What do 76 Use-Permit Applications in California Mean for the Marijuana Industry?

As of the March 31, 2017 deadline, 76 marijuana use-permit applications had been submitted in Monterey County, California with many applications seeking permits for multiple grow sites, manufacturing locations, and dispensaries. The 76 applications represent businesses that want to start or continue operations in the marijuana industry in Monterey County after August 12, 2017 when permits will become a requirement.

Medical Marijuana in California without State Regulations

The state of California is working on what could be the most comprehensive rules and regulations for medical marijuana cultivation, manufacturing, transportation, and dispensing, but until the rules and a dispensary system are in operation in 2018, the state loosely regulates marijuana businesses. Instead, these businesses are permitted and regulated at the local government level.

As discussed in Cannabiz Media’s Marijuana Licensing Reference Guide: 2017 Edition, the nearly one million medical marijuana patients in California have been serviced by businesses that were not required to have state-issued licenses. With the unstacked license structure allowed in the state, businesses can operate in two sectors of the marijuana supply chain. However, rules and regulations mandated at the local level mean things aren’t consistent from county to county or town to town.

Local authorities can fully ban marijuana businesses, limit license availability, or utilize zoning ordinances to restrict the presence of marijuana businesses. Local rules even guide advertising, signage, packaging, and more.

To date, the state has really only controlled marijuana taxes with a 7.6% sales tax although local taxes may also be levied. The Monterey Herald reports that Monterey County expects to collect $900,000 in taxes for the first quarter of 2017 from 80 marijuana tax bills.

That tax revenue could increase significantly if all of the permit applications submitted are approved. The Monterey Heraldexplains that the majority of the applications (65) were for growing permits, which could equate to up to 5.7 million square feet of grow space and cultivation of 1.3 million pounds of marijuana product per year. As a result, the county’s tax revenue could climb to $20 million per year.

Medical Marijuana in California with State Regulations

With new state rules expected to be released later this year and implemented in 2018, it remains to be seen how the authority of municipalities will change in the future. However, the influx of use-permit applications in Monterey County provides a snapshot of just how many businesses want to enter or stay in the industry in California even before the state’s medical marijuana rules have been released or the recreational marijuana program has been developed, which could change things even more in the future.

In the past, getting into the marijuana industry in California didn’t have the same barriers to entry that businesses in other states have faced. As discussed in Cannabiz Media’s Marijuana Licensing Reference Guide: 2017 Edition, California doesn’t charge tens or hundreds of thousands of dollars in fees to obtain state-issued licenses nor does it require businesses to have assets or bonds worth millions of dollars to enter or to stay in the marijuana industry.

In the most recent data from the Small Business Administration, about 80% of small businesses survive for one year while just 50% survive for five years and only 33% survive for 10 years or longer. Is the marijuana industry different? Will marijuana-related businesses have a better or worse survival rate than the U.S. average?

Only time will give us the answers to those questions, particularly as state medical marijuana regulations are put into effect and the state’s recreational marijuana program begins. However, one thing is certain. California’s economy is the sixth largest in the world having surpassed France last year. No doubt, it will provide excellent data for other states and businesses to benchmark.

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