How to Open a Retail Marijuana Business in California

∗∗∗Warning: The laws that regulate opening and operating California retail marijuana outlets are technical and complex. Legally speaking, it is a risky venture.

The state of California has begun issuing temporary state seller's licenses to people and entities who have obtained a license from the county or city where they wish to locate. But many local jurisdictions, as well as federal law, prohibit the sale of marijuana.

This article provides a basic outline regarding the current state of the law. But the law is constantly changing.

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.

How to Open a Retail Marijuana Business

On January 1, 2018, the sale of recreational marijuana became legal under California law, subject to local restrictions.

In order to legally sell retail marijuana, businesses must obtain a license from the state of California and their local city or county.

Not all counties authorize the sale of marijuana within their borders. Local jurisdictions may prohibit the sale of marijuana altogether or may put their own conditions on it.

Additionally, the sale of marijuana remains illegal under federal law.

This article addresses how to obtain a license from the state of California. People interested in legally selling marijuana should also check with their local county or city business office – such as the Los Angeles County Office of Cannabis Management.

Note that not all counties and cities authorize the sale of marijuana. Local consent is required in order to establish a retail marijuana business in California.

You may also wish to review our article on How to Open a Medical Marijuana Dispensary in California.

To help you understand how to open a retail marijuana business, our California marijuana defense lawyers discuss, below:

marijuana dispensary

1. How do I apply for a license to sell marijuana in California?

The California Bureau of Cannabis Control (BCC) issues state licenses to retailers, distributors, and testing labs.

Licenses for growing marijuana are issued by the California Department of Food and Agriculture.

Licenses to distribute marijuana in California are issued by the California Department of Public Health Manufactured Cannabis Safety Branch.

This article is specifically about licenses for selling marijuana products in California.

Process for obtaining a license

An annual application is required to sell marijuana legally in California. A separate license is required for each location (premises).

As of January 1, 2018 the BCC is accepting applications for temporary licenses only. The temporary license is good for 120 days and may be extended for additional 90-day periods. These temporary licenses will be phased out beginning January 1, 2019.

However, the temporary license can only be issued if the applicant has a valid license, permit, or other authorization issued by the local jurisdiction.1

Applicants will be required to register an account on the Bureau's online self-service portal before applying for a license.

2. Types of marijuana sales licenses available in California

California law provides for two types of marijuana sales licenses:

An “A-license” (Adult Use License) permits the sale of recreational marijuana. That is, it covers cannabis or cannabis products intended for adults who are 21 years of age and older and who do not possess a physician's recommendation.

An “M-license” (Medical Marijuana License) permits commercial activity involving medical marijuana.

Each location must have a separate license and there can be only one licensee per premises. The sole exception is that a licensee holding both an A-License and M-License for the same commercial cannabis activity (e.g., retail sale) may have the same premises for both types.

Licenses are also divided by type of business. Sales licenses fall into three general categories:

  • Retailer (Type 10), who sells cannabis goods to customers and may deliver cannabis goods to customers, 
  • Non-Storefront Retailer (Type 9), who sells and delivers cannabis goods to customers from a licensed premises that is not open to the public, and
  • Microbusiness (Type 12), who engage in 3 out of 4 of the following activities:
    • Cultivation on less than 10,000 square feet,
    • Manufacturing (non-volatile extraction, infusion, packaging, and/or labeling),
    • Distribution and/or
    • Retail sales.

Other license types available from the BCC include:

  • Distributor (Type 11),
  • Distributor Transport Only (Type 13),
  • Testing Laboratory (Type 8, no M or A designation), 
  • Cannabis Event Organizer (Type 14), and
  • Temporary Cannabis Event.

3. Who can legally sell retail marijuana in California?

Applicants must have at least one individual who meets the definition of "owner" under California Business and Professions Code section 26001(al).

This is the person who will complete the state of California licensing application and submit it online at www.bcc.ca.eov. Alternatively, the individual can a complete a hard copy and deliver it to the Bureau's office(s).

Pursuant to Business and Professions Code section 26001(a1), an “owner” means any of the following:

  1. A person with an aggregate ownership interest of 20 percent or more in the person applying for a license or a licensee, unless the interest is solely a security, lien, or encumbrance.
  2. The chief executive officer of a nonprofit or other entity.
  3. A member of the board of directors of a nonprofit.
  4. An individual who will be participating in the direction, control, or management of the person applying for a license.

4. What if I have a criminal record?

A criminal record does not automatically disqualify an applicant from obtaining a retail marijuana license in California unless the conviction is for:

  • A "violent felony" such as rape or murder, as defined in California Penal Code 667.5;  
  • A "serious" felony (including many sex crimes), as defined in California Penal Code 1192.7;
  • A felony conviction involving fraud, deceit, or embezzlement
  • A felony conviction involving giving a controlled substance to a minor or using a minor to sell or furnish a controlled substance; or
  • A felony conviction for drug trafficking with enhancements, as defined in Health and Safety Code 11370.4 or 11379.8.

However, other than one of these, a prior drug conviction may not be the sole ground for denial of a license.

hands of man and woman going over premises plan

5. What information will I have to provide?

The application to receive a marijuana sales license is lengthy. It requires detailed information on the business, individual owners, financial interest holders, the premises, and the business' operating procedures.

Applicants must also be able to provide evidence of:

  • Their legal right to occupy the premises and sell marijuana there,
  • Verification that the premises is not within a 600-foot radius of a school,
  • A premises diagram,
  • A copy of a valid local license, permit, or other authorization, and
  • A $5,000 surety bond payable to the State of California to cover the cost of destruction of cannabis goods.

6. Is priority licensing available?

Yes. The following applicants will receive priority for the issuance of a license:

  • Medical marijuana dispensaries that operated in compliance with the Compassionate Use Act of 1996 and its implementing laws before September 1, 2016;2 and
  • Applicants who have served as an active duty member of the Armed Forces of the United States and can provide evidence of honorable discharge.3

7. How much does it cost to apply for a marijuana sales license?

There is no application fee to apply for a temporary marijuana business license from the state of California.

Once regular California marijuana licenses become available, the annual cost to apply for a license to sell retail marijuana will be as follows: 

License Type

Fee per Application

All Annual Licenses

$1,000

Cannabis Event Organizer License

$1,000

Temporary Cannabis Event License

$1,000

Physical Modification of Premises

$500


The application fee is due when the application is submitted

8. What is the annual fee for a California cannabis sales license?

The annual cost of the license itself depends on the type of operation and total square footage. The fee is set on a sliding scale based on the maximum dollar value of the licensee's operation.

Retailers can expect to pay between $4,000 and $72,000 annually.4

The license fee itself is payable only when the application is approved.

A full list of retail marijuana license fees can be found here.

9. How much does it cost to open a retail marijuana business?

Depending on the size and location, it can cost anywhere from $30,000 to $500,000 or more to open a retail marijuana business legally.

The initial costs include (but are not limited to):

  • Application and license fees payable to the state and local licensing agencies, 
  • Building the store and purchasing the appropriate equipment,
  • Fees for services from legal and financial advisors.

Some companies will build a ready-to-go "turn-key" dispensary for you. Such companies can be located online (but do your research). They promise to

  • File all necessary paperwork on your behalf, and
  • Make sure that you comply with all laws.
  • The cost for a turn-key operation ranges from $100,000 - $200,000.

Just know that before you purchase this type of set-up, you should consult with your own California marijuana attorney to ensure the accuracy of the company's information.

10. The risk of federal prosecution

Notwithstanding legalization of marijuana in California, the sale and distribution of cannabis remains illegal under federal law. This means that even a seller who is in strict compliance with California's marijuana laws is technically violating federal drug laws.

Adding to the confusion is the government's recent rescission of the “Cole memos,” the Obama Administration's “hands-off” policy with respect to federal prosecutions. Federal prosecutors may now set their own priorities as to whether to go after cannabis sellers who are in compliance with California law.

At present, we are unaware of any desire by federal prosecutors in California to go after dispensaries that operate with a license and in accordance with California law.

However, there is still a risk. Additionally, federal prosecutors are less likely to take a hands-off approach if they believe a marijuana sales business is nothing more than a front for drug trafficking.

This is just one reason why it is critical to consult with a skilled California marijuana attorney before opening a medical marijuana dispensary.

Need advice on California's marijuana laws? Call us…

male receptionist

If you or someone you know needs legal assistance with a marijuana-related issue, we invite you to contact our California drug lawyers for a free consultation.

We have local offices throughout California and knowledgeable California criminal attorneys to serve your needs.

Call us at 855-JUSTICE to discuss your situation at no charge and in complete confidence.

Additionally, our Las Vegas, Nevada marijuana attorneys are available to answer any questions about opening a marijuana dispensary in Nevada.


Legal references:

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