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Opening a Dispensary Info

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[size=12]Information on starting a new dispensary

Is it legal to sell medical cannabis?

No. Proposition 215 makes no mention of buying or selling cannabis. It simply allows qualified patients or their caregivers to grow, possess, and transport medical cannabis. It also allows a qualified patient to consume that cannabis for medical purposes. Likewise, legislation passed by the state assembly in 2003 (SB-420 or CA Health and Safety Code 11362.7) gave no explicit protection under state law for buying or selling cannabis. Many dispensaries operate as retail stores. While this is a practical solution, it is not legal under the state law. It is very important that you avoid language that discusses buying or selling cannabis when you organize your new dispensing collective or cooperative.

What is legal under the state law?

State law recognizes the establishment of collectives and cooperatives of patients and caregivers that are organized to provide medication (CA Health and Safety Code 11362.775). The state assembly assumed that these cooperatives and collectives would grow medicine and distributed its members. Only a handful of such "true" cooperatives actually exist in the state right now, all in rural areas where outdoor cultivation is more feasible.

How can a dispensary be legal?

A dispensary can be legal if it is organized as a patients and caregivers collective or cooperative under the state law. A cooperative is a specific kind of business defined under the California Corporations Code. A cooperative has a Board of Directors that is elected annually, and must report individual transactions from individual members every year. It is a cumbersome and indiscreet organizational model.

The term collective, however, is not defined under the state law. You have broad latitude in defining what a collective is. In general, a medical cannabis dispensing collective would share the following elements:

1. Membership - There should be a process of joining the dispensing collective that involves verification of medical status. Verification should involve personal contact with the recommending physician (or his or her agent) and verification of the physician's identity and license with the state. You can not make a legitimate claim to be a membership based organization if patients simply flash a card at the door.
2. Member Based Acquisition of Medication - A dispensing collective should only acquire excess medication from its registered members, and provide it back to other members. The cycle of cultivation and consumption should be a closed-circuit with no entanglement with illicit market.
3. Reimbursements and Allocations - State law allows for caregivers to be reimbursed for cultivating medication. Nothing in state law allows caregivers to "sell" medication. A dispensing collective should reimburse its members for excess medication that they provide to the collective. The collective is then free to allocate that medication to other members. The collective can not "sell" medication to members. The members simply reimburse the collective for medication that is been allocated to them. The reimbursement provided to the collective should be sufficient to cover the overhead cost -- including rent, utilities, salaries, and other operating expenses.
4. Not-For-Profit Operation - A dispensing collective should not be in the business of making money. This does not mean that the collective operators and other personnel cannot be paid a salary. However, collective operators would be wise not to accumulate large sums of money. Instead, excess revenue should be reinvested in services for members in the ongoing grassroots effort to reform medical cannabis laws. Alternatively, operators can lower the reimbursement for allocated medication or return excess revenue to registered members.

Some dispensary operators are exploring other novel organizational structures for dispensaries. My newest collective in Hollywood is organized as a non-profit mutual benefit organization, for example. Time will tell whether or not novel these structures are useful and legally valid. You should always remember that the legal status of dispensing collectives and cooperatives is still evolving in step with our medical cannabis laws. No one has been to court to defend any organizational structure for a dispensary. This is entirely uncharted legal territory.

Can a dispensing collective be a legal business?

Yes and no. The collective itself is simply an association of patients and caregivers. As such, it is not truly a "business". However, it will be necessary to organize a legal business in order to carry out the activities of the collective. There will be taxes to pay, payroll to cover, a lease to sign, etc. Operating a legally organized business is the best way to deal with all of these issues. It is also a great way to avoid numerous legal pitfalls and liabilities. The business you organize for this purpose can be a sole proprietorship, corporation, partnership, or other legal form. An accountant can best advise you which business form to choose. The stated purpose of that business would be to promote and facilitate the nonprofit, collaborative association of patients and caregivers engaged in the medical cultivation and use of cannabis as authorized under state law. Note that the legally organized business does not actually buy or sell cannabis. This is the activity of the patients and caregivers who are associated together.

How do I find a location to rent?

Finding a landlord who will rent to a medical cannabis dispensing collective is very tricky. You must be straightforward with your landlord when looking to rent the property. If you mislead your landlord, he or she can have you evicted for violating your lease. Also, you will be starting a business relationship on very bad footing. The first step is to choose a city in which to locate. Then, decide on the neighborhood in which you believe the dispensing collective will be appropriate (It is a good idea to do some advance research on the political inclination and leadership in the city or county you choose). Finally, you must locate properties that are for rent in your target neighborhood. Contact the landlord for every suitable property that is for rent. Be prepared to explain who you are, what it is you want to do, and why will be good for the community. Remember that landlords will also need to know that you are financially stable and able to pay the rent. Good credit is very important in this process.
Where do I get a permit?

Most cities and counties do not currently issue permits for medical cannabis dispensing collectives and cooperatives. In most cases, you will have to obtain a business license and a zoning permit for retail store. Dealing with local authorities on this topic can be very difficult. Because the permit process and requirements vary in different cities and counties, I strongly recommend talking with me or another experienced operator about your specific location before you begin the permitting process. City and counties do not yet know what to do with medical cannabis dispensing collectives. In some jurisdictions, it's very easy to get a permit. Others may block your access to a permit for months or even years. As a general rule, the more liberal your local city or county the more likely you are to get a permit to operate a dispensing collective or cooperative. Some operators have found it useful to be very vague when they apply for the permit. This may be necessary in a conservative jurisdiction, but it can also be risky. Do not lie in a permit application. That is grounds for having it revoked.

Do I need permission from the local City Council or County Board of Supervisors?

Usually not. Only a handful of cities have adopted guidelines or issued permits for collectives. (See a list of city and county guidelines.) If your city or county has guidelines, you should follow them closely. The guidelines will usually contain an application procedure.

If you do not have local guidelines, I recommend that you inform the local officials after you secure a location and set a date for opening. Do not contact them and ask for permission. They will likely say no. Simply tell them that you plan to open and you would like their feedback. You should contact the City Council representative or the Board of Supervisor member who represents the district in which you are locating. However, it will also be wise to contact the most liberal representative in the jurisdiction. This person is likely to be your strongest ally.

Do I need permission from the Police Department?

No. Just like elected officials, the Police Department is likely to oppose a new medical cannabis dispensing collective. In fact, law enforcement has always been the leading opponent of medical cannabis. Do not expect a lot of support from your local police department. However, you do need to talk to them before you open your doors. You do not want your first interaction with the Police Department to be by surprise. Again, do not ask for permission -- simply inform and include.

Can I go to jail for this?

Yes. Medical cannabis remains illegal under federal law, and a recent Supreme Court decision reaffirmed the federal government's right to prosecute patients who use or grow it (Gonzales v. Raich, 2005). You may face very serious charges for operating a medical cannabis dispensary. You have to be prepared to face this if you intend operate in this political climate. Take some time to consider what you have to lose and how far you are willing to go before you open your doors.

You may also face legal challenges on the state level. No one has ever gone to court to defend the medical cannabis dispensing collective model. While it is to be legal under state law, we will not be sure until someone defends themselves in court. If you are operating a dispensing collective, this might be you. While penalties in state court are generally less severe than federal courts, it is possible that a dispensary operator would spend time in county or state jail.

Where do you get your medicine?

A dispensing collective must obtain its medication from its registered members. This is a significant challenge for new dispensing collectives. You have to build your membership base before you have enough members to provide excess medication to supply the others. This may be very frustrating for new operators, but is an important phase to get through. Your members will understand if you do not have a wide selection when you first open. Encourage those members who do grow cannabis to bring their excess medication back to the collective to help the other members. Some legally qualified medical cannabis patients are very good at growing medicine. In fact, some have extremely large stores of excess medication. These talented patients will often be looking for a dispensing collective or cooperative to join. Some people refer to these patients as "vendors." A better term is patient-cultivator. It has been my experience that these patient-cultivators will find you when you open your dispensary.

I am sorry to say that I cannot help you locate medication for your new dispensing collective.


Where can I get more help?

If you have not done so already, I strongly recommend that you visit several medical cannabis dispensing collectives. It will be very useful to see how other people are operating their collectives, so that you can decide if these models are right for you. You should also make a point to join and participate in Americans for Safe Access (ASA), the largest and most effective medical cannabis campaign in the country. ASA has invaluable educational resources for you and the patients you serve.

I am available for telephone consultation statewide and in person consulting in Southern California on a limited basis. In rare cases, I can travel elsewhere.

Some additional thoughts...

Operating a medical cannabis dispensing collective is a very important and compassionate project. It is also a lot of hard work. You should think hard about your level of commitment and the risk you're willing to take before you begin this project. Some operators would do better for themselves, the patients, and the grassroots movement for medical cannabis if they decided not to operate dispensing collectives. There are easier and safer ways to earn a living. This is a line of work that is most appropriate for people who are committed to compassion Â* and to the cause of medical cannabis.

New operators also do well to reflect honestly upon their motives for opening a dispensing collective. Your motives will influence how you operate your collective and the decisions you make regarding your patients and community. The consequences for making bad decisions are serious for you, the patients, the community, and medical cannabis in general. If you say that your motive is compassion, then your actions should reflect this. Neighbors, elected officials, and police officers can tell when you're being insincere. Do not put yourself and others at risk by failing to examine your motives.

I need to include a disclaimer to be very clear about my participation in conversations with new dispensary operators: I am not an attorney or an accountant. The contents of this message do not constitute professional legal or financial advice, nor am I recommending that you take any specific actions. This information is for educational purposes only. The contents are my own opinions.

Good luck with your project. Please keep me posted on your progress and let me know how I can help.