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Selling Medical vs. Recreational: What You Need To Know

Selling Medical vs. Recreational: What You Need To Know

The cannabis industry has exploded across much of the United States, with numerous states legalizing both recreational and medical marijuana. However, some states have only one of the two legalized, while many others put serious business restrictions on the production, marketing, and sale of these two different products. 

If you are looking to open a dispensary business, you'll need to know the difference between medical and recreational marijuana. What are the most important preparations to make before your first sale?

License To Sell

The first thing any dispensary must take account of is its license. No business can legally sell cannabis without abusiness license proper license. Each state distributes its own license and each state has different licensure standards. In Michigan, for example, a medical marijuana dispensary owner will need to prove that they have assets worth at least $150,000 and up to $500,000 before they can qualify for an industry license; however, those who wish to open a recreational dispensary do not need to prove they have these financial resources. 

On top of the financial proof, you'll also need to pay the license fee, which is usually several thousand dollars, as well as the (much more) expensive regulatory assessment. This assessment may cost $50,000 or more—an eye-watering sum, but one that is necessary to prevent the business from falling afoul of regulations, which in turn could lead to even greater fines or a shutdown. 

If you want your dispensary to sell both recreational and medical marijuana, which is possible in dual-use states (albeit much more difficult), you may need to pay two sets of license fees as well as two sets of regulatory assessments.

Papers, Please

A medical dispensary can only legally sell to patients who have a doctor's recommendation and/or prescription. While anyone over the age of 21 can purchase cannabis from a recreational dispensary, necessitating only an ID check at the door, a medical dispensary will need more rigorous standards and enforcement. 

A medical patient does not need to be 21, although they must be 18, and will need to have the state-issued medical card. Receptionists at medical dispensaries will need to check the ID, ensure it is accurate and not expired, and log them as an appropriate patient type. A point of sale solution makes it easier for a dispensary to both organize and sell based on a specific customer or patient. Finally, it should be noted that it is illegal for medical marijuana dispensaries and their employees to provide any type of medical advice to patients.

Death and Taxes

business taxesFew industries face as many tax issues as cannabis, where the bill to pay Uncle Sam might account for months of revenue. The taxes for selling recreational cannabis are not the same from selling medical cannabis. While recreational cannabis incurs a state-mandated sales tax specific to the product, medical sales are exempt from this tax, and only subject to state sales tax. This makes medical cannabis more expensive than recreational cannabis overall, but non-cannabis products (like lighters, smoking devices, or t-shirts) are subject to all taxes even if the customer has a medical card. 

To pay your business taxes, for recreational or medical or both, you'll need to register your business ID number with both the state and federal tax administrations. Prior to setting up shop, you apply to the IRS for a business ID number; once tax time rolls around, you'll use it for both payroll and income taxes. You'll also use the business ID number if you want to apply for financing or funding.

Establish Labels and Limits

Whether you purchase cannabis and cannabis products wholesale from a distributor, or whether you grow everything in-house, you need to create clear and unambiguous labels for your products. Medical cannabis products must be explicitly labeled as for sale specifically to medical patients, while recreational cannabis products must be labeled specifically for personal instead of medical use. Either way, labels must also have the information about the product, such as THC and/or CBD concentration, as well as the name of the strain and any further information. 

In addition to labels, your products will need specific limits for customer purchases. A medical patient cannot purchase more cannabis than their card allows, while a recreational patient cannot purchase more product than a state mandates (for example, two ounces in Colorado). This requires specific weighing and measurement to ensure there are no overages.

Starting and Finishing

If you want to start a medical and/or recreational cannabis dispensary, you need to know the specific laws and regulations regarding its operations. When it comes to expertise about acquiring the financing you need to get started or grow, the team at CannaBusiness Financing is ready to help. You can get pre-approved within 48 hours, so don't hesitate to reach out today. 

Posted by Canna Business Team



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In an industry that is constantly evolving, Canna Business Financing provides business owners with a reliable source to gather the most up-to-date information. From resources to fund the growth of your business to insights on best practices to scale, look no further!

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