Marijuana Retail Business in California: Opening & Operating A Dispensary

The legalization of marijuana use, whether for medicinal or recreation purposes, is slowly spreading throughout the United States. As more states work to legalize and decriminalize the use of cannabis products, business-minded individuals may see this movement as an opportunity to establish a small business. Businesses that are legally allowed to sell cannabis products are called dispensaries, and the requirements and regulations for these differ from state to state.

With the ongoing discussions about the legalization of cannabis products on a federal scale, both users and potential owners should understand the laws in their state. Dispensaries and users that stay small and focused, obey the state laws on sales and usage, and run their business properly are unlikely to be targeted. Thus, if you're embarking on this business opportunity, be sure to stay current with both federal and state laws regarding cannabis.

Read More: California Marijuana Dispensary Laws: Retail & Licensing

In the U.S., federal laws still declare the use, sale or distribution of marijuana. Federal law treats marijuana as a controlled substance and governs it as such. Even though many states have decriminalized marijuana and made it legal for medicinal or recreational purposes, it is technically still a federal crime to be involved with marijuana in any way.

This said, a number of states have approved marijuana, mostly for medicinal use, but, in some cases, for recreational use as well. This puts the state laws at odds with the federal law, which still declares it a controlled substance. However, it’s a matter of enforcement.

The federal government is, as a general rule, more interested in targeting large-scale operations and drugs with much more serious potential health consequences. While larger operations may still be points of interest, the federal government does not seem to want to commit large resources to finding and prosecuting dispensaries and marijuana users the states have declared legal.

What this means is that if an individual wants to open a dispensary or an individual wants to shop at a dispensary, the chances of landing in a federal court are very low. As of December 2019, there seems to be a ceasefire in terms of the conflict between state and federal laws while more information on the issue is gathered.

It’s highly unlikely that small dispensaries and individual users would be targeted. However, it needs to be mentioned that cannabis is still a controlled substance, and selling it is still a federal crime. Time will tell whether the federal government aligns itself with the direction states seem to be moving in.

Cannabis use for medicinal purposes has been legal in California since 1996, and it was legalized for recreational use in 2018. In California, marijuana can be purchased at approved dispensaries. Any dispensary in California has to use the CCTT-Metrc system: This is a reporting tool the state requires to keep track of all commercial transactions involving marijuana.

Dispensaries must have a license, which must be renewed annually. The requirements for a cannabis retailer license in California are:

• Information about the intended business, including formation of incorporation papers, financial documents, and plans of operation.
• Information regarding the physical location of the dispensary.
• A $5,000 bond payable to the state of California.

The application for an annual license costs $1,000, plus an added licensing fee that’s based on the projected size of the dispensary’s business. There are two types of licenses: one for adult use and one for medical marijuana use. If the dispensary intends to sell to both potential customer groups, it will need to apply for and obtain both types of licenses. In addition, the business must have a permit or approval from the local government to operate the dispensary to obtain an annual license.

Dispensaries are expected to meet the following regulation points to stay compliant with California law:

• The age of every customer must be verified; recreational marijuana can be sold only to adults over the age of 21. To purchase medicinal marijuana, adults must be over 18 years old, with a valid ID and a doctor’s recommendation.
  
  

• The daily purchase limits of cannabis must be adhered to. For adult use:

• No more than 1 ounce of non-concentrated cannabis per day; and
  

• No more than 8 grams of concentrated cannabis per day.* For medicinal use, the daily limit is 8 ounces of medicinal cannabis per day.
  
  
• All marijuana-related transactions must be submitted to the state’s tracking system, daily.
  
  
• Cannabis harvested for use or sale must be tested to meet the safety and quality standards set by the state. Thus, anything grown at the dispensary must undergo lab testing before sale.

Users of adult or medicinal marijuana need to be aware of the state laws and limits regarding their cannabis use.

• Driving under the influence is absolutely against the law, whether it’s from alcohol, marijuana or other intoxication.
• Consumption of legal cannabis is prohibited in public areas, any place tobacco smoking is prohibited, and within 1,000 feet of any sort of facility where children are present (school, daycare, etc.)
• Cannabis may be legally consumed in private residences, including outside or in additional structures on private property, as long as the area is enclosed away from the public and local laws do not prohibit it.
• The legal limits for possession are similar to the limits on purchase, and possession over this limit is a crime.

It is illegal in California to sell or possess with the intent for sale without a state-approved license. Most of the penalties relate to the user or customer, but it’s important to be aware of what is considered an infraction or a violation.

• For anyone under 21, possession of a marijuana or cannabis is considered an infraction.
• For adults over 21, possession over the legal daily limit can be an infraction or a misdemeanor, which can lead to up to six months of jail time along with a fine up to $500.
• Attempting to sell cannabis without a license can lead to fines up to $500 and a jail term up to six months.
• Selling cannabis to a minor is a felony under California Health and Safety code and can lead to anywhere from three to seven years in state prison.
• There are a number of laws regarding the cultivation of cannabis plants that vary from county to county, but in general, possession of six or more plants may be an infraction or a misdemeanor. For dispensaries, this would likely be more lenient, depending on the local legislation.
• Federal penalties for possession, sale and distribution technically still apply as well as a ban on transporting marijuana across state lines.

California seems to be slowly but surely encouraging the legal, controlled growth of the marijuana and cannabis industry within the state. Business owners wanting to get in on the ground level have an opportunity to start and open their own dispensary by applying for the license that makes their business legal. By ensuring all sales of cannabis are tracked using the daily record system, California makes it easier to understand how the legalization of cannabis will affect both the economy and the demographics who choose to use it for medicinal and recreational purposes.