Cannabis Business in Minnesota

Minnesota’s Medical and Recreational Cannabis Market

Minnesota entered the recreational cannabis market in August 2023, though retail sales are not expected to begin until 2025. The state already has a well-established medical marijuana program, which has been operating since 2015, serving over 48,000 patients through 15 dispensary locations.

Minnesota’s recreational cannabis will be subject to a 10% tax on gross sales receipts. Exemptions apply to purchases made on Tribally Regulated Land, medical cannabis bought by registered patients, and products bought by retailers for resale. Retailers can secure this exemption by submitting Form ST3, a Certificate of Exemption, to their supplier. Once exempt, retailers are responsible for collecting sales tax from the final consumer when the product is sold.

The state's Office of Cannabis Management has indicated that many of the same regulations governing medical cannabis will extend to the adult-use market, with strict oversight from seed to sale and robust safety standards for cultivation. However, recreational cannabis will be subject to limits on both possession and potency, unlike the tax-free medical program.

Cannabis-Touching Businesses in Minnesota

The cannabis industry in Minnesota involves a variety of license types, covering everything from cultivation to retail. Below are the primary license types available:

1. Cannabis microbusiness
2. Cannabis mezzobusiness
3. Cannabis cultivator
4. Cannabis manufacturer
5. Cannabis retailer
6. Cannabis wholesaler
7. Cannabis transporter
8. Cannabis testing facility
9. Cannabis event organizer
10. Cannabis delivery service
11. Lower-potency hemp edible manufacturer
12. Lower-potency hemp edible retailer
13. Medical cannabis cultivator
14. Medical cannabis processor
15. Medical cannabis retailer
16. Medical cannabis combination business

Ancillary Cannabis Businesses in Minnesota

The cannabis industry in Minnesota is supported by a variety of ancillary businesses, which provide essential services to ensure the smooth operation and compliance of cannabis companies. Below are the primary types of ancillary businesses that play a critical role in the state’s cannabis ecosystem:

• Accounting: Cannabis businesses face unique financial challenges, especially under IRS Section 280E, which limits tax deductions. Specialized accounting firms help businesses navigate tax laws, maintain accurate financial records, and ensure compliance with both state and federal regulations.
• Banking: Due to federal banking restrictions, many cannabis businesses struggle to access traditional financial services. Specialized banks and payment processors offer services tailored to the cannabis industry, providing essential tools like checking accounts and payment solutions to help manage business finances.
• Insurance: Cannabis businesses need comprehensive insurance coverage to protect their operations, employees, and products. Cannabis-specific insurers offer policies that cover areas like product liability, property damage, and worker’s compensation, ensuring businesses are protected from potential risks.
• Legal Compliance: Navigating the legal landscape is crucial for cannabis businesses. Law firms specializing in cannabis regulation assist companies in securing licenses, maintaining compliance with state regulations, and staying informed on changes to the legal framework surrounding cannabis operations.
• Security: Given the high value of cannabis products and cash transactions, security is essential. Businesses providing alarm systems, video surveillance, and access control help protect facilities and ensure compliance with state-mandated security requirements.
• Marketing: Due to strict advertising regulations, cannabis businesses require specialized marketing services to promote their products within legal boundaries. Marketing firms offer tailored strategies that help cannabis companies build brand recognition and reach their target audiences.

Other ancillary cannabis businesses include:

• Packaging and labeling companies
• Software and technology providers
• Testing labs
• Consulting firms
• Human resources services
• Energy and sustainability services