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So you want to open a cannabis dispensary in California?

Cannabis is still a hot topic in California, whether it’s the new rules under MCRSA or the implementation of Prop 64. The State is saturated with money and business ventures, and even veterans of the industry are trying to assess how to stay in business and swim in the turbid waters. The only sure thing is that changes are coming, and if you want to operate a dispensary in 2018, you will have to operate under new guidelines.

Rules for California cannabis

A dispensary in CA will no longer be operating under the protection of a collective.

While nothing is completely finalized, the following proposed regulations are in store for dispensaries:

  • Licensing – A dispensary in CA will no longer be operating under the protection of a collective. To qualify for a State license, any applicant who already has an operating dispensary will need to have a local conditional use permit, or if there is no ordinance where they are currently operating, some sort of proof that they have been operating legally prior to applying for a State license. If you are operating under the collective umbrella, but are in an area that has an official ban, you will not be able to apply for a State license regardless of whether you paid taxes or operated otherwise lawfully.
  • General operations – The process of acquiring, packaging, labeling and reselling cannabis is set to be much more regulated than has been required. The main stipulations being proposed currently include:
    • Dispensaries can only receive their cannabis from licensed distributors and have it delivered by licensed transporters. This forced distribution stipulation is still in the language, but looks like it may be altered or removed. Dispensaries must use some type of track and trace system.
  • No product can be sold without undergoing testing procedures, and no dispensary can package any cannabis products on site.
  • Dispensaries will only be allowed to operate between the hours of 6:00 am to 9:00 pm, and strict guidelines are set in place regarding amount of cannabis on display, inventory tracking and reconciliation, and procedures involving delivery. There must also be a tracking system of every person who enters or accesses the dispensary premises.

These are just some of the regulations in store for a dispensary to operate legally but something else lies in store for the fully compliant medical dispensary-increased taxation.

Dispensaries will have to make the crucial decision of whether they can absorb the taxes in their margins, or must pass these extra costs onto their patients.

As described above, California will use the dual licensing system. A legal dispensary will already be paying all the taxes involved with the local conditional use permit as well as the regular taxes any business pays, and then will have to pay a gross receipts tax to the State. So you pay taxes to the city, and then you pay taxes to the State, but you still can’t use a traditional banking solution or take 280E deductions – a tough landscape for any business owner.

Dispensaries will have to make the crucial decision of whether they can absorb the taxes in their margins, or must pass these extra costs onto their patients. And making that decision is even harder in an environment that is more competitive than ever.

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