Starting a new business is difficult, but starting an online dispensary is even more difficult. Obtaining a medical or retail marijuana license can be time-consuming and expensive, and it is illegal in some cities.
As communities choose to keep moratoriums on limiting the number of licenses available, company owners may find themselves in a bind, as in the instance of Gabe Franklin, a Breckenridge man who received a medical marijuana center license through a transfer of ownership in 2015. He didn’t have the cultivation license necessary by Colorado law, which mandates that medical dispensary proprietors grow at least 70% of their on-hand inventory.
Assistant Town Manager Shannon Haynes described the situation as “a pickle.” “He got rid of his cultivation license and now only has a medical license, which means he can’t sell.” The problem is that we have a moratorium in place that prevents the issuance of a new license.”
On Airport Road, the community now has four dispensaries open, compared to two in nearby Frisco, one in Silverthorne, and three in Dillon. As of March 1, 2016, Colorado had 514 licensed medical marijuana centers and 424 retail marijuana stores across the state. There were additionally 753 medicinal cultivations and 503 retail cultivations reported by the state. Colorado offers a total of seven separate cannabis-related permits, including sales, production, testing, and infusion.
The state will not provide a license to applicants for locations that are capped under municipal law, according to Lynn Granger, communications director for the Colorado Department of Revenue’s Enforcement Division.
“They don’t grant the license because the Marijuana Enforcement Division (MED) checks to see what the caps are,” Granger said of Franklin’s case. “With medical, though, they issue the license and the counties handle it on the back end.” They obtain a license, but they are unable to use it.”
“I don’t know if they would want to do that, wait and see, or move,” Granger said, adding that he could turn in his license.
While the town council in Breckenridge debated whether Franklin should be allowed to receive a cultivation license, they finally chose to wait until the moratorium ended in July 2016.
Wendy Wolfe, who sat on Breckenridge’s town council until March 22, 2016, remarked, “We need time to think about all of the repercussions of this.” “This flaw was brought to our attention by one of our applicants. We were attempting to assist someone. But if they sell this license, we’re in for a different situation.”
Depending on the number of patients served, the cost of a medical marijuana facility application now ranges from $7,000 to $15,000. The cost of a new license ranges from $5,200 to $13,200, with renewals costing somewhat more.
The process for a retail establishment is far less expensive, with $5,000 application fees and $3,000 in first license payments. Each employee must also obtain an occupational license, sometimes known as a “badge,” which costs $250 per person.
According to special counsel Jean Gonnell of Denver-based business firm Hoban & Feola, LLC, the entire cost of opening exceeds $1 million.
“In Colorado, I don’t believe you can establish a marijuana firm for less than a million dollars,” Gonnell said. “I don’t think you could start one for less than $2 million in Denver.”
While some investors may be interested in the cannabis market, Colorado law currently prohibits out-of-state lenders from receiving a profit share. Only business owners are eligible for profit shares under the existing law, and the owner of a medicinal or retail marijuana firm must be a two-year resident of the state before seeking for a license.
“There’s a lot of skepticism.” Many people believe marijuana should be treated differently than other businesses, according to Gonnell. “There’s a lot of red tape in terms of where the cash can come from, how you can pay investors, and facility security investments.”
In January, a bill was proposed in the Colorado Senate that, if passed, would allow license applicants to be either a Colorado resident or a citizen of the United States for applications submitted beginning in January 2017. The law would make it illegal for licenses to own a majority position in a publicly traded corporation, and it would also make it mandatory for licensees to be Colorado citizens.
Investing in a cannabis-related business that does not require a license, such as security or containers, is now the sole option.
“An unsecured promissory note with a high interest rate is possible. But it isn’t enough for certain out-of-state lenders, according to Gonnell. “It’s been that way from the start.” It all boils down to (the state’s) want to ensure that cartels and criminal actors don’t profit from Colorado’s marijuana economy.”
To make matters worse, most banks will not open accounts for marijuana-related firms because it is still illegal on the federal level. Only a few smaller, local branches exist, and those that do frequently charge exorbitant fees. Many firms, according to Granger, use cash to remit sales tax to the state.
“It’s a complete pain. Gonnell remarked, “so much so that the MED has a cash-counting machine there.” “Many people don’t work in cash and must rely on money orders.”
Colorado currently levies a 2.9 percent sales tax on all purchases and a 10% sales tax on retail purchases. The advertised price of retail products additionally includes a 15% excise tax.
In addition, local sales taxes are levied. A 5% excise tax is collected in Frisco, Silverthorne, and Breckenridge.
“It’s a tougher industry because you have to follow both state and municipal standards,” Gonnell explained. “As a result, you’ll need to know both.”
Despite these disadvantages, individuals who have ventured into the industry have reaped the benefits. As clients went through the door, High County Healing customer relations director Joe Lindsey stood by the counter, giving high fives and smiles. High County Healing began as a medicinal dispensary and has recently grown to retail, as have many other businesses since Amendment 64 was passed.