The Marijuana Business: What Would It Look Like If Minnesota Passed Law Legalizing It?

ST. PAUL, Minnesota — The DFL-led Legislature is on track to legalize recreational marijuana this year, a move that would usher in a new industry and bring with it new rules and regulations.

But what would it look like if you tried to expose a black market industry?

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The legislation establishes a new state agency for cannabis management, which would be the primary regulatory body. Local governments would have some authority to dictate where companies are allowed to operate in their communities.

New marijuana business licenses would cover all parts of production and distribution: from growing, manufacturing, wholesale and retail — to shipping products and hosting events.

There would also be separate licenses for the existing medical marijuana market and if a company only wants to produce and sell low-dose THC edibles, which became legal last summer.

But there are limits to how many licenses a person can get. One of the authors’ goals with the legislation is to limit vertical integration, or one large corporation controlling all parts of the supply chain.

A business owner can’t be both a marijuana grower — defined as a grower in the bill — and operate, say, a retail pharmacy. But a “micro-enterprise” and a “mezzo-enterprise” are notable exceptions, allowing a single company to grow, manufacture, and sell marijuana as long as it complies with limits on how much it can grow and how many businesses it can operate.

Zach Rohr, owner of Cannon Falls-based Minny Grown, is still getting tailwind from the legislature’s decision to allow the compound, which can induce high levels of food and beverage, as long as it’s derived from hemp. His company grows the crop — a cousin of marijuana — and makes THC gummies.

Eager to capitalize on new cannabis business opportunities with marijuana legalization, he’s considering what looks best for him and his company. He’s been thinking about a microbusiness license.

“It seems like the intention of the bill is to give local farmers a chance, to give the local retailer a chance,” Rohr said in an interview. “So that’s really what we’re hoping for [the bill] – all these licenses are just creating this whole new economy in Minnesota.

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Who can apply?

Only adults 21 years and older may operate cannabis businesses and use marijuana. There are residency requirements in Minnesota to apply.

The bill gives the new state cannabis agency discretion to issue the number of licenses that meet demand. There is a “scoring mechanism” to evaluate bids, including criteria such as safety, business and environmental plans.

It would also consider “social justice” applicants, such as those facing cannabis convictions under current law.

Tax Structure and Fees

The products sold would be subject to the normal sales tax and an additional 8 percent gross receipts tax on marijuana, which puts Minnesota on the low end of the scale compared to other states.

Supporters of the measure have stressed that they don’t want the tax structure to be onerous so that a black market can continue to thrive.

There are application and fees that can cost up to $20,000 depending on the license.

Federal Law Restrictions

Twenty-one states have legalized weed for recreational use and even more for medical use. But it’s still a federal Schedule I drug, meaning a business owner can’t deduct business expenses from federal taxes.

Because of this state ban, banks see this as a legal risk and most will not work with cannabis companies, forcing some companies to run a cash-only operation, which can leave them vulnerable to theft.

Josh Wilken-Simon, owner of Legacy Glassworks, sells handmade glass pipes by artists from across the country. He said he’s been preparing for “inevitable” legalization since first opening his storefronts in Minneapolis and Duluth more than a decade ago. His hope is to open a pharmacy despite the risks.

“Anyone entering the cannabis market in Minnesota or across the country is taking on a massive financial risk, and it’s not going to be easy for anyone to operate — not just these tax implications, but large corporations in general often dominate a brand new market.” said Wilken-Simon. “I’m willing to take the risk to give the people of Minnesota what they want, and do it responsibly.”

The legislation has gone through more than two dozen committee hearings since the session began, with stakeholders and lawmakers discussing the bill and making revisions. The most recent iteration of the bill, which came after a major change was added, includes a separate license for companies that want to stick with hemp-only products and avoid the potential marijuana-related baggage, which was a request from local brewers who had done so seen a boon with THC drinks.

Hemp became legal in 2018 with a motion from Congress, removing it from the same drug classification as marijuana if it contained no more than 0.3% THC on a dry weight basis.

Caroline Cummings

Caroline Cummings is an Emmy-winning reporter with a passion for reporting on politics, public policy and government. She is excited to join the WCCO team.

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