Colorado Cannabis Licenses
On November 6, 2012, Colorado voters passed Amendment 64, legalizing the use and regulation of recreational cannabis. Two years later, Colorado started issuing licenses, and since then, the cannabis business in Colorado has boomed. Sales have increased every year since the market opened in 2014, and they show no signs of stopping. Even the economic slowdown COVID-19 pandemic caused could not slow the industry down. In fact, cannabis sales in 2020 increased 25% to $2.19 billion when compared to 2019.
In Colorado, there are two categories of cannabis business licenses – recreational and medicinal – each with four types of licenses available. A business can hold both a recreational license and a medical license, but will have to apply for each one separately.
Cannabis (Marijuana) Dispensary
Dispensaries are divided into two types, a retail or recreational dispensary, where customers at least assuming they at least 21 years old, and having a valid form of government ID like a driver’s license or a passport, can purchase cannabis and a medical dispensary, where customers require medical cannabis card to make purchases. While medical cards can technically be acquired by individuals over 18 but below 21, it is important to note that businesses selling both medical and recreational cannabis at a single location cannot sell to anyone younger than 21 at that location.
Cannabis Cultivation Facility
These businesses grow and cultivate cannabis for sale to marijuana stores or product manufacturers but cannot sell directly to consumers. A cultivation license allows such businesses to cultivate, prepare and package cannabis. Operating one of these businesses requires significant horticultural knowledge and typically requires material capital investments.
Cannabis Product Manufacturer
Manufacturers are allowed to purchase cannabis and incorporate it into new products, like edibles and oil. These products are then sold to dispensaries which sell them to consumers. Cannabis product manufacturing requires a separate license and is subject to additional regulations including regular testing of the product.
Businesses (or individuals) can be separately licensed to transport cannabis from one business to another, like from a Cultivation Facility to a Products Manufacturer. In addition, Colorado has recently began issuing retail cannabis delivery licenses pursuant to which delivery directly to homes and businesses will be permitted.
Cannabis Licenses in Colorado
Like all businesses, a cannabis-focused enterprise needs to first pick and name and incorporate with the Colorado Secretary of State. Cannabis companies can use any form of entity incorporate available in Colorado including corporations, limited liability companies, or limited liability partnerships. The choice of entity type could have significant legal and tax implications so we recommend speaking with one of CannDelta’s experienced consultants that have years of experience navigating cannabis law.
A consideration unique to licensed marijuana businesses in Colorado is that the Colorado Marijuana Enforcement Division (“MED”) must be kept up to date on any changes made to the trade name or any DBA (doing business as) a business may undertake.
Before submitting any applications to the MED, a prospective cannabis business should have already:
- established a business entity with the Colorado Secretary of State
- applied for (and received) a Federal Taxpayer ID
- entered into relevant corporate governance documents
- created an organizational chart setting forth ownership percentages
- if applicable, be prepared to provide proof of possession of the real estate where the business will operate, including:
- facility diagrams with plans for the licensed premise
- security and surveillance
- a copy of the local license application
Business Fees in Colorado
To get started in the cannabis industry, a business is going to need a substantial amount of capital. To apply for the Regulated Marijuana Business License, for example, a business will already need to possess the property where the business will be located, which could be a costly endeavor. In addition, it will also need to pay several fees to state and local governments, among them are:
- Business Entity fee: $50 – This fee is paid to the Colorado Department of State to register your business organization, be it a corporation, LLC, or Limited Partnership
- Marijuana Occupational License Application Fee: $100 – This fee is paid to MED when submitting your application for a Marijuana Occupational License
- Regulated Marijuana Business License Application Fees are payable to the MED when submitting your license application. The fee amount varies depending on the type of license you are seeking. Below are the fees for each license category:
- Medical Marijuana Store License: $7,000
- Medical Marijuana Products Manufacturer License: $2,500
- Medical Marijuana Cultivation Facility Class 1 License (up to 500 plants): $2,500. Fees increase as the number of plants does.
- Medical Marijuana Transporter License: $5,400
- Retail Marijuana Store License: $7,000
- Retail Marijuana Products Manufacturer License: $6,500
- Retail Marijuana Cultivation Facility Tier 1 License (up to 1,800 plants): $6,500. Fees increase as the number of plants does
- Retail Marijuana Transporter License: $5,400
These are the initial license fees. Each license needs to be renewed annually.