How to Open a Dispensary in Maryland

How to Open a Dispensary in Maryland in 2024

The Maryland cannabis industry offers several business opportunities for entrepreneurs, including persons looking to open dispensaries. To open a cannabis store in the state, you must obtain a standard or micro license from the Maryland Cannabis Administration. A 30-day Round 1 application window, exclusively reserved for persons who qualify as social equity applicants, is slated to open on November 13, 2023.

Why Open a Dispensary in Maryland?

Maryland's cannabis market is expected to experience significant growth following the legalization of recreational cannabis. Since July 1, 2023, medical cannabis dispensaries in the state have been permitted to sell recreational cannabis upon receiving the appropriate authorization from the Maryland Cannabis Administration. Also, with a licensing window slated to be opened in November 2023, cannabis businesses are expected to be awarded adult-use marijuana dispensary licenses on or before January 2024.

According to the 2021 annual report of the MMCC (Maryland Medical Cannabis Commission), annual dispensary sales reached $600 million in 2021, compared to about $242 million in 2019. Also, a 2022 report by the MMCC showed that more than 162,000 Marylanders were certified as medical marijuana patients.

Furthermore, projections by the Maryland Department of Legislative Services suggest that Maryland's legalization of recreational cannabis could generate approximately $57 million in annual tax revenue by the fiscal year 2024, and the cannabis market size could reach $1.7 billion by 2024. A slightly more conservative projection by the Marijuana Policy Group, a consulting firm in the cannabis industry, puts the combined size of Maryland's legal cannabis market, including recreational and medical, at $1.2 billion by 2024.

Types of Dispensary Licenses in Maryland

To open a cannabis dispensary in Maryland, you must obtain a standard or micro license. The standard license allows you to operate a dispensary at a physical location, while a micro license only allows you to operate a delivery service with up to 10 employees, meaning you cannot operate a physical storefront.

How to Get a Maryland Dispensary License

The Maryland Cannabis Administration (MCA) announced a cannabis business licensing round under the state's Cannabis Reform Act on September 8, 2023. The 30-day application window, also called Round 1, opens at 12:00 a.m. EST on November 13, 2023, and closes at 5:00 p.m. EST on December 12, 2023.

Round 1 of the application for cannabis dispensary licensure is exclusively reserved for social equity applicants. A social equity applicant is an applicant that has at least 65% ownership and control held by one or more individuals who:

• Lived in a Disproportionately Impacted Area (DIA) for at least five of the past 10 years;
• Attended a public school in a DIA for a minimum of 5 years; or
• Attended, for at least 2 years, a 4-year institution of higher education in Maryland where at least 40% of the individuals who attended the institution are eligible for a Pell Grant

Note that a DIA is an area that had more than 150% of Maryland's 10-year average for cannabis possession charges. An interactive map of DIAs in the state is available on the website of the OSE (Office of Social Equity). Prospective applicants must confirm their eligibility via the Social Equity Verification portal. To request a link to the portal, complete the Cannabis Business Licensing Interest Form. Before you begin the final application process for a cannabis dispensary license, you must receive the final confirmation of your social equity eligibility. The confirmation will be emailed with a link to access the report in a portable document format (PDF). If you are eligible, the report will contain the term "CLEAR" in the top section.

If the number of applicants for a dispensary license in a municipality exceeds the number of licenses allocated to that region, eligible applicants will be placed in a randomized lottery. Seventy-five standard dispensary licenses and 8 micro dispensary licenses will be distributed by county. For a complete breakdown of the distribution of dispensary licenses, see the MCA cannabis business license application announcement.

Applicants are not required to be current residents of Maryland to obtain a standard or micro license to set up a dispensary. If you are applying under the social equity status based on living in or attending a public school in a DIA outside of Maryland, you must also use the MCA’s Social Equity Verification Portal. You must provide data that shows the geographic area in question meets Maryland's definition of a disproportionately impacted area. After completing the required verification on the portal, you may receive additional communications from the MCA with specific data requirements to verify the location as a DIA.

Winners of the Round 1 lottery will be notified on or before January 1, 2024. Round 2 of dispensary applications is not expected to begin before May 1, 2024. The MCA will release further information and guidance on the licensing application and lottery process in the weeks leading to the opening of the application window. Therefore, prospective applicants should visit the cannabis licensing page of the MCA website frequently for further updates.

Information and Documents Required for a Dispensary License in Maryland

Although final application procedures are yet to be released by the MCA, the agency requires applicants to submit certain documents to verify their eligibility as a social equity application. The documents must be submitted to Creative Services Incorporated (CSI). CSI is a full-service, global background screening and security firm partnering with the Maryland Cannabis Administration to verify applicants’ eligibility for social equity licensing.

After completing the Cannabis Business Licensing Interest Form, you will get a personalized link to a verification portal within 2 business days from the CSI. Using the link, you must submit the required documents.

To prove that you lived in a DIA for at least 5 of the previous 10 years, you must submit any two of the following:

• Residential lease
• Driver's license or other government-issued identification containing a valid address
• Mortgage loan
• Bank statement
• Utility bill addressed to the prospective applicant
• W-2/1099
• Income tax return
• Court document
• Credit card statement
• Housing authority record

To prove that you attended a public school in a DIA for a minimum of 5 years, you must submit one of the following:

• School transcripts
• Enrollment records

The records must be obtained from a public school and show the school's address. If you cannot access and provide school records, the MCA advises that you still enter and engage the CSI portal. The CSI may be able to verify some information using third-party sources if you provide the following:

• School name
• School location
• Dates of attendance
• Date of graduation (if applicable)
• Name while attending

To prove that you, for at least 2 years, attended a 4-year IHE (institution of higher learning) in Maryland where at least 40% of the individuals who attend the IHE are eligible for a Pell Grant, provide 2 years' worth of transcripts or enrollment records from any of the following:

• Bowie State University
• Coppin State University
• Morgan State University
• The University of Baltimore
• University of Maryland Eastern Shore
• Washington Adventist University

You will also be asked to provide the following:

• School name
• School location
• Dates of attendance
• Major
• Degree
• Date of graduation (if applicable)
• Name while attending

What Plans Do You Need to Open a Dispensary in Maryland?

All applicants applying in the Round 1 application window are required to submit a detailed operation plan, a business plan, and a detailed diversity plan in their applications. An operational plan should include details about your location, equipment, facilities, operating procedures, staffing plans, vendors, security plans, and see-to-sale tracking requirements. A business plan should include a 1- or 2-page executive summary, company analysis, industry analysis, proof of funding, and financial projections. A diversity plan must include comprehensive plans on promoting equity among people of color, veterans, women, and persons with disabilities.

Are There Municipal Requirements for Opening a Cannabis Dispensary in Maryland?

According to the current information on the MCA website, for the application for a cannabis dispensary license, there are no specific municipal requirements for licensees. However, you may be required to obtain a municipal business license or permit from the local government in the jurisdiction where you intend to set up a dispensary.

How Long Does It Take to Get a Maryland Dispensary License?

With the final application process not yet published by the Maryland Cannabis Administration, estimating the exact period to get a dispensary license is difficult. However, the state plans to begin issuing the first round of dispensary licenses on or before January 1, 2024.

Where Can You Locate a Cannabis Dispensary in Maryland?

Cannabis dispensaries in Maryland may be located in any zoning district that allows for retail businesses, but they are subject to certain restrictions. For example, dispensaries are not allowed to be located within 500 feet of a school, playground, child care center, public park, recreation center, religious institution, or library. They also cannot be located within 1,000 feet of another dispensary.

Can Licensees Have More Than One Dispensary Location in Maryland?

Yes. Maryland allows cannabis licensees to operate more than one dispensary location in the state.

How Much Does It Cost to Open a Marijuana Dispensary in Maryland?

The following are the costs associated with opening and running a cannabis dispensary in Maryland:

• Application fee: $1,000 for a micro license or $5,000 for a standard license
• Initial licensing fee: $50,000 (social equity applicants may be eligible for 50% deductions in the licensing fee)
• Startup costs: $250,000 - $1,000,000 (this includes costs for facility build-out or renovations, security systems, inventory, compliance measures, branding, staffing salaries and training, legal and consulting fees, insurance, and other related expenses)
• Tax: 9%

However, estimated day-to-day running costs after startup may include:

• Lease or rent expenses: $5,000 - $20,000 per month
• Staffing salaries and other remunerations: $8,000 - $20,000 per month
• Inventory restocking: $10,000 - $50,000 per month
• Marketing and advertising: $2,000 - 5,000 per month
• Utilities: $1,000 - $3,000 per month
• Insurance premiums: $2,000 - $5,000 per month
• Regulatory compliance costs: $1,000 - $5,000 per month

Do You Need an Insurance Policy for a Cannabis Dispensary in Maryland?

Although Maryland has not required specific insurance policies from dispensaries, the following are recommended:

• General Liability Insurance: This protects a dispensary from financial losses caused by lawsuits from third parties, such as customers and vendors. It covers claims for property damage, bodily injury, or personal injury that arise from the dispensary's operations
• Product Liability Insurance: This insurance can protect a dispensary from financial losses caused by lawsuits from customers who claim that they were injured or harmed by a product sold by the dispensary
• Workers' Compensation Insurance: The workers' compensation insurance provides coverage for lost wages and medical bills for employees who are injured or become ill while on the job
• Property Insurance: Property insurance protects a dispensary's physical assets, such as the building, equipment, inventory, and fixtures, against damage or loss caused by covered events such as fire, theft, or vandalism

How to Get a Grant to Open a Dispensary in Maryland

Starting a cannabis dispensary requires a lot of funds, and only a few entrepreneurs can raise the necessary capital. If you are planning on setting up a dispensary in Maryland, you can raise funds using any of the following methods:

• Self-funding: You may use your savings or assets as the primary source of capital. While this provides complete control over the business, it may be limited by the extent of your financial resources
• Family and Friends: You may seek financial support from family members and friends to raise funds for your dispensary
• Loans: Conventional business loans from banks or credit unions may be used to finance a Maryland cannabis dispensary. However, due to federal regulations, securing such financing from financial institutions may be difficult
• Equity Funding: You can raise funds for your business by selling equity in the business to investors. While this option can provide substantial capital, it often entails relinquishing partial ownership and decision-making control
• Cannabis-Specific Brokers and Lenders: Specialized financial institutions or private lenders focusing on the cannabis industry often offer financing options. These lenders understand the unique challenges of the cannabis business and can tailor funding solutions accordingly
• Government Programs and Social Equity Investments: Under the Maryland social equity program for cannabis business, you may be able to access capital in the form of grants and no-interest loans if you qualify

Does Maryland Have a Social Equity Program for Cannabis Dispensaries?

Yes, Maryland has a social equity program for cannabis dispensary applicants. The social equity program is vital to Maryland's efforts to create a more equitable cannabis industry. The program aims to ensure that people who have been disproportionately impacted by the War on Drugs can benefit from the economic opportunities associated with cannabis legalization. The criteria for inclusion in the program were established by the Office of Social Equity and are available on the OSE website.

The Maryland social equity program prioritizes diversity and equity in cannabis licensing by:

• Giving exclusive licensing rounds to social equity applicants, who are individuals and businesses from communities disproportionately harmed by cannabis prohibition and enforcement
• Providing financial (grants and no-interest loans) and technical assistance to social equity applicants
• Creating new license categories (incubator and on-site consumption) and classes (micro business) that require less capital to start up
• Removing non-violent cannabis convictions as a barrier to employment in the cannabis industry
• Creating an Office of Social Equity to help social equity applicants and small, minority- and women-owned businesses
• Removing barriers to entry for small businesses, such as competitive scoring applications, high application fees, and property requirements

To enjoy these benefits, you must confirm your eligibility for the program using the Social Equity Verification portal. To obtain a link to access the portal, you must complete the Cannabis Business Licensing Interest Form.

Does Maryland Tax Marijuana Dispensaries?

Maryland adult-use cannabis dispensaries are required to include a 9% sales and use tax on cannabis products sold to buyers. Cannabis businesses operating in more than one location in Maryland must file a separate sales and use tax return for each location. There are no local excise taxes on cannabis in the state. Dispensaries must remit the state-imposed sales and use tax to the Comptroller of Maryland, Revenue Administration Division.