∗∗∗Warning: The laws that regulate opening and operating California medical marijuana dispensaries are technical and complex. Legally speaking, this is an extremely risky venture. Many counties will not even issue licenses for dispensaries, which means that opening them is inherently illegal.
While this article provides a basic outline regarding the current state of the law, it should not replace a legal consultation with a savvy California marijuana attorney. If you are looking to open a California marijuana dispensary, we advise that you first meet with a local attorney who can guide you through the appropriate steps to ensure legal compliance.
Medical marijuana dispensaries...also sometimes referred to as
may be legally established under California's medical marijuana laws . However, their operation is strictly prohibited under federal law and by many local ordinances. As a result, opening and operating a medical marijuana dispensary is highly dangerous and may subject you to criminal prosecution.
In order to open a dispensary in accordance with California law, there are specific steps you should follow. Some of these include (but are not limited to):
Failing to abide by these rules / suggestions subjects you to an even higher risk of prosecution for violating California's marijuana laws . Among these are laws relating to
And keep in mind that even if you precisely follow all guidelines, you still subject yourself to federal prosecution as well. However, you are much less likely to be charged in federal court if you comply with state and local laws.
In this article, our California marijuana defense attorneys1 explain How to Open a Marijuana Dispensary by addressing the following:
If, after you read this article, you would like more information, we invite you to contact us at Shouse Law Group.
You may also find helpful information in our related articles on California's Marijuana Laws; California's Medical Marijuana Laws; Possessing Marijuana; Possessing Marijuana for Sales; Selling Marijuana; and Cultivating Marijuana.
In the last 15 years, California has enacted a number of laws that regulate the use, possession, cultivation and distribution of medical marijuana.
"Medical" marijuana is legal marijuana...that is, as long as its possession, use, cultivation and distribution strictly adhere to the following guidelines.
This first law was passed by voters in 1996. It is known as Proposition 215, the Compassionate Use Act. This act exempts certain patients and their primary caregivers from criminal liability for possessing or cultivating marijuana when these activities are conducted pursuant to an approved medical recommendation.2
The types of patients that this law applies to are "seriously ill Californians" who suffer from
The second law was passed by the California legislature and went into effect in 2004. This law, known as Senate Bill 420...the Medical Marijuana Program "MMP" Act...builds on Prop. 215 and establishes a statewide identification card system for these "qualified patients" and their caregivers.
Cards are valid for one year and allow these protected individuals to cultivate, possess and transport up to
unless a local ordinance or one's doctor authorizes more.4
In addition, the MMP grants a qualified right to the "collective and cooperative" cultivation of medical marijuana, which is where marijuana dispensaries find their legal authority.
But perhaps the most important point to note about medical marijuana is the fact that even though it is legal in California...and many other states as well...federal law still prohibits its distribution and use.
The United States "Controlled Substances Act"...the nation's controlling federal legislation regarding drugs...classifies marijuana as a Schedule I drug.5 When a drug is listed as "Schedule I", it means that the drug has
This means that even if you are properly using, growing, cultivating or distributing medical marijuana in California, you are nevertheless violating federal law. As a result, if you want to open a marijuana dispensary in California, you must be prepared to deal with this dichotomy.
Opening a marijuana dispensary in California is going to cost you. According to industry analysts, opening a legal dispensary costs anywhere from $30,000 to $500,000, depending on
These costs include (but are not limited to):
There are a variety of companies that will build a "turn-key" dispensary for you, which literally means that all you have to do is "turn the key" to open the door, and the establishment is completely ready for you to run.
You can find these types of companies on-line. They promise to
The cost for these medical marijuana dispensaries ranges from $100,000 - $200,000.
But before you purchase this type of dispensary, you should consult with your own California marijuana attorney to ensure the accuracy of the company's information.
There really is no specific legislation that recognizes medical marijuana "dispensaries". It's the MMP that grants authority to "collectives" and "cooperatives", also known as "co-ops".
California Health and Safety Code 11362.775 states that medical marijuana patients and primary caregivers may "associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes".
This provision doesn't give these facilities carte-blanche to do as they wish. In fact, collectives and cooperatives must adhere to strict guidelines in order to comply with state legislation. These requirements include:
Collectives and cooperatives are not designed to make a profit but instead are supposed to be set up as "non-profits" to benefit their members.8 Despite the fact that people are quick to cash in on what is being called as the "green rush", California law specifically states that there is nothing in Prop. 215 or the MMP to "authorize any individual or group to cultivate or distribute marijuana for profit".9
Medical marijuana transactions are subject to sales tax, which means that collectives and cooperatives must obtain a Seller's Permit (information about which may be found on the California State Board of Equalization's website). And...depending on the city / county in which you plan on opening the facility...you may additionally be required to obtain a business license and/or a zoning permit.
In order to comply with state regulations, you will want to prove that you are not distributing marijuana for anything other than medical purposes. In order to do this, you should
a) Have an application process – have new patients or primary caregivers complete a written application that provides his/her recommending physician's name and contact information.
b) Verify that the patient or caregiver has a valid California medical marijuana identification card or...in cases where they do not...personally contact the recommending physician and verify his/her license status.
c) Keep copies of all I.D. cards and physician referrals. And,
d) Require the members of your collective or cooperative to sign a contract agreeing not to distribute or use marijuana for anything other than medicinal purposes. And if you discover that members are not abiding by their contracts, revoke their membership.
California medical marijuana collectives and cooperatives are not permitted to purchase marijuana from (or sell it to) non-members. Keep in mind that the only type of legally grown marijuana is that grown by a qualified patient or his/her primary caregiver.10 Dispensaries are simply supposed to provide a means for facilitating and coordinating lawful marijuana transactions between members.
This means that you should record the source of all incoming and outgoing marijuana.
When it comes to distributing your marijuana, you may
a) provide it free to members,
b) distribute it in exchange for services that members provide to the collective or co-op,
c) charge fees that are reasonably calculated to cover only your overhead and operating expenses, or
d) any combination of the above.
These rules are to ensure that you comply with your status as a "non-profit".
California law establishes strict guidelines under the Medical Marijuana Program "MMP" Act for how much medical marijuana a patient or caregiver may grow, possess or distribute...8oz of dried marijuana, 6 mature marijuana plants or 12 immature plants. If a person is a caregiver to more than one patient, he/she may grow, possess or transport those amounts for each patient.11
Similarly, a co-op or collective may grow, possess or distribute those amounts for each member. For example, a co-op that has 10 members may carry ten times the amount authorized for one person. However, many local ordinances prohibit growing or possessing more than 99 plants, regardless of how many patients / caregivers the collective has.
Because of this, it is very important to document exactly how many members you have, as well as how much marijuana you have at any given time. Engaging in any marijuana-related activities with more than the legal amounts will increase your potential criminal liability.
This isn't a law. It's just good common sense. Neighborhood complaints are the number one cause of police raids. As a result, you will want to make sure that your establishment is as "neighborhood friendly" as possible.
This includes (but is not limited to):
- having a pleasant storefront with no "offensive" signs or symbols to attract law enforcement or neighborhood protest,
- operating a well-run, clean and professional store,
- hiring security to ensure that patients are safe and that the surrounding homes or businesses are not negatively impacted by loitering or other criminal activities,
- establishing and following cash-handling practices...both for in-store sales as well as with respect to bank runs...to prevent robberies or other security violations, and
- forming and maintaining positive relationships with local police departments, governments and elected officials.
Medical marijuana dispensaries that do not operate as a collective or cooperative are actually illegal. Owners of these "for profit" shops may be prosecuted...even if some of their customers are actual qualified patients and/or primary caregivers.
Law enforcement officers / agencies will look for signs that the dispensary isn't in compliance with local laws by investigating operating practices such as
It bears repeating that the only legal authority for operating a California medical marijuana dispensary lies in Senate Bill 420. If you operate outside of these parameters...for example, by running a "for profit" business...you are violating California's marijuana laws regarding
just to name a few.
California law sets the minimum requirements for opening and operating medical marijuana dispensaries...local law establishes additional regulations as it deems fit. Cities and counties regulate issues such as
∗For a list of specific regulations, you can review the list provided by Safe Access Now that details a city-by-city guide.
The fact remains that medical marijuana collectives, co-operatives and dispensaries are illegal under federal law. This means that even if you are in strict compliance with California's laws, you are nevertheless violating federal drug laws.
And in addition to imposing substantial fines and prison time for federal violations, federal agencies may also seize and cause a forfeiture of your collective and your inventories.
Fortunately, many federal agencies are turning a blind-eye to dispensaries that are operating in an otherwise legal fashion. In fact, in 2009, Eric Holder, the U.S. Attorney General, released a statement that the office would not prosecute marijuana dispensaries that complied with state law. "The policy is to go after those people who violate both federal and state law, to the extent that people do that and try to use medical marijuana laws as a shield for activity that is not designated to comport with what the intention was of the state law. Those are the organizations, the people, that we will target."
This is one reason why it is critical to consult with a skilled California marijuana attorney before opening a medical marijuana dispensary. You will want to do whatever it takes to make sure that you mitigate the risks of running what "the feds" will essentially label a criminal enterprise.
It bears repeating that none of this information is intended to replace an in-person consultation with an experienced California marijuana attorney. As Riverside CA criminal defense attorney Michael Scafiddi14 explains, "Local marijuana laws are ever changing...one minute you could be in compliance, and the next minute you could be breaking the law."
The best way to avoid prosecution and criminal liability is to speak with a lawyer before opening a California medical marijuana dispensary.
For questions about opening a California medical marijuana dispensary, or to discuss your case confidentially with one of our California criminal defense attorneys, do not hesitate to contact us at Shouse Law Group.
We have local criminal law offices in and around Los Angeles, San Diego, Orange County, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.
Additionally, our Las Vegas Nevada criminal defense attorneys are available to answer any questions about Nevada's marijuana laws. For more information, we invite you to contact our local attorneys at one of our Nevada law offices, located in Reno and Las Vegas.15
Attorney General's Office –
Guidelines for the Security and Non-Diversion of Marijuana Grown for Medical Use
California NORML (National Organization for the Reform of Marijuana Laws) –
California NORML Advice for Medical Marijuana Providers
1 Our California marijuana defense attorneys have local Los Angeles law offices in Beverly Hills, Burbank, Glendale, Lancaster, Long Beach, Los Angeles, Pasadena, Pomona, Torrance, Van Nuys, West Covina, and Whittier. We have additional law offices conveniently located throughout the state in Orange County, San Diego, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.
2 California Health and Safety Code 11362.5 -- Medical marijuana use. ("(a) This section shall be known and may be cited as the Compassionate Use Act of 1996. (b)(1) The people of the State of California hereby find and declare that the purposes of the Compassionate Use Act of 1996 are as follows: (A) To ensure that seriously ill Californians have the right to obtain and use marijuana for medical purposes where that medical use is deemed appropriate and has been recommended by a physician who has determined that the person's health would benefit from the use of marijuana in the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief. (B) To ensure that patients and their primary caregivers who obtain and use marijuana for medical purposes upon the recommendation of a physician are not subject to criminal prosecution or sanction. (C) To encourage the federal and state governments to implement a plan to provide for the safe and affordable distribution of marijuana to all patients in medical need of marijuana [such as through medical marijuana dispensaries, medical marijuana collectives or medical marijuana cooperatives]. (2) Nothing in this section shall be construed to supersede legislation prohibiting persons from engaging in conduct that endangers others, nor to condone the diversion of marijuana for nonmedical purposes. (c) Notwithstanding any other provision of law, no physician in this state shall be punished, or denied any right or privilege, for having recommended marijuana to a patient for medical purposes. (d) Section 11357, relating to the possession of marijuana, and Section 11358, relating to the cultivation of marijuana, shall not apply to a patient, or to a patient's primary caregiver, who possesses or cultivates marijuana for the personal medical purposes of the patient upon the written or oral recommendation or approval of a physician. (e) For the purposes of this section, "primary caregiver" means the individual designated by the person exempted under this section who has consistently assumed responsibility for the housing, health, or safety of that person.")
3 See same.
4 California Health and Safety Code 11362.77 -- Amount qualified patients or caregivers may possess; guidelines; modifications to possession and cultivation limits by Attorney General. ("(a) A qualified patient or primary caregiver may possess no more than eight ounces of dried marijuana per qualified patient. In addition, a qualified patient or primary caregiver may also maintain no more than six mature or 12 immature marijuana plants per qualified patient. (b) If a qualified patient or primary caregiver has a doctor's recommendation that this quantity does not meet the qualified patient's medical needs, the qualified patient or primary caregiver may possess an amount of marijuana consistent with the patient's needs. (c) Counties and cities may retain or enact medical marijuana guidelines allowing qualified patients or primary caregivers to exceed the state limits set forth in subdivision (a). (d) Only the dried mature processed flowers of female cannabis plant or the plant conversion shall be considered when determining allowable quantities of marijuana under this section. (e) The Attorney General may recommend modifications to the possession or cultivation limits set forth in this section. These recommendations, if any, shall be made to the Legislature no later than December 1, 2005, and may be made only after public comment and consultation with interested organizations, including, but not limited to, patients, health care professionals, researchers, law enforcement, and local governments. Any recommended modification shall be consistent with the intent of this article and shall be based on currently available scientific research. (f) A qualified patient or a person holding a valid identification card, or the designated primary caregiver of that qualified patient or person, may possess amounts of marijuana consistent with this article.")
5 California Health and Safety Code 11054 HS -- Schedule I; substances included. ("(a) The controlled substances listed in this section are included in Schedule I...(d) Hallucinogenic substances. Unless specifically excepted or unless listed in another schedule, any material, compound, mixture, or preparation, which contains any quantity of the following hallucinogenic substances, or which contains any of its salts, isomers, and salts of isomers whenever the existence of those salts, isomers, and salts of isomers is possible within the specific chemical designation (for purposes of this subdivision only, the term "isomer" includes the optical, position, and geometric isomers): (13) Marijuana.") Yet despite this language, medical marijuana is a recognized exception and allows marijuana to be distributed through medical marijuana dispensaries, medical marijuana collectives and medical marijuana cooperatives.
6 21 U.S.C. Section 812 -- The United States Controlled Substances Act. ("(a) Establishment. There are established five schedules of controlled substances, to be known as schedules I, II, III, IV, and V. Such schedules shall initially consist of the substances listed in this section. The schedules established by this section shall be updated and republished on a semiannual basis during the two-year period beginning one year after October 27, 1970, and shall be updated and republished on an annual basis thereafter. (b) Placement on schedules; findings required Except where control is required by United States obligations under an international treaty, convention, or protocol, in effect on October 27, 1970, and except in the case of an immediate precursor, a drug or other substance may not be placed in any schedule unless the findings required for such schedule are made with respect to such drug or other substance. The findings required for each of the schedules are as follows:(1) Schedule I. – (A) The drug or other substance has a high potential for abuse.(B) The drug or other substance has no currently accepted medical use in treatment in the United States. (C) There is a lack of accepted safety for use of the drug or other substance under medical supervision...") Yet despite this federal law, California law recognizes a medical marijuana exception that allows marijuana to be distributed through medical marijuana dispensaries, medical marijuana collectives and medical marijuana cooperatives.
7 California Corporation Code 12311, Section "b" -- "Cooperative" as part of corporate name. ("(b) No person shall adopt or use the word "cooperative" [for example, in connection with a medical marijuana dispensary, medical marijuana collective or medical marijuana cooperative] or any abbreviation or derivation thereof, or any word similar thereto, as part of the name or designation under which it does business in this state, unless incorporated as provided in this part or unless incorporated as a nonprofit cooperative association under Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code, as a stock cooperative, as defined in Section 11003.2 of the Business and Professions Code, as a limited-equity housing cooperative, as defined in Section 33007.5 of the Health and Safety Code, as a credit union or organization owned for the mutual benefit of credit unions, or under some other law of this state enabling it to do so. However, the foregoing prohibition shall be inapplicable to any credit union or organization owned for the mutual benefit of credit unions, any housing cooperative, the financing of which is insured, guaranteed, or provided, in whole or in part, by a public or statutorily chartered entity pursuant to a program created for housing cooperatives, a nonprofit corporation, a majority of whose membership is composed of cooperative corporations, or an academic institution that serves cooperative corporations.")
8 California Corporations Code 12201 -- Purpose of corporations; earnings distribution; control. ("Subject to any other provision of law of this state applying to the particular class of corporation or line of activity, a corporation may be formed under this part for any lawful purpose provided that it shall be organized and shall conduct its business primarily for the mutual benefit of its members as patrons of the corporation. [For example, a medical marijuana dispensary, medical marijuana collective or medical marijuana cooperative]. The earnings, savings, or benefits of the corporation shall be used for the general welfare of the members or shall be proportionately and equitably distributed to some or all of its members or its patrons, based upon their patronage (Section 12243) of the corporation, in the form of cash, property, evidences of indebtedness, capital credits, memberships, or services. Such corporations are democratically controlled and are not organized to make a profit for themselves, as such, or for their members, as such, but primarily for their members as patrons (Section 12243).")
9 California Health and Safety Code 11362.765 -- Criminal liability; application of section; assistance and compensation. ("(a) Subject to the requirements of this article, the individuals specified in subdivision (b) shall not be subject, on that sole basis, to criminal liability under Section 11357, 11358, 11359, 11360, 11366, 11366.5, or 11570. However, nothing in this section shall authorize the individual to smoke or otherwise consume marijuana unless otherwise authorized by this article, nor shall anything in this section authorize any individual or group to cultivate or distribute marijuana for profit [though nonprofit medical marijuana dispensaries, medical marijuana collectives and medical marijuana cooperatives are legal in this state]. (b) Subdivision (a) shall apply to all of the following: (1) A qualified patient or a person with an identification card who transports or processes marijuana for his or her own personal medical use. (2) A designated primary caregiver who transports, processes, administers, delivers, or gives away marijuana for medical purposes, in amounts not exceeding those established in subdivision (a) of Section 11362.77, only to the qualified patient of the primary caregiver, or to the person with an identification card who has designated the individual as a primary caregiver. (3) Any individual who provides assistance to a qualified patient or a person with an identification card, or his or her designated primary caregiver, in administering medical marijuana to the qualified patient or person or acquiring the skills necessary to cultivate or administer marijuana for medical purposes to the qualified patient or person. (c) A primary caregiver who receives compensation for actual expenses, including reasonable compensation incurred for services provided to an eligible qualified patient or person with an identification card to enable that person to use marijuana under this article, or for payment for out-of-pocket expenses incurred in providing those services, or both, shall not, on the sole basis of that fact, be subject to prosecution or punishment under Section 11359 or 11360.")
10 See same.
See also 11362.775 -- Criminal sanctions against qualified patients, primary caregivers, and persons with valid identification cards – Medical marijuana dispensaries, medical marijuana collectives and medical marijuana cooperatives. ("Qualified patients, persons with valid identification cards, and the designated primary caregivers of qualified patients and persons with identification cards, who associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes, shall not solely on the basis of that fact be subject to state criminal sanctions under Section 11357, 11358, 11359, 11360, 11366, 11366.5, or 11570.")
11 See endnote 4, above.
12 People ex rel. Lungren v. Peron (1997) 59 Cal.App.4th 1383, summary. ("The court held that the sale and possession for sale of marijuana continue to be proscribed by Health & Saf. Code, §§ 11360, subd. (a), and 11359, following enactment of Prop. 215, and the lack of profit to the seller does not exempt such activities from prosecution. The court further held that the thousands of persons who patronized the club [that is, a marijuana dispensary], and who designated the marijuana sellers in the club as "primary caregivers" at the time of sale, did not thereby confer that status on the sellers. Prop. 215 defines "primary caregiver" as an individual "who has consistently assumed responsibility for the housing, health, or safety" of a patient for whom medicinal marijuana has been prescribed (Health & Saf. Code, § 11362.5, subd. (e)), and the "consistency" of these sellers' purported primary caregiving was a myth.")
13 California Health and Safety Code 11362.768 -- Medical marijuana cooperative, medical marijuana collective, medical marijuana dispensary, etc.; proximity to schools restricted; application to specified individuals; exception; storefront or mobile retail outlet requirement; more restrictive local ordinances or policies; preemption. ("(a) This section shall apply to individuals specified in subdivision (b) of Section 11362.765. (b) No medical marijuana cooperative, collective, dispensary, operator, establishment, or provider who possesses, cultivates, or distributes medical marijuana pursuant to this article shall be located within a 600-foot radius of a school. (c) The distance specified in this section shall be the horizontal distance measured in a straight line from the property line of the school to the closest property line of the lot on which the medical marijuana cooperative, collective, dispensary, operator, establishment, or provider is to be located without regard to intervening structures. (d) This section shall not apply to a medical marijuana cooperative, collective, dispensary, operator, establishment, or provider that is also a licensed residential medical or elder care facility. (e) This section shall apply only to a medical marijuana cooperative, collective, dispensary, operator, establishment, or provider that is authorized by law to possess, cultivate, or distribute medical marijuana and that has a storefront or mobile retail outlet which ordinarily requires a local business license. (f) Nothing in this section shall prohibit a city, county, or city and county from adopting ordinances or policies that further restrict the location or establishment of a medical marijuana cooperative, collective, dispensary, operator, establishment, or provider. (g) Nothing in this section shall preempt local ordinances, adopted prior to January 1, 2011, that regulate the location or establishment of a medical marijuana cooperative, collective, dispensary, operator, establishment, or provider. (h) For the purposes of this section, "school" means any public or private school providing instruction in kindergarten or grades 1 to 12, inclusive, but does not include any private school in which education is primarily conducted in private homes.")
14 Riverside CA criminal defense lawyer Michael Scafiddi is a former police officer and police sergeant who worked narcotics detail and is now a noted expert on California marijuana laws. He defends clients charged with marijuana-related crimes, including dispensaries and co-ops, throughout the Inland Empire, including Riverside, Murrieta, Temecula, Banning, Beaumont, Palm Springs, Indio, Cathedral City, San Bernardino, Redlands, Big Bear, Fontana, Rialto, Colton, Rancho Cucamonga, Chino and Ontario.
15 Please feel free to contact our Las Vegas Nevada criminal defense attorneys Michael Becker and Mike Castillo for any questions relating to Nevada's marijuana laws. Our Nevada law offices are located in Reno and Las Vegas.
If you or a loved one faces misdemeanor or felony charges, contact our California criminal defense attorneys for help. We'd be glad to meet with you for a free consultation at one of our local criminal law offices in Los Angeles, San Francisco, Van Nuys, Pasadena, Long Beach, Orange County, Rancho Cucamonga, San Bernardino or Riverside.
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