How To Sell Cannabis In Washington State
OUT OF THE SHADOWS AND ONTO MAIN STREET: HOW TO LEGALLY SELL WEED IN WASHINGTON STATE
Unless you’ve been living under a rock for the past few years, you know that voters in the State of Washington accepted a measure to legalize the use, sale, and production of marijuana in 2012, and intentionally created a new market for entrepreneurs. But if you’re thinking about opening up a pot shop in Washington or getting rich by growing the world’s greatest cannabis, you should know this new market is far from the Wild West. Those starting a business in the marijuana industry will not only have to brave the risks of any new business, these entrepreneurs will also have to navigate the state’s ever-evolving marijuana rules. Below, you’ll find all the answers to your questions concerning selling, producing, and processing cannabis products in the State of Washington.
What do I need to legally work in the marijuana industry in Washington State?
The most basic answer is you need a license from the Washington State Liquor Control Board (WSLCB). The WSLCB issues and manages six different marijuana-related licenses. The most well known licenses are for the three industry stages that get recreational marijuana market-ready: producers, processors and retailers. More recently, the WSLCB has added a Transportation License, a Research License and a license to become a Medical Marijuana Cooperative.
We have the following pages describing the steps to becoming a marijuana producer, processor or retailer in Washington:
How do I get a producer, processor or retailer marijuana license from the WSLCB?
At the moment, you can’t—at least not a new license. The WSLCB has no plans to open applications in the near future. Initially, the WSLCB offered a 30-day window (November 18, 2013 to December 20, 2013) to apply for licenses. The WSLCB has since issued all the licenses it currently plans to issue. While the state hasn’t reached the legal maximum number of any of these licenses, the board still isn’t opening up applications for new licenses anytime in the foreseeable future.
Just because all the licenses have been issued doesn’t mean you can’t enter the industry though. You can invest in or buy an existing business.
Can’t I just buy a marijuana license directly from an already-licensed business?
Nope. Marijuana licenses aren’t transferable assets. This means that the licenses can’t be bought and sold individually—they’re permanently connected to the business. Again, you’ll have to invest in or buy a business that already has a license. You’ll then have to file a Change in Governing People, Percentage Owned and/or Stock/Unit Ownership form, which has a $75 fee. You’ll also most likely need to submit forms with the Washington Secretary of State, indicating changes in governors and ownership.
How much does a marijuana producer, processor, or retailer license cost?
$1381 a year. The annual license and renewal fee has bounced around over the last few years. It started out at $1,000, and went up to $1480 in July 2017. According to the Revised Code of Washington (in response to Section 3 of HB 2334), the fee went down to $1381 in July 2018. The WSLCB website, however, has yet to be updated and still lists the renewal fee as $1480.
If the state does open up new applications again, there will also be a nonrefundable application fee of $250.
Can I have marijuana producer, processor and retailer licenses at the same time?
No. You can obtain both the producer and processor licenses, but if you are a retailer, that is the only license you can hold. Sales are always separate from growing and processing.
You can, however, hold up to three of one kind of license (such as three producer licenses). Retailers can have up to three retailer licenses, but they have yet one more restriction to follow: they can’t hold more than 33% of the retailer licenses allotted for their city or county.
What kind of information is required on the license application?
Applications are currently closed, but the application process includes submitting a regular State of Washington Business License Application along with a Marijuana License Addendum. The addendum is fairly simple and asks questions which are mostly concerned with zoning issues. There is, however, an interview sometime after handing in your application.
What taxes does Washington levy on cannabis sales?
There is a single 37% excise tax paid by the customer at retail sale. Previously, there was a 25% gross receipts tax at each stage of the process. In other words, producers paid a 25% tax to sell to processors, processors paid a 25% tax to sell to retailers, and retailers paid a 25% tax to sell to customers. In 2015, this was replaced with the single 37% tax.
Note that customers pay the tax, but it’s the seller’s responsibility to collect this tax. So, if your retail business fails to collect this tax, you’ll still be on the hook for that money with the state. The 37% tax is in addition to any other regular state or local taxes that would apply to any Washington business. Some marijuana products, such as low THC products, are exempt from the 37% tax.
What are the requirements for investors?
When initial applications were being accepted a few years ago, all money had to come from Washington—no out-of-state investors. Now, the WSLCB can allow out-of-state funds, but your business has to first submit an Application for Additional Funding to the WSLCB and receive approval. Out-of-state financiers have to be US residents.
Where in Washington can I open a pot shop?
With some local exceptions, you can open a pot shop (or grow shop or processing facility) anywhere except within 1000 feet of any elementary or secondary school, playground, recreation center or facility, child care center, public park, public transit center, library, or game arcade that allows minors to enter. Local authorities will also be notified and have an opportunity to object.
Do I need to register a business entity with Washington’s Secretary of State to sell cannabis?
Yes, Washington business entities (such as LLCs and corporations) are required by law to register with the Washington Secretary of State. The only exceptions are sole proprietorships and general partnerships—both of which lack the limited liability of a registered business entity.
If you’re taking over an existing business, it will likely already be registered. You will, however, need to ensure the business stays in good standing with the state. This means paying taxes and filing reports, like Washington’s mandatory Annual Report. For more specifics on the differences between the most common entity types, you can refer to our LLC vs. Corporation Comparison Guides.
I want to start or take over a marijuana business in Washington, but I’d like to retain some anonymity as the owner. Do I have any options?
Washington is not a great state as far as ownership anonymity is concerned, but you can keep your personal address off the public Secretary of State records by hiring a third-party registered agent.
Registered agents are required for any business entity registered with the Secretary of State. When you hire Northwest Registered Agent as your registered agent, it’s a flat rate yearly price of $125 a year. You’ll have an online account that tracks your report due dates and when your yearly service with us is up. Any documents we receive locally for you are uploaded into your account immediately for complete viewing. If or when you get served with a lawsuit, we can email up to 4 people and your attorney at the same time for real-time complete viewing of a lawsuit. You’ll receive annual report reminders as well. Our service is the same price every year, and there are no weird fees or cancellation fees.
For applications or changes to existing marijuana licenses, contact:
Washington State Liquor and Cannabis Board
PO Box 43098
3000 Pacific Ave SE
Olympia WA 98504-3098
Website: Washington State Liquor and Cannabis Board