Top 20 Business-Related Aspects of Colorado’s Recreational Marijuana Regulations

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Colorado entered the cannabis history books yet again yesterday, becoming the first state in the nation to officially pass regulations covering the cultivation and sale of marijuana for adult use.

On the final day of session, the state legislature approved several measures – the most significant being House Bill 1317 – that establish business requirements and set up a framework for this emerging industry. It represents the culmination of months of hard work, long days that turned into longer nights and plenty of back-and-forth as lawmakers and key stakeholders hammered out regulatory proposals. The bills now head to Gov. John Hickenlooper, who has indicated he will sign them. The Colorado Department of Revenue will then work on developing detailed rules by July 1 that fit the overall framework established by lawmakers.

Here are 20 of the most important business-related aspects of the new regulations for entrepreneurs who hope to enter the adult-use market:

#1. The following businesses must apply for and obtain a license:retail marijuana stores, infused products/edibles manufacturers, cultivation facilities and testing labs.

#2. The state will begin accepting applications for these businesses on Oct. 1, and the first official retail stores selling marijuana to the general public could open as early as Jan. 1, 2014.

#3. Individuals who currently run dispensaries, cultivation sites and infused products companies that are licensed by the state – or have a pending license application – are the only ones who can apply to operate recreational cannabis businesses until July 1 of next year. Dispensary owners can either convert their operations to focus solely on the recreational side or keep the MMJ business and add a retail arm as well. They can apply to have both the medical and recreational businesses at the same location if local laws allow for such an operation. When the license becomes effective, the applicant must identify the medical marijuana inventory that will become retail inventory, and there must be “physical separation” between the two.

#4. Entrepreneurs who do not currently own dispensaries can file a notice starting Jan. 1 saying that they intend to submit an application. When the state begins accepting general applications in July 2014, it will give preference to those who submitted a notice of intent. Licenses for this group would then become effective as early as Oct. 1.

#5. The state must review and process applications within 90 days of receiving them.

#6. The state can limit the number of retail marijuana business licenses/shops and overall production for individual cultivation operations or for the industry as a whole.

#7. Marijuana cannot be consumed on-site at retail stores, other cannabis businesses or bars.

#8. Marijuana coffee shops, incorporated cannabis collectives and government-run marijuana shops are not allowed.

#9. The first crop of retail stores and infused products companies will have to grow 70% of the marijuana they sell until Oct. 1, 2014, when they can start buying it from retail cultivation facilities.

#10. State licenses are subject to local approvals, meaning cities can ban retail marijuana shops (some already are moving in that direction).

#11. Store owners, managers and employees as well as investors in retail cannabis businesses must be Colorado residents. Owners must be residents for at least two years before applying for a license, and they also must submit to a background check.

#12. The application fee is $500 for those who currently run licensed medical marijuana businesses – or are in the process of obtaining a license – and $5,000 for those who don’t.

#13. Colorado residents 21 and over can purchase up to an ounce of marijuana at a time from any given retail store by showing their driver’s license  – meaning shop owners will have easy access to hundreds of thousands of potential consumers.

#14. Visitors will also be able to purchase marijuana, opening the door to cannabis tourism and increasing potential sales exponentially. However, out-of-state consumers will only be able to buy a quarter-ounce in any single transaction in a bid to help limit diversion of cannabis to other states.

#15. Measures to implement a 10% sales tax and a 15% excise tax on retail marijuana transactions will be put to Colorado voters in November. The money would be used to fund the cannabis program and for school construction.

#16. All marijuana must be sold in sealed, nontransparent, child-proof packaging with labels that display potency levels, net weight, batch number, warnings and other information. Edibles labels must also contain ingredients, possible allergens, serving sizes and nutrition information.

#17. Marijuana businesses will be subject to regulations on everything from advertising and security to transportation, storage and inventory tracking.

#18. General businesses/employers in Colorado can set their own policies and rules regarding marijuana use by their workers, meaning there are no state-level protections for employees who consume cannabis.

#19. The state will establish an independent testing and certification program for retail shops and infused products manufacturers to ensure product safety and potency claims. It will also set requirements for testing frequency, among other things.

#20. Marijuana magazines, including business-related publications, can only be sold at retail cannabis stores or behind the counter at other establishments, provided an individual 21 years of age or older is present.