Since approving adult-use cannabis in 2018 (and medical cannabis a decade prior to that), Michigan has become one of the nation’s hottest cannabis markets. But while it’s a moment of real opportunity, there are equal challenges to opening a dispensary in MI. For one thing, a host of state regulations can make the licensing process lengthy and expensive. And because the state’s laws regarding adult-use cannabis are somewhat in flux, you can expect that you’ll need to keep a very close eye on new regulations as they appear.
But if opening a dispensary in Michigan is your ultimate goal, you can gain valuable insights from others’ experiences. And though we’re not in the business of running dispensaries ourselves, helping dispensary owner/operators thrive is all we do. With that in mind, here’s a top-level overview of some of the steps you’ll need to take if you’re considering opening a dispensary in Michigan.
How to Open a Dispensary in MI: Licensing and Permitting
With a population of roughly 10,000,000, Michigan is the nation’s 4th-largest cannabis market. Some estimates suggest that by 2022, the state’s regulated cannabis market could be worth some $1.4 billion. Naturally, that means there’s a great deal of scrutiny paid to those who want to open a Michigan dispensary. It’s yet another reason that being on top of state laws isn’t optional; it needs to be part and parcel of your approach.
What steps do you need to take to open a dispensary? Lets begin with a list of statewide and federal statutes.
MI Dispensary Federal Regulations
- Controlled Substances Act (21 U.S.C. sections 801-971)
- Internal Revenue Code (26 U.S.C. 280E): Prevents tax deductions for cannabis businesses
MI Dispensary State Regulations
- Michigan Regulation and Taxation of Marihuana Act (MRTMA)
- Certain communities have declined to allow any MRTMA-licensed facilities
- Michigan’s Marijuana Tracking Act
- Medical Marihuana Facilities Licensing Act
What are some of the restrictions on selling cannabis in Michigan?
All sales must be recorded by tracking software, and amounts per customer per day are limited to:
- 2.5 ounces of cannabis
- 7 grams of cannabinoid extract or concentrate
- 16 ounces of cannabis-infused solid products
- 36 fluid ounces of liquid cannabis-infused products
- 12 cannabis plants
- 15 grams of concentrated cannabis
In addition, MMFLA Section 333.27504 stipulates that:
- Retail stores cannot allow consumption of cannabis unless they have a specific license and designated smoking areas
- Dispensaries cannot sell food or alcohol
- Dispensaries must not be located within 1,000 feet of a drug-free zone (such as a school or daycare facility), liquor stores or other dispensaries
- All customers must be at least 21 years old
How do I get a license to sell cannabis in Michigan?
All applicants can expect to undergo a prequalification process and background check as they prepare and submit their documentation. All applicants apply through the state’s Marijuana Regulatory Agency (MRA) for a Medical Marihuana Facilities License (note the archaic spelling of “marijuana”). For a full text of Michigan’s laws concerning licensing, click here.
Michigan has implemented a unique social equity initiative to help those communities unduly affected by cannabis prohibition and justice system overreach. The MRA hosts a Social Equity Program; applying for a license in any of these program locations will garner reduced fees for your dispensary licenses and renewal fees.
What kinds of fees are required to open a dispensary in Michigan?
- The application fees total roughly $6,000
- All cannabis businesses are required to contribute to the $500,000 annual fund for substance abuse disorder programs (MMFLA Section 333.27603)
- Licensing fees total between $10,000 and $66,000
Can my MI dispensary application be denied?
It can; among the reasons are that the MRA can consider any criminal history and decide to deny your cannabis business license. Other requirements for dispensary owners include:
- No felonies within the last 10 years
- No misdemeanors involving controlled substances within the last 5 years
- No local ordinance violations within 5 years
- Must be at least 21 years old
- Must not have past issues with law enforcement or legal violations (except for traffic violations)
How to Open a Dispensary in MI: Banking, Sourcing, and Tax Considerations
We sincerely hope you’re not daunted by the list of requirements we just shared. But we’re not quite done with the hard stuff yet; in addition to all the licensing procedures, there are other considerations to take into account:
The banking industry, which is federally regulated, has historically been reluctant to offer checking accounts to cannabis businesses. That said, there are hopeful signs this is changing. But depending upon your banking situation, your business may need to operate on an all-cash basis, and this will inevitably present certain logistical and security concerns.
Restrictions on Sourcing and Distributing
While most businesses can sell and ship their products to persons in other states, federal law prohibits the transport of cannabis across state lines. This also means that every dispensary has to source its raw materials and products in-state.
Even though cannabis businesses are not considered legal by the federal government, you are still required to pay income tax. And while most businesses are able to deduct normal operating expenses, cannabis businesses cannot. And federal income tax will be on the gross income amount, which will pencil out to higher taxes for your cannabis business. According to the Michigan Department of Treasury’s Revenue Administrative Bulletin (RAB):
- Dispensaries pay a 3% tax on gross retail paid to the Michigan Treasury Online (MTO)
- Dispensaries pay a 6% sales and use tax on statewide sales
- Dispensaries pay a 10% additional tax on recreational cannabis sales
- Late fees apply on license renewals (MMFLA Section 333.27402(11))
How to Open a Dispensary in MI: The Fun Stuff
So, assuming you haven’t given up and decided to open up a lemonade stand instead, let’s take a moment to focus on the fun stuff: The exciting, wildly creative, and—fingers crossed!—highly lucrative parts of opening a dispensary. Because for all the layers of red tape, expensive licensing fees and nail-biting property inspections, there really aren’t many thrills that compete with the feeling you get when you step back to take in what you’ve built.
Fortunately for us, we get to be right next to this moment time and time again as our clients see their dreams take flight. And over the years spent helping that achieve those dreams, we’ve compiled quite a library of tips, tricks, and best practices you’ll need when you’re preparing to open your dispensary in MI. Things like: