Ins and Outs of Dispensary Compliance

While state and local regulations vary across the United States, dispensary compliance is a notoriously convoluted process no matter where business owners are opening their retail locations. All legal cannabis businesses should be aware of key compliance areas to ensure they operate in accordance with regional regulations. 

Cannabis compliance begins before business licenses are granted by the state, and requires ongoing adherence to everything from HIPPA and OSHA to seed-to-sale tracking. Business owners must navigate the application process, which involves a labyrinth of forms, documents, approval stages, and fees. 

Multi-state operators (MSOs) with access to capital and nuanced professional resources have a much easier time navigating compliance in the cannabis industry than independent social equity applicants who are new to the business world. Fortunately, technology has the power to help cannabis entrepreneurs without corporate funding manage compliance with regulations using automated software. Dispensary compliance software integrates with other systems and automates product tracking and sends any necessary documentation to the appropriate state tracking system.

Licensing Authorities

Before anyone can fulfill their dispensary dreams and sell cannabis products, they must obtain the required licenses and permits from the state. Each state is different, and some states, like California, require business owners to receive municipal licenses before they can apply for state licenses. In Arizona, dispensaries must pay annual renewal fees and an additional $2,500 in the case of name or location changes. 

Because of application fees, the short length of cannabis retail permits, and the ever-evolving laws for license holders in the cannabis industry, it is important for dispensary owners to develop a clear understanding of compliance regulations in their region. With a slew of environmental and safety concerns in the industry, complex staff training needs, and the challenge of tracking sales, cannabis businesses have a lot riding on the maintenance of their license. 

If a retail brand is buying from a third-party vendor, the product must be accompanied by documentation that shows its test results at a licensed lab. At every step of the retail process, businesses must include all labels required by the state in which they operate. Compliance can make or break the financial trajectory of a business. 

While state licensing processes and dispensary compliance may seem intimidating, the first step to obtaining a license is learning about the application process in your state of operation:











Dispensary Compliance Penalties

Because compliance is expensive and complex, many cannabis brands are overwhelmed by regulatory demands. Without a comprehensive compliance program, businesses subject themselves to even more costly consequences down the road. The costs of dispensary compliance penalties are high, but the costs of noncompliance are much more detrimental. 

Businesses that clearly define their compliance processes and train their teams appropriately are able to avoid massive fines, potential license revocation, and painstaking damage control. For those who are hesitant about investing in their compliance program, there are a plethora of cautionary tales that demonstrate the importance of adhering to regulations. 

In 2017, the cannabis brand Sweet Leaf was busted for looping, an illegal practice that cannabis buyers use to get around transaction limits at dispensaries. After Colorado’s Marijuana Enforcement Division identified Sweet Leaf’s compliance violations, the company spent an entire year dealing with appeals and legal fees. 

The owners of Sweet Leaf ultimately reached a deal with the state that included $2 million in taxes and fees, the destruction of all remaining inventory, and a 15-year ban from the Colorado cannabis market. To pay the fees and comply with their ban from cannabis, Sweet Leaf sold all 26 of its licenses. 

Individual budtenders at Sweet Leaf were also sanctioned by the state. The liability of noncompliance is a threat not only to a business but to its individual employees. Each of the budtenders had to negotiate plea deals or endure a trial in the face of felony drug charges. Cannabis businesses have a responsibility to maintain compliance with the health of their business, the safety of their customers, and the legal protection of their employees.

Dispensary Compliance Software

Compliance in the cannabis industry is essentially impossible without investing in the appropriate technology and software. With a quality dispensary compliance management system, companies can automate the process of tracking products and submitting the necessary documentation to state tracking systems like Biotrack and Metrc – even when they lose access to the internet. 

Software companies who prioritize compliance frequently offer team training to make sure all employees are familiar with cannabis regulation requirements and compliance features. 

Customer relationship management (CRM) and point of sale (POS) systems that integrate with existing software infrastructures help record and manage inventory, security, facility conditions, monetary movement, and seed-to-sale tracking. Automated seed-to-sale software helps organize and maintain records for regulatory inspection, track business operations according to state-sanctioned time frames, and support the license holder’s responsibilities. 

Before investing in a cannabis compliance software system or redefining an approach to compliance, business owners should seek a comprehensive understanding of their options and requirements. Education is both a necessary and powerful tool for sustained success in the cannabis industry.

Businesses can seek certification and education in everything from Responsible Vendor Training and identification protocol to record management and compliance with regulatory bodies. Lots of courses are available online, and at the Cannabis Community College, there are valuable courses taught by senior staff members with advanced training pre-approved by the state.