Cannabis Industry FAQs for Entrepreneurs
With the legalization of recreational marijuana in Minnesota, there’s a new wave of interest and opportunity for cannabis based businesses in our area. While it may seem like a chill business venture to pursue, there’s a lot to know and learn about this developing market. Take a look at these helpful FAQs to help determine if the cannabis business may or may not be right for you!
Under state law, the licenses to operate cannabis dispensaries and related businesses will be issued by the State of Minnesota once it develops its own set of regulations and policies. The law does allow local governments to establish rules that regulate the locations of the businesses, their hours of operation, signage, and other related issues
CITY OF ROCHESTER
The Rochester City Council approved a moratorium on cannabis startups until 2025 as the state grapples with new rules for legalized adult-use cannabis.
The moratorium doesn't ban smoking and growing marijuana for personal use if you are 21 or older.
What does the new recreational marijuana law do?
It legalizes the possession and use of marijuana for Minnesotans 21 and older. It creates a new state agency, called the Office of Cannabis Management (OCM), tasked with licensing cannabis and hemp businesses and overseeing a legal recreational market, as well as the existing medical cannabis and hemp-derived markets. The law mandates the expungement of all misdemeanor marijuana offenses and creates a Cannabis Expungement Board to review felony offenses for possible expungement on a case-by-case basis. It also imposes new rules and requirements for hemp-based THC drinks and edibles, which exploded in popularity after they were legalized last year.
When does the new law take effect?
Legal retail sales might not begin until early 2025. Virtually all of the bill's changes to the state's medical cannabis program take effect on March 1, 2025.
What kinds of cannabis products will be legal?
Production and retail sale of marijuana flower, concentrates, topicals and edible products, such as candy and beverages. It also permits the sale of immature cannabis plants and seeds, as well as hemp-derived THC products.
Possession limits.
Minnesotans 21 and older will be allowed to possess or transport in public up to 2 oz of cannabis flower, up to 8 grams of cannabis concentrates, and edible cannabis products containing up to a total of 800 milligrams of THC. They could also possess up to 2 pounds of marijuana in their homes.
Will people from out of state be able to purchase marijuana in Minnesota?
Some states, like Illinois, have different purchase and possession limits for nonresidents. Minnesota has no additional restrictions for out-of-state customers, and people with a valid ID showing they are 21 or older would be allowed to purchase cannabis products at licensed retailers. If someone were to cross a border into a neighboring state with legally purchased cannabis, the person could be subject to prosecution in that state. It is also a federal crime to transport marijuana across state lines.
Will people be allowed to smoke anywhere?
No. People over the age of 21 will be allowed to use marijuana in a private residence or in their yard; on private property that is not accessible to the public, if permitted by the owner; or on the premises of a business or event licensed for on-site consumption. Vaporizing or smoking cannabis in a multifamily housing building would be prohibited, however, except for registered medical cannabis patients.
Where will the consumption of cannabis products be explicitly prohibited?
In motor vehicles, on school property and in state correctional facilities. The law requires owners of child day care programs to disclose to parents or guardians if they allow employees to consume cannabis products on the premises outside of hours of operation.
HOME CULTIVATION
Will it be legal to grow cannabis at home?
Up to eight cannabis plants per residence, with no more than four being mature and flowering at the same time. Plants may be grown indoors or outdoors, but they must be kept in an enclosed, locked space that is not open to public view.
It will be illegal to use chemical solvents to extract cannabinoids at home without a license.
Where will I be able to buy seeds or immature plants?
The law allows licensed retailers to sell seedlings and immature plants for at-home growing. There is no provision in the new law regarding the sale or gifting of seeds. The law differentiates between hemp seeds – which are intended to be grown into industrial hemp plants that contain less than 0.3% THC – and cannabis seeds, which are intended to be grown into marijuana plants with higher levels of THC.
How can I get seeds?
There is already a thriving online marketplace of cannabis breeders and seed banks that ship seeds across state lines due to a gray area in federal law.
The 2018 federal agriculture bill legalized hemp products containing less than 0.3% THC by weight. A 2022 letter from the Drug Enforcement Administration to a marijuana industry attorney stated that seeds with less than 0.3% THC can be considered hemp and are therefore legal, at least in the opinion of the DEA, even if – when planted and grown – they would produce marijuana with much larger amounts of THC. However, the federal Controlled Substances Act includes seeds in its definition of illegal marijuana.
The Minnesota Department of Agriculture also clarified in a June email: "Someone selling seed in the state needs to follow proper labeling laws. The MDA issues permits for labeling seed. No one in the state currently has a labeling permit from the MDA for cannabis seed. We will issue permits to label cannabis seed starting July 1 and seed sales will then start Aug. 1."
Types of licenses
Cannabis cultivator, which allows the license holder to grow enough cannabis plants to fill up to 30,000 square feet. Cultivators may also harvest, package and label cannabis flower for sale to other businesses, such as a manufacturer or retailer.
Cannabis manufacturer, which allows a business to process cannabis flower into other products, such as concentrates, edibles and topicals. Manufacturers can sell products to other businesses.
Cannabis retailer, allowing the holder to operate up to five retail stores, commonly called dispensaries in other states, where cannabis products may be purchased by Minnesotans 21 and older.
Cannabis microbusiness, which allows a company to cultivate up to 5,000 square feet, manufacture and sell cannabis products at a single location. A microbusiness may allow on-site consumption of edibles in a dedicated space with a separate entrance. Microbusinesses can also offer live or recorded entertainment.
Cannabis mezzobusiness, which is similar to a microbusiness except larger ("mezzo" is Italian for "medium"). Mezzobusinesses may cultivate up to 15,000 square feet, as well as manufacture and sell cannabis products. However, they will not be allowed to offer on-site consumption of cannabis products or entertainment. A mezzobusiness may operate up to three retail locations.
Cannabis wholesaler, which authorizes the license holder to purchase cannabis flower, immature plants, or other cannabis or hemp products from other businesses and sell them to cannabis manufacturers, retailers, microbusinesses and mezzobusinesses.
Cannabis transporter, which allows the holder to transport cannabis plants, flower and other products between other cannabis businesses. The law requires transporters to obtain insurance and install lockable storage compartments in their vehicles for transporting cannabis. All vehicles must be staffed by at least two employees while transporting marijuana products.
Cannabis delivery service, which allows a business to purchase cannabis products from retailers, medical cannabis retailers, microbusinesses or mezzobusinesses and deliver them to customers. Like cannabis transporters, a delivery service must install lockable storage compartments in its vehicles for transporting cannabis.
Cannabis event organizer, allowing the holder to organize cannabis events lasting up to four days. Event organizers may charge entrance fees and must verify that all attendees are age 21 or older. They may also designate space for on-site consumption (if allowed by the local government) and authorize cannabis retailers, microbusinesses and mezzobusinesses to sell cannabis products at licensed events.
Medical cannabis licenses: medical cannabis cultivator, medical cannabis processor, medical cannabis retailer, as well as medical cannabis combination business, which would allow a medical cannabis business to also sell recreational products.
Can local governments ban cannabis businesses from operating within their borders?
No, they would not be able to ban cannabis businesses entirely. But they would have the option of limiting the number of cannabis retailers to one for every 12,500 residents. If a county meets the one retailer per 12,500 residents threshold, individual cities or towns within that county will not be required to allow a cannabis business.
What are the packaging requirements for cannabis products?
It must be child-resistant, tamper-evident and opaque. Packaging for edibles must be resealable in materials approved by the U.S. Food and Drug Administration for packaging foods. Packaging materials cannot contain or be coated with PFAS "forever" chemicals. Lower potency, hemp-derived beverages would not require child-resistant packaging. Packaging could not resemble that of other products that do not contain cannabis.
Labeling for cannabis products will vary somewhat depending on the type of product, but they will generally be required to identify the name and license number of the cultivator or manufacturer, the batch number, symbols identifying it as cannabis, a warning that the product is not for children and the phone number of the Minnesota Poison Control hotline. Cannabis flower labels must also include the net weight and the amount of cannabinoids. Labels for edible products must include the serving size, the net weight of the product, all ingredients and the amount of cannabinoids it contains per serving.
Will cannabis businesses be allowed to advertise?
Yes, though the ways they can advertise will be strictly limited. Outdoor advertising will be banned for all cannabis businesses. Hemp businesses could advertise outdoors as long as it is unrelated to low-potency hemp edibles.
Cannabis and hemp businesses will not be allowed to advertise in print, television, radio or any other medium if 30% or more of the expected audience is under 21. They will also be prohibited from using online pop-up ads. Direct communication advertising, such as email marketing, will be allowed as long as the business first verifies the recipient is 21 or older. Verification methods could include user confirmation or birth date disclosure, similar to online alcohol and tobacco advertising. Similarly, location-based mobile advertising will require the business to first verify the device owner is 21 or older.
Taxes
How will retail cannabis sales be taxed?
The law imposes a 10% tax rate on the sale of cannabis products. It would not apply to products purchased through the state's medical cannabis program. State and local sales taxes will also apply to retail cannabis sales.
The state will collect additional revenue from application and license fees for marijuana businesses. For example:
A cannabis cultivator will pay a $10,000 application fee, a $20,000 initial license fee and $30,000 to renew its license
Manufacturers will pay $10,000 for both their application and initial license fees and then $20,000 for renewal.
Retailers will pay less — $2,500 for their application and initial license fees and $5,000 for renewal.
A cannabis "microbusiness" will pay no initial license fee, a $500 application fee and $2,000 to renew its license.
Can local governments collect additional taxes on marijuana sales?
No, the law explicitly prohibits local governments from imposing a sales tax solely on cannabis products.
How much tax revenue does the state expect to raise from retail cannabis sales?
By fiscal year 2027, the Minnesota Department of Revenue estimates that recreational marijuana sales could generate about $107 million in annual tax revenue for the state and roughly $21.5 million for local governments. The department estimates state and local governments could take in more than $300 million in tax revenue from fiscal year 2024 to 2027.
How will tax revenue from marijuana sales be used?
The state will share one-fifth of the tax revenue raised with local governments. Revenue will also be distributed to state agencies to cover the costs of oversight of the cannabis industry, law enforcement and various grants created by the legislation.
Starting in fiscal year 2026, yearly state expenditures related to cannabis will include:
$19 million for Department of Health programs
$15 million for "cannabis industry community renewal" grants
$10.8 million for the Department of Public Safety
$3.25 million for the University of Minnesota, much of that helping to set up and run a Center for Cannabis Research at the School of Public Health
Any revenue left over after required expenditures will go to the state's general fund.
HEMP INDUSTRY
How will the new law affect existing businesses making and selling legal hemp-derived THC products?
The existing market for hemp-derived THC food and drink will be allowed to continue as long as businesses register with the Minnesota Department of Health by Oct. 1. The health department will regulate hemp-derived cannabis products until 2025.
As is the case now, only food and beverages with hemp-derived THC in amounts up to 5 milligrams per dose are allowed – with a limit of 50 milligrams per package for edibles and a new 10 mg per-package limit for beverages. Vapes, flower and other products with hemp-derived THC remain illegal.
One immediate change will specifically outlaw THC-P, an extremely potent synthetic cannabinoid that has led to reports of illnesses nationwide. HHC and THC-O are also explicitly banned; only delta-8 and delta-9 THC derived from hemp are allowed.
The Office of Cannabis Management will take over the licensing, regulation and enforcement of the low-dose hemp-derived market on March 1, 2025.
Will liquor stores be allowed to sell hemp-derived products?
Yes, starting May 31, 2023. The bill adds lower-potency hemp edibles and beverages to the short list of items liquor stores are allowed to sell.
Does the law change Minnesota's medical cannabis program?
The new law eliminates the $200 enrollment fee for new patients.
Starting in 2025, more businesses will be allowed to enter the medical marijuana market. State law previously allowed only two operators to grow, process and sell limited types of products at a small number of dispensaries around the state. And medical marijuana providers will be allowed to apply for a license to sell products to both recreational and medical customers (at one site per business per congressional district).
Medical marijuana will not be subject to the 10% gross receipts tax.
Will medical patients be able to shop at recreational retailers?
Yes, but then they would have to pay the 10% tax on products that medical retailers don't have to charge registered patients. Some retailers will be able to sell both recreational and medical marijuana in one location starting in 2025.
What types of jobs could still require testing for cannabis under the law?
A "safety-sensitive" job, which Minnesota law defines as a supervisory or management position in which impairment by drugs or alcohol would threaten the health or safety of any person.
Firefighters and licensed peace officers, including police officers, Minnesota State Patrol troopers and state conservation officers.
Health care workers and caregivers who work with children, vulnerable adults or who treat, examine or provide emergency care to people with medical or mental health conditions.
Positions that require a commercial driver's license or involve the operation of a motor vehicle and are subject to drug or alcohol testing under state or federal law.
Professional athletes whose employment contracts permit drug or alcohol testing.
Jobs funded by a federal grant or any other position subject to drug or alcohol testing under state or federal law.
For those considering venturing into the cannabis industry in Minnesota, the new recreational marijuana law presents a promising landscape of opportunities. With the legalization of adult-use cannabis, the establishment of the Office of Cannabis Management (OCM), and the introduction of various licensing categories, there's ample room for entrepreneurs to enter the market. The law's emphasis on expunging prior marijuana offenses and its rigorous packaging and labeling requirements demonstrate a commitment to social responsibility and product quality.
Home cultivation allowances provide potential for niche businesses catering to home growers, while the inclusion of various license types, from cultivators to retailers, allows for a diverse range of cannabis-related ventures. While advertising regulations are strict, savvy entrepreneurs can still find creative ways to build their brands and reach their target audience.
The taxation structure, with its revenue-sharing model and significant revenue projections, underscores the potential profitability of the industry. This, combined with the growth potential in the hemp-derived market and the extension of opportunities to medical cannabis businesses, makes Minnesota an enticing destination for cannabis entrepreneurs.
However, it's crucial to stay informed about evolving regulations and compliance requirements. Overall, the new recreational marijuana law in Minnesota offers a dynamic environment for entrepreneurs to seize opportunities, contribute to the economy, and be part of a transformative industry while adhering to legal and ethical standards.
Are you an aspiring or early stage entrepreneur seeking assistance with your business idea? We’re happy to help! You can contact our Director of Entrepreneurial Services for assistance at juliana@collider.mn!
