There are a lot of questions swirling around why dispensaries are charging so much for their Dispensary License. The short answer is that the cost of running a dispensary has just skyrocketed in recent years, making it necessary for these business owners to raise expected revenues by as much as 10 times from what was seen before. However, many people don’t realize that several states either have or are considering tax-incentives for cannabis businesses that help offset some of these costs. Although it’s not always an easy feat, entering this market can be extremely rewarding if you’re able to gain public support and carefully manage the risks involved.
States are competing each other to set the highest license fees in order to attract the most businesses. For instance, California and Nevada will both be granting 12-month Dispensary License for $3.5 million each; while Maryland and Pennsylvania are offering $2.5 million licenses in hope of gaining enthusiasm from cannabis companies looking to expand. It’s not surprising that some states which have retained the status quo are lagging behind. If you’re curious to what these license fees are in your state, you can use this handy guide.
How Did The Dispensary License Cost Increase So Much?
Many cannabis business owners are frustrated with how much the license cost has increased over the years. What was once a $20,000 fee to get a dispensary in operation is now a $300,000 fee. There are several reasons as to why this is the case:
Business owners are required to maintain larger inventories because they need more cannabis available for sale. This means they have higher operational costs, which subsequently translates into higher Dispensary License fees. Business owners are hiring professionals to help them obtain the necessary licensing, legal assistance and security personnel (including armed guards). This requires substantial upfront payments before the dispensary can even begin operations. The application process is much more complex and rigorous. This means your initial licensing fees will be used to pay for additional training, marketing, and legal assistance. Business owners are being subjected to higher taxes that are being collected by the state and federal governments. Some states (Nevada, for instance) even impose a 15% tax on all sales made at the dispensary.
What Can I Do If I Don’t Feel Comfortable Paying These High License Fees?
One of the best things that you can do is wait until you feel comfortable with these costs before you apply for a cannabis business license. In some states, lawmakers have mandated that government agencies cannot charge more than $5,000 per year in Dispensary License fees for cannabis businesses. The catch, however, is that these same lawmakers have allotting a maximum $5,000 in tax revenue for each cannabis business. This means that if you’re going to operate your dispensary in Delaware, you’ll only be collecting $20,000 per year in revenue once you factor in your license fee and taxes.
There are plenty of other states wherein lawmakers aren’t willing to set license fees at a minimum of $5,000 each. Oregon is one such state where professionals charge anywhere from $7,500 to $19,000 per year just for the opportunity to apply for a dispensary permit; with some professionals charging as much as $791 per hour. In Washington D.C. and San Francisco, the fee for a dispensary license is $50,000 despite state laws only allotting a maximum tax revenue of $20,000 per year.
What Makes A Dispensary License Fee So Expensive?
The cost of running a cannabis business is higher than ever because it’s becoming increasingly difficult to acquire a license. Another reason why the license costs are so high is because cities and counties are putting more requirements and regulations in place. As more people become interested in this industry, more cities and counties are requiring that potential businesses get licensed before they can even make an application to set up shop or allow them to operate within the city or county boundaries.
A large portion of a Dispensary License fee is spent on obtaining the necessary permissions from a local jurisdiction. If you fail to obtain proper permission from the local city council, then it will be impossible for you to acquire your state marijuana business license. This means that you’ll need to pay extra fees to regain permission before you can apply for your state permits.
How Long Does It Take To Acquire A Dispensary License?
On average, it takes around 4-12 months between the time that a professional cannabis business owner applies for their Dispensary License and when they receive them. This is because these businesses are entering an industry that is heavily regulated, and they need to ensure that they’re in complete compliance with all laws. A lot of these regulations have been put forth by local governments, which means that you’ll need to obtain permission from your local city council before you can even start the application process.
Although it’s not easy to obtain a cannabis business permit, millions of people are starting to realize the value of medical cannabis. With more than 1 in 10 adults using this form of medication during their lifetime, it’s important that we pay close attention to how this industry develops over the next several years. The fact that so many people are ponying up such a large amount of money to gain a Dispensary License is evidence that the high cost is justified. A lot of these businesses are looking to be one of the first in their particular city or county, which means they will be purchasing expensive licenses and paying large amounts of taxes to begin.
Although it’s understandable that a lot of cannabis business owners don’t want to pay high license fees and taxes, it’s imperative that you do your due-diligence before you submit an application for your state business permit. You can learn more about opening a cannabis store by checking out our guide on doing so.