Best States to Open a Dispensary

If you’re looking to open a dispensary, you’ll want to consider a few things before making your decision. Where will be the best state to open up shop? What are the market conditions like in that state? How easy is it to get started in the cannabis industry there? We’ve compiled a list of the best states to open a dispensary in 2022 based on several key metrics. Keep reading for more information!

Key Metrics

Let’s first define the metrics that should be used to choose the relevant state. There are several variables to consider in this fast-paced, evolving sector. We’ve chosen several factors that are essential when opening a business and that have a strong influence on its development, expansion, and success:

  • Legal Environment – Is the state’s legal framework conducive to a dispensary business? Does it allow for dispensaries to operate legally and without fear of persecution? Surely, this is the first and foremost thing to consider, and it relates almost to all businesses in the cannabis niche.
  • Ease of Market Entry – How easy is it to obtain the licenses and permits necessary to open a dispensary in the state? Is there a lengthy, complicated process involved? Are there restrictions on who can apply for a license? It might seem that the entry to the market in a state where cannabis is legal will be problem-free. However, there are still numerous issues that can complicate this process or even make it impossible.
  • Market Entry Costs – What are the startup costs associated with obtaining the licenses and permits necessary to open a dispensary in the state? Are they expensive or affordable? Each state has its own regulations that should be considered at the stage of budgeting. The total cost to open a dispensary starts at around $250 and may go as high as $1 million or more.
  • Tax Climate – What is the tax climate like in the state for dispensaries? Are taxes high or low? Does the state offer any tax breaks or incentives for businesses in the cannabis industry? The tax climate is an important factor to consider when choosing a state for your dispensary business.
  • Market Opportunity – What is the potential for growth in the state’s cannabis market? Is the market already saturated, or is there room for new businesses to enter and prosper? Obviously, you’ll want to choose a state with a strong market opportunity and higher potential sales. This is essential to consider the price of the product itself. The price ranges from $6 to over $10 per gram.

Let’s proceed to the list of the best states to open a dispensary in 2022.

Oregon

Oregon is one of the best states to open a dispensary. The legal environment is favorable and there are plenty of opportunities for market entry. Additionally, the tax climate is good and there is a strong demand for cannabis products.

It is a trailblazer in the field of coffee, microbrews, and, more recently, cannabis. Unlike its neighbor to the south, California, Oregon is a cheap state to start and operate a cannabis company.  The application process is less competitive than in some other states, and there are no residency requirements.

Probably the most remarkable thing about Oregon is that it has the lowest application fee in the whole US at only $250. This is much lower than any other state offers. While the cost of cannabis in Oregon is among the lowest in the country at $6.65 per gram, it is not subject to an excise tax either.

Overall, considering all the taxes and payments necessary to start a business here, it is possible to state that this is the cheapest state to open a dispensary. In other words, a really favorable business environment helped Oregon to appear in the first place on our list.

Colorado

Colorado is another great state for dispensaries. The market conditions are excellent and there are many resources available to help you get started. Additionally, the tax climate is favorable and the demand for cannabis products is quite high.

The state’s legal framework is conducive to a dispensary business. Colorado was one of the first states to legalize cannabis, and it has a long history of supporting the industry. Additionally, there are plenty of resources available to help you get started.

However, it is essential to consider that Colorado’s price per gram is low at $7.14, suggesting that the state may be suffering from over-saturation and intense competition.

Michigan

Michigan is another great state to open a dispensary. The legal environment is favorable and there are plenty of opportunities for market entry. With nearly 30 million people, North America is the world’s largest consumer market, making it a lucrative opportunity for enterprising businesses. And Michigan possesses the second place in our list in terms of the population number.

Cannabis was legalized in Michigan in 2018 and since then the industry has been booming. There are currently over 200 dispensaries operating in the state, and that number is expected to grow.

The market opportunity is good, but it’s important to note that Michigan has a very high tax rate on cannabis at 20%. This may make it difficult to compete with other states with lower taxes.  Moreover, the application fee is $6,000, which makes it even higher than the nation’s average. The best part of Michigan is its profit potential. That’s why it appears in third place.

Alaska

Being one of the wildest states in the US, it also has a lot of favorable opportunities to start a business. The state’s legal environment is conducive to a dispensary business, and there are plenty of resources available to help you get started.

Alaska was another of the first states to legalize cannabis. The market is already quite active, but there is still enough space to enter. The average price of their products is significantly above the national average of $10.82 per gram, owing to higher tax rates—growers pay $50 an ounce in excise taxes. On the other hand, Alaska has no income tax or sales tax.

Moreover, the application fee is only $500, which is one of the lowest in the country. To sum up, Alaska is one of the best states to open a dispensary, with plenty of market opportunities and favorable tax rates.

California

This state is definitely not new to cannabis. It has quite a long history of use and sale, both for medical and recreational purposes. The state’s legal environment is conducive to a dispensary business, and there are plenty of resources available to help you get started.

Moreover, the market opportunity is excellent as California has the largest population in the US. The average price per gram in California is $11.21, but it is subject to an excise tax of $15 an ounce. The application fee is also quite affordable at $5000 being the nation’s average.

It is also essential to consider that the demand for cannabis products is quite high in California. However, the market is already quite saturated so it may be difficult to compete with other businesses. Create a business strategy in advance to have a better possibility of success.

Massachusetts

This state has a lot to offer for those interested in the cannabis industry. In 2016, Massachusetts became the first state in the United States to legalize recreational cannabis. In 2018, it opened its first recreational dispensaries. Its most appealing feature for new dispensary owners is its quick approval time, with many applications being approved in less than 90 days. Let’s have a look at the budgeting prospect to start a canna-business in this state.

First of all, it is necessary to mention that being a business person in this state is quite pricey. The retailer licensing fee will cost you $40,000. This is understandably a big sum. However, compared to some other states like Illinois and Hawaii with $200,000 and $100,000 respectively, Massachusetts becomes a much more affordable option. At the same time, it is considered to be one of the easiest states to open a dispensary in terms of legal regulations.

Washington

Washington was one of the first states to legalize recreational cannabis, and it has had a lot of success in the sector. The Washington state cannabis market generated $1.8 billion in revenue in 2020, up 21% from 2019. It is evident that the market is continuing to grow despite the number of already existing companies there.

The fee for the entry application here is as low as in Oregon – just $250. However, the possibility to enter the market is currently unavailable. It is necessary to keep track of the latest news if you choose this state.

At the same time, Washington has the highest excise tax rate nationwide at 37%. It doesn’t prevent numerous applicants from waiting for the possibility of opening a business here.

Vermont

This state is known to be one of the friendliest when it comes to the cannabis business. The application fee for a retail license here is only $1000. It is much lower than in other states like Ohio, where the fee is $5000. Moreover, Vermont has a very low tax rate on cannabis at just 14%.

The market opportunity is also quite good as the state has a population of over 600,000 people. The average price per gram in Vermont is $11.67. It is wise to start a business here, as the absence of taxes will also make it easier to expand and develop.

It is also necessary to mention that the process of opening a dispensary in Vermont is quite simple and straightforward. There are plenty of resources available to help you get started.

Maine

This state has a lot of potential for the marijuana industry. The market is already quite developed, but there is still room for new businesses. The average price per gram in Maine is $11.24. Maine is definitely a state worth considering for those interested in the cannabis industry.

The legal environment is also quite favorable, with a low tax rate of 20%. The application fee is also quite affordable at $300. However, if you want to start a dispensary, the price will be much bigger — $15,000. At the same time, conditions here are still much better than in many other states, which makes it worth considering. Who knows, maybe the situation will change in a couple of years and your business will be already prospering by that time.

Nevada

This state is often associated with gambling and tourism. However, it also has a lot to offer for those interested in the cannabis industry. The legal environment is quite favorable, with a low tax rate of 20%. The application fee is also quite affordable at $5000 which is an average in comparison to other states.

Nevada is definitely a state worth considering for those interested in the cannabis industry. The market opportunity is quite good as the state has a population of over three million people. The average price per gram in Nevada is $11.67. Considering a favorable tax policy, it is undoubtedly a nice place for development.

It is also necessary to mention that the market is already quite saturated. So, it might be quite difficult to find a niche here. Still, if you are determined enough, Nevada can become a great state for your cannabis business.

Arizona

Arizona, which just legalized recreational cannabis use in November 2020, has completed a fast turnaround in issuing recreational permits. The cannabis market here is anticipated to grow in popularity and profitability in the years ahead as more cannabis firms begin operation.

It is necessary to mention that the market welcomes new businesses. The reason for it is the big population of the state, with only a few businesses currently operating there. In other words, the demand exceeds the supply. Growers and processors will additionally profit from Arizona since the state began issuing recreational cultivation permits in April 2021. In its first year, the state was expected to make $406 million in sales. Quite a good perspective for any business, right?

New Jersey

New Jersey is one of the states with a very developed cannabis market. The application fee for a retail license here is $20,000 which is quite high. However, the market opportunity is perfect as the state has a population of over nine million people. The average price per gram in New Jersey is $12.50.

New Jersey may earn approximately $1 billion in annual cannabis sales by 2024, according to some experts (depending on how quickly New York implements its own marijuana laws). With demand expected to outpace supply, the state is an excellent location to start a cannabis company in cultivation or extraction. Small companies, in particular those with five or fewer employees, can access the necessary services. Microbusiness dispensary licenses make it possible in New Jersey. This is a perfect opportunity for everyone to compete in the market.

The legal environment is also quite favorable, with a low tax rate of just six percent. Considering all of these factors, New Jersey is definitely a state worth considering for those interested in the cannabis industry.

New York

When it comes to the recreational cannabis market, New York is one of the newest states on the scene, and they have implemented one of the most advanced approaches to legalization nationwide. The state has a population of over nineteen million people, making it one of the largest potential markets in the country. The average price per gram in New York is $13.00.

New York has a very favorable legal environment with a low tax rate of just 7%. The application cost of a dispensary license is also quite affordable at just $5000. Considering it being a newbie among other states, it is worth thinking about starting a business here and not wasting time. By the time the market becomes oversaturated, your company might already become recognizable and popular among the users. That’s why starting your own weed brand as early as possible is often a good idea.

In Conclusion

These are just a few of the states that offer a favorable environment for those interested in the cannabis industry. When considering which state to start your weed company in, be sure to assess all the factors that will affect your bottom line. The legal environment, tax climate, market opportunity, and ease of market entry are all important factors to consider.

In the following table, you will find a collected information on each state:

State License fee $ per ounce Excise tax
Oregon $250 187 17%
Colorado $4,000 200 15%
Michigan $6,000 273 10%
Alaska $1,000 305 20%
California $5,000 207 15%
Massachusetts $5,000 283 10.75%
Washington $250 197 37%
Vermont $25,000 300 14%
Nevada $5,000 234 15%
Maine $300 233 10%
Arizona $5,000 233 16%
New Jersey $20,000 299 6.625%
New York $10,000 271 9%

Oregon, Colorado, Michigan, Alaska, California, Massachusetts, Washington, Vermont, Nevada, Maine, Arizona, New Jersey, and New York are all great states to consider when starting your weed business. Each state offers its own unique advantages and opportunities.

Dmytro Syvak is an expert at MjSeo.Agency, where he works as a business development manager. He also writes blog articles for the MjSeo Blog, and he takes part in interviews and podcasts. Dmytro has a big experience in the cannabis industry, he loves to share his knowledge with others and develop his skills.