How to Start a Dispensary in Minnesota

Minnesota legalized medical cannabis in 2014, marking the start of the state’s cannabis regulation. Since then, the number of residents using medical cannabis has steadily increased. Starting a cannabis dispensary in Minnesota can be a promising business venture, given the state’s evolving cannabis laws and the increasing acceptance of medical marijuana. Minnesota became the 23rd state to legalize medical cannabis, offering a structured regulatory framework to ensure the industry’s growth while maintaining public safety. 

The use and possession of cannabis by individuals aged 21 and older became legal in Minnesota on August 1, 2023; however, cannabis remains illegal under federal law and is classified as a controlled substance. The Minnesota Department of Health oversees the program, ensuring patients with qualifying conditions can access the required treatment. This blog provides a comprehensive guide on how to start a dispensary in Minnesota, focusing on the necessary steps, licensing requirements, and key considerations for aspiring dispensary owners.

Cannabis Business Licensing in Minnesota

Obtaining a cannabis business license is the first crucial step in opening a dispensary in Minnesota. The process is managed by the Office of Cannabis Management, which ensures all cannabis businesses comply with state laws and regulations. Here are the key aspects of obtaining a cannabis business license in Minnesota:

• Eligibility: Applicants must be at least 21 years old and meet specific residency requirements. A thorough background check is conducted to ensure applicants do not have disqualifying criminal histories.
• License Types: Minnesota offers various types of licenses for cannabis businesses, including those for cultivation, processing, and dispensing. Prospective dispensary owners must apply for the appropriate license based on their business model.
• Application Fees: Applicants must pay non-refundable fees, which vary depending on the license type.
• Licensing Fees: Successful applicants must also pay annual licensing fees, which contribute to the regulatory oversight and administration of the cannabis program.

Overview of Available Licenses

Minnesota’s cannabis program offers several types of licenses for businesses. Understanding the available license types is essential for selecting the one that aligns with your business goals:

• Cultivation License: This license allows the holder to grow cannabis plants which can be supplied to processing facilities and dispensaries. The application fee for this license is $10,000. 
• Microbusiness License: This is designed for small-scale operations that cultivate, process, and sell cannabis products. The application fee is $500.
• Retailer License: Retailers are authorized to sell cannabis products directly to consumers. The application fee for a retailer license is $2,500.
• Transporter License: This allows for the transportation of cannabis products between licensed facilities. The application fee is $250.
• Testing Facility License: Testing facilities are responsible for ensuring the quality and safety of cannabis products. The application fee for this license is $5,000. 

Note: For detailed information on license types and fees, please refer to the Office of Cannabis Management.

Navigating the Application Process

The application process for a cannabis business license in Minnesota is detailed and requires thorough preparation. Here are the key steps:

• Business Plan: A comprehensive business plan is essential. It should outline the dispensary’s goals, target market, operational strategy, and financial projections. This plan demonstrates the business’s viability and adherence to regulatory standards.
• Social Equity Applicants: Minnesota’s cannabis laws include provisions for social equity applicants—individuals or groups from communities disproportionately affected by past cannabis prohibition. The state offers support and incentives to ensure equitable participation in the cannabis industry.
• Regulatory Compliance: Understanding and complying with Minnesota’s cannabis laws is critical. Applicants must familiarize themselves with state laws and regulations to ensure their business operations are lawful and transparent. 
• Site Selection: It is crucial to choose an appropriate location for the dispensary, which must comply with zoning regulations and should ideally be accessible to the target market. It should also meet security requirements mandated by state laws.
• Application Submission: Complete the application form provided by the Office of Cannabis Management. Ensure all required documents, including the business plan, site plan, security plan, and financial statements, are submitted along with the application.

The MDA is obligated to collect annual fees for site registration and hemp crop certification, which includes THC testing. All fees are non-refundable and cannot be transferred. A $50 fee applies to any license modifications made after the initial application process. 

Application Windows:

The OCM has established specific application periods for different license types:

• Social Equity Applicants: The initial application window for social equity applicants opened on July 24, 2024.
• General Applicants: Application periods for general licenses are anticipated to open in 2025. Prospective applicants are advised to prepare the necessary documentation in advance.

Compliance with State Laws and Regulations

Operating a cannabis dispensary in Minnesota requires strict adherence to state laws and regulations. For example, IndicaOnline’s POS system, which is integrated with the Marijuana Enforcement Tracking Reporting Compliance (Metrc) system, can help your dispensary stay fully compliant with state regulations. Here are some key compliance areas:

• Product Quality and Safety: All cannabis products must meet quality and safety standards set by the Minnesota Department of Health. Regular testing and accurate labeling are mandatory to ensure consumer safety.
• Security Measures: Dispensaries must implement robust security measures to prevent unauthorized access and ensure the safety of staff and customers. These include surveillance systems, secure storage, and alarm systems.
• Record-Keeping and Reporting: Accurate record-keeping is essential for compliance. Dispensaries must maintain detailed records of inventory, sales, secure payment methods like IndicaPay, and transactions. Regular reports to the Office of Cannabis Management are mandatory.
• Patient Confidentiality: Protecting patient confidentiality is paramount. Dispensaries must implement measures to safeguard patient information and comply with privacy regulations.

Additionally, cannabis sales are subject to a 10% retail tax, which is in addition to the state’s 6.875% sales tax and any locally imposed sales taxes. Tax revenue supports regulatory activities, substance abuse treatment, and other state programs.

Social Equity and Community Impact

Minnesota’s cannabis laws place a significant emphasis on social equity, aiming to address the historical injustices of cannabis prohibition. The social equity program is designed to ensure communities disproportionately affected by previous cannabis laws can participate in the burgeoning cannabis industry.

The verification process for social equity applicants involves providing documentation to prove eligibility. Eligibility criteria include having a prior conviction for cannabis-related offenses, being a military veteran, or residing in areas with high poverty levels or high cannabis enforcement rates. Once verified, applicants can proceed with applying for cannabis business licenses. The initial application window for these licenses is from July 24 to August 12, 2024. Verified applications will undergo a review process and, if qualified, will enter a lottery for license allocation later in the fall. 

The Minnesota Office of Cannabis Management supports social equity applicants by offering reduced application fees, technical assistance, and priority licensing. These measures help lower the barriers to entry, providing fair opportunities for marginalized communities to succeed in the cannabis industry.

Building a Successful Cannabis Dispensary

Starting a cannabis dispensary in Minnesota is a multifaceted process that requires careful planning, adherence to regulations, and a commitment to quality and safety. By understanding the licensing requirements, navigating the application process, and ensuring compliance with state laws, aspiring dispensary owners can establish a successful and reputable business. Minnesota’s evolving cannabis industry offers promising opportunities, and with the right approach, you can be part of this growing sector. Stay informed about updates from the Office of Cannabis Management and be prepared to adapt to changes in Minnesota’s cannabis industry.