills handed out or left on cars

• Can have a sign on the dispensary building but must not be attractive to minors

Note: 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

Related Resources

• Federal Marijuana Laws

• Marijuana Business: Licenses, Permits, and Planning

• Setting Up a Marijuana Business: The Basics

• How to Get Financing for a Marijuana Business

• Scheduling a Licensing Appointment with CDOR

Get Legal Help With Your Marijuana Dispensary

Opening a startup is exciting. It can also be exhausting. Navigating special state regulations and federal prohibitions can be intimidating. Contact a local Colorado cannabis business attorney for guidance.