How to Open a Dispensary in Utah

How to Open a Dispensary in Utah in 2024

To open a dispensary in Utah, you must obtain a medical cannabis pharmacy license. The last application window closed late in 2019, and it is not yet certain when the next application window will open. As of July 1, 2023, issuance of new medical cannabis pharmacy licenses were transitioned over to the UDAF (Utah Department of Agriculture and Food). While the UDAF has yet to announce new application timelines, prospective applicants are advised to review the previous application process.

Why Open a Dispensary in Utah?

There are currently over a dozen medical cannabis pharmacies in Utah. Considering the annual increase in the number of medical cannabis patients in the state, opening a dispensary in Utah may be a profitable venture. Data from the Utah Department of Health & Human Services Center for medical cannabis transactions revealed a significant increase in medical cannabis sales in Utah since the March 2020 inception of medical cannabis sales. Between 2021 and 2022, net medical cannabis sales grew by 59%, reaching a total of $118.7 million in 2022, compared to the $74.8 million recorded in 2021.

Furthermore, the number of active registered patients in Utah experienced a 51% increase from October 1, 2021 to September 30, 2022, as detailed in the DHHS 2022 annual report. According to the DHHS September 2023 report, there were 72,792 patients registered in the medical cannabis program, and more than $300 million generated in cumulative sales since 2020.

Types of Dispensary Licenses in Utah

Utah issues one type of dispensary license. The Utah Department of Health and Human Services issued medical cannabis pharmacy licenses to persons seeking to open cannabis dispensaries in the state. The license authorizes licensees to sell medical cannabis to qualified patients.

How to Get a Utah Dispensary License

The application window for the medical cannabis pharmacy license is closed in Utah. However, the Utah Department of Health issued 15 medical cannabis pharmacy licenses in early 2020 through a single Request for Proposal (RFP).

Applicants were required to read, reference, and demonstrate that their proposals were in compliance with the standards established in the Utah Medical Cannabis Act and ensure that the attachments in their applications corresponded to the Mandatory Minimums and Technical Requirements Sections of the RFP. Applications were limited to a total of 100 pages, including attachments, per applicant.

Note that the applicant must not be younger than 21 or have been convicted under Utah or federal law of a felony or misdemeanor for drug distribution. Applicants were allowed to make payments for the application fee via credit cards or check made payable to:

Utah Department of Health P.O. Box 144003 Salt Lake City, Utah 84114-2104

The Utah Department of Health evaluated applications based on:

• Experience (250 points): Experience with establishing and successfully operating a business that involves complying with a regulatory environment, tracking inventory, and training, evaluating, and monitoring employees
• Operating plan (600 total points): Description of the applicant's plan to ensure the safety and security of patrons and the community
• Employee and Company Information (100 points): The applicant must provide a list naming all prospective employees and their titles and a corresponding organizational chart
• Facility Information (175 points): This includes information on the:
  • Physical characteristics of the proposed dispensary, including a floor plan and an architectural elevation
  • The property's current ownership status
  • Documentation demonstrating that the proposed location complies with proximity restrictions
  • Description of security protocols and standards to ensure the security of the physical structure
  • Description of the process that the dispensary will take to ensure that access to the premises is limited to employees and medical cannabis cardholders
  • Description of any processes or controls that will be implemented to prevent the theft, diversion, or loss of medical cannabis or medical cannabis devices
  • Description of the proximity of the dispensary facility to anticipated patient populations
  • Description of the planned hours of operation (days and times)
• Technical Standards (75 points): This describes the training and continuing education opportunities beyond those that are state-mandated that will be provided to medical cannabis pharmacy employees
• Customer Consultation (50 points): This describes the medical cannabis pharmacy’s plan for cardholder education when cardholders make purchases
• POS System (25 points): This provides a general description of how the medical cannabis pharmacy's point of sale (POS) system will be compatible with the seed-to-sale inventory control system designated by the State of Utah (MJ Freeway’s Leaf Data Systems Software)
• Storage Protocols (75 points): This describes the pharmacy’s medical cannabis storage protocols, both short and long-term, to ensure that cannabis is stored in a manner that preserves its integrity and complies with the Utah Medical Cannabis Act and Utah Medical Cannabis Act Rule
• Strategic Plan (100 points): This is a description of the applicant’s strategic plan for opening the medical cannabis pharmacy that has a high likelihood of success
• Local Connection (75 points): This must describe how the applicant will make positive connections to the local community if awarded a license
• Ability to Keep Cost of Medical Cannabis Low for Cardholders (100 points): This describes the extent to which you can reduce the cost of medical cannabis or medical cannabis devices for cardholders

Information and Documents Required for a Dispensary License in Utah

Information submitted in an application proposal for a medical cannabis pharmacy license must comply with laws outlined in Title 26, Chapter 61a, Utah Medical Cannabis Act and the following attachments:

• Medical Cannabis Pharmacy Fact Sheet
• Medical Cannabis Fact Sheet
• Medical Cannabis Pharmacy Proximity Requirements
• Medical Cannabis Practice Act Rule, Utah Admin Code. R380-400 through R380-411
• Link to Title 26, Chapter 61a of the Utah Medical Cannabis Act
• Owners and Directors Contact Information: The applicant must provide the name and address of an individual who:
• for a publicly traded company has a financial or voting interest of 10% or greater in the proposed medical cannabis pharmacy;
• for a privately held company, a financial or voting interest in the proposed medical cannabis pharmacy, or
• has the power to direct or cause the management or control of a proposed medical cannabis pharmacy
• Bond Statement
• Past Disciplinary Actions
• A concise description of any formal investigation, charge, claim, or adverse action taken by any licensing jurisdiction, government agency, law enforcement agency, or court in any state for any violation or detrimental conduct in relation to any of the applicant's or an owner’s past or present cannabis-related operations or other businesses and any corrective action taken as a result covering the past 7 years to which the applicant was a party
• Electronic Payment Providers: This includes the names of all electronic payment providers the applicant plans to use for any electronic payments made to and by the medical cannabis pharmacy and the financial institutions that will process and deposit those transactions. The contact information for these providers must be provided

Note that your business entity information and organizational documents, while not required to be submitted as part of the initial application, may be requested by the Utah DOH before the award of the license. If requested, the documentation must be provided within 24 hours of the request being made. A land use permit will also be required within 120 days of the license being issued.

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

It is recommended that you develop a comprehensive business plan outlining your dispensary business operations, including details such as your proposed location, facility design, staffing, security measures, and financial projections. A well-prepared business plan demonstrates your commitment to comply with state regulations and can help you source funds for your startup.

Per Utah dispensary organization license application requirements, the following plans are also required to be submitted:

• Operations Plan: A person applying for a medical cannabis pharmacy license must submit a proposed operation plan for the medical cannabis pharmacy that includes:
• A description of the physical characteristics of the proposed facility, including a floor plan and an architectural elevation
• A description of the credentials and experience of:
  • Each officer, director, or owner of the proposed medical cannabis pharmacy
  • Any highly skilled or experienced prospective employee
• The medical cannabis pharmacy's employee training standards
• A security plan
• A description of the medical cannabis pharmacy's inventory control system, including a plan to make the inventory control system compatible with the state electronic verification system
• Storage protocols, both short- and long-term, to ensure that cannabis is stored in a manner that is sanitary and preserves the integrity of the cannabis
• A description of the proposed medical cannabis pharmacy's strategic plan for opening the medical cannabis pharmacy, including gauging appropriate timing based on:
  • The supply of medical cannabis and medical cannabis products, in consultation with the department
  • The quantity and condition of the population of medical cannabis cardholders, in consultation with the Department of Health and Human Services
• Strategic Plan: This plan must include the following:
• Gauging the appropriate timing of opening the pharmacy based on the supply of cultivated and processed medical cannabis in Utah and the estimated quantity and condition of the population of medical cannabis cardholders
• A detailed description of all medical cannabis, medical cannabis devices, and medical cannabis education material intended to be offered by the medical cannabis pharmacy during the first year of operation. It must include a photographic image of at least 4 examples of products the pharmacy plans to sell, showing the containers and corresponding labels for products that the pharmacy plans to use. These may be examples of products that are currently sold in other states or products not sold in other states that you intend to sell for the first time in Utah. All text appearing on labels must be legible in the images provided
• A financial plan that includes audited, certified financials and the following information:
  • Documentation of liquid assets and the source of those liquid assets from a financial institution in the United States or the District of Columbia. This documentation must identify an amount of funds in liquid assets that are not encumbered and may be converted within 30 days after a request to liquidate assets
  • Documentation of illiquid resources
  • If the applicant is relying on funds from an owner, officer, board member, or any other source, evidence that such person had unconditionally committed such funds to the use of the applicant in case the department awards a medical cannabis pharmacy license to the applicant
  • Evidence that the applicant has adequate funds to cover all expenses and costs of the first year of operation
  • Two-year budget, which includes but is not limited to: - Any assets and liabilities - Any pro forma used to develop the plan
  • Documentation related to any contracts for services or proposed contracts for services that are directly related to the cultivation, processing, or dispensing of medical cannabis or medical cannabis devices or providing of home delivery services in Utah
• Local Connection Plan: This will describe how the applicant will make positive connections to the local community if awarded a license and will contain descriptions, such as:
• Any direct or indirect connections intended to the local businesses, workforce, non-profits, or charities
• How the applicant intends to provide their local community with community benefits and mitigate any nuisance and negative impacts that the facility’s existence may cause, including any safety-related concerns
• The commitment to the community and to improving the quality of life of their neighbors through sustainable practices which can be maintained and supported over time
• Site Plan: This plan must include a floor diagram showing and naming different areas of access, such as:
• A public area where non-cardholders and non-employees may be present
• A cardholder area where only cardholders and employees are allowed
• A limited access area where medical cannabis is stored and only employees are allowed

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

The Utah Department of Health includes provisions for local approval in its requirements for a medical cannabis pharmacy license. Utah municipalities may require additional zoning requirements but are not authorized to ban the operation of a cannabis dispensary outright. Therefore, applicants should contact relevant local authorities to find out if there are additional licensing requirements in the area where their facilities will be established.

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

The Utah Department of Health announced the licensure for 15 medical cannabis pharmacies in January 2020 after the department opened the application window for applicants in October 2019. While it took about 3 months for the award of licenses after the closure of the 2019 application window, it is not yet certain if that timeline will remain the same when the next application window opens.

Where Can You Locate a Cannabis Dispensary in Utah?

Utah municipalities typically have local zoning requirements for where a medical cannabis pharmacy may be established. However, these local regulations are usually within the stipulated state regulations. Per Chapter 41a of Title 4 of the Utah Agricultural Code, a medical cannabis pharmacy may not be located within 200 feet of a community location or 600 feet of a district that the municipality or county has zoned as primarily residential.

However, the Utah Department of Health may grant a waiver to reduce the proximity requirements by up to 20% if the department determines that it is not reasonably feasible for the applicant to site the proposed medical cannabis pharmacy without the waiver.

Can Licensees Have More Than One Dispensary Location in Utah?

Yes. Utah allows medical cannabis pharmacies to operate in multiple locations in the state. However, each location requires its own application and payment of a separate application fee.

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

Besides the license application fee and the license fee, there are other expenses involved in setting up a medical cannabis pharmacy in Utah. These expenses include real estate costs, security costs, staffing salaries, equipment costs, inventory costs, insurance costs, legal costs, and advertising costs.

Although the medical cannabis pharmacy application fee is $2,500 and the annual medical cannabis pharmacy license fee is $67,000 (urban) or $50,000 (rural), the total cost for starting a medical cannabis pharmacy in the state may reach up to $2,000,000 depending on the size of the pharmacy. Note that applicants who want to be approved to provide home delivery service must pay an additional $2,500 on their annual licensing fees.

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

According to Chapter 4-41a-1001 of the Utah Code, for each application submitted to the Department of Health, the applicant must submit proof of obtaining and maintaining:

• A performance bond in the amount of $100,000 issued by a surety authorized to transact surety business in the state; or
• Liquid cash account in the amount of $100,000 with a financial institution

Note that in accordance with Utah law, every employer in the state is required to provide workers' compensation coverage for all its employees. If a workplace injury occurs, workers' compensation serves to address the financial aspects of the situation. It covers the expenses related to the injured employee's medical treatment and provides compensation to offset the loss of income they may experience due to the injury. Furthermore, in cases of permanent impairment or disability resulting from a work-related incident, workers' compensation can offer ongoing disability compensation throughout the worker's life.

How to Get a Grant to Open a Dispensary in Utah

Entrepreneurs looking to obtain loans from traditional banks and credit unions may be unable to access financial assistance due to the government's stance on cannabis. While Utah has legalized medical marijuana, cannabis remains an illegal substance in the United States. Since financial institutions operate under federal laws, they are hesitant to grant loans to cannabis businesses. However, you may source funds to open a medical cannabis pharmacy in Utah via these alternatives:

• Self-funding: This is the most straightforward and convenient option, but it requires that you have the financial resources to fund your entire startup yourself
• Family and friends: If you have family members and friends who have the required financial resources, you may be able to borrow money from them to start your medical cannabis pharmacy
• Equity investors: Equity investors are individuals or organizations who are willing to invest in your medical cannabis pharmacy but will ask for a share of ownership in return
• Cannabis-specific lenders: There are some lenders who specialize in providing loans to cannabis businesses. These lenders may be more willing to lend to cannabis businesses than traditional banks, but they typically have higher interest rates and fees
• Crowdfunding: You can raise funds for your dispensary from a large number of people online using crowdfunding platforms

Does Utah Have a Social Equity Program for Cannabis Dispensaries?

Utah does not have a state social equity program to assist medical cannabis pharmacy license applicants or licensees who have been disproportionately harmed by cannabis prohibition.

Does Utah Tax Marijuana Dispensaries?

Utah does not charge a use or sales tax on cannabis. Only the sale of a medical cannabis device by a medical cannabis pharmacy is subject to the taxes imposed under Chapter 12 of Title 59 of the Utah Code.