How to Open a Dispensary in Texas

How to Open a Texas Dispensary Overview

Are you looking to open a dispensary in the Lone Star State? Do not let paperwork, bureaucracy, and complex regulations keep you from establishing your business. There are several steps to take when opening a dispensary in Texas including determining who can qualify as an owner, securing location permits and licenses, understanding applicable taxes, and navigating other relevant laws pertaining to cannabis stores. With our comprehensive guide on how to start a dispensary in Texas, we’ll walk through all of these topics one by one so that any entrepreneur can make confident decisions while starting their venture.

The Texas Department of Public Safety’s Regulatory Services Division (RSD) announced on January 16, 2023, that it would begin accepting new applications for medical cannabis dispensaries in Texas under the Lone Star State’s Compassionate Use Program. In Texas, only three dispensaries have been licensed in the last three years.

The program is managed by DPS, which is in charge of running and securing an online compassionate use registry of physicians who can prescribe low levels of tetrahydrocannabinol (THC) to patients with specific medical conditions. The program was first implemented in 2015 as Senate Bill 339 during the 84th session of the Texas Legislature.

According to the DPS website, the application is detailed to filling out the documents and submitting to an online portal with a $7,356 fee to the Comptroller via wire transfer. The application period ends at 5 p.m. On April 28, CST.

Applicants who have previously applied for a CUP dispensing organization license may reapply by submitting an updated application form (CUP-101). Application fees will be waived for applicants who are reapplying.

How Do I become a legal Dispensary in Texas

Becoming a cannabis dispensary in the great state of Texas can be rewarding for cannabis entrepreneurs – but first, you’ll need to have the right skills and resources. Specifically, those interested in cannabis dispensaries must keep up with cannabis law, ensuring they are compliant at all times and able to provide social equity programs whenever necessary. 

You may apply for an electronic application here. Submissions must be complete with the exhibit attachments found below.  Once your completed application is submitted, you must obtain licensing from the Texas Department of Public Safety (DPS). This includes submitting a criminal history report, fingerprints, and other supporting documents. The DPS may also require proof that you have secured or are actively working to secure a real estate location for your dispensary. 

Exhibit A – Ownership documentation TAC §12.11(b)(1) 

Proof of ownership and current status, including but not limited to a current Certificate of Existence or Certificate of Authority from the Texas Office of the Secretary of State and a Certificate of Good Standing from the Texas Comptroller of Public Accounts 

Exhibit B – Proof of required liability insurance TAC §12.11(b)(6) 

A certificate of insurance as proof of commercial general liability insurance coverage against claims of liability for damage to property of third parties and for personal injuries to third parties, including bodily injury, property damage, and product liability, with limits of: 

1. a) $1,000,000 each occurrence. 
2. b) $2,000,000 General Aggregate limit. 
3. c) $1,000,000 Product Liability. 

If a certificate of insurance is not available at the time of application, a letter of intent to obtain required insurance may be submitted. Prior to final approval of a license, applicants will be required to provide a valid certificate of insurance.

Exhibit C – Proof of the ability to secure the premises, resources, and employees necessary to operate as a dispensing organization TAC §12.11(b)(7)(B) 

Security is of the utmost importance to a cannabis dispensary due to the often sensitive nature of the products. Cannabis dispensaries must take precautions to protect their inventory, employees, and customers from theft or other illegal activities. This involves implementing robust security measures such as cameras, guards, and secure access systems. Additionally, cannabis dispensaries must also ensure that they are compliant with all local, state, and federal laws related to the cannabis industry in order to remain legally operating. By following strict security protocols, cannabis dispensaries can ensure that their business is safe and successful.  Additionally, by providing a secure environment for customers and employees, dispensaries are able to promote a sense of trustworthiness as well as peace of mind.

• Descriptions of all property’s applicant proposes to utilize to cultivate, process, and dispense low- THC cannabis, including ownership information for the properties. 
• Descriptions of the methods proposed for the cultivation, processing, and dispensing of low THC cannabis. 
• Descriptions of the types and locations of worker safety equipment and plans and procedures for complying with federal Occupational Safety and Health Administration (OSHA) regulations for workplace safety. 
• A list of current and proposed staff, including, position, duties and responsibilities, and an organizational chart illustrating the supervisory structure of the dispensing organization. 
• Description of the applicant’s proposed testing laboratory, and description of the proposed testing protocols and methods. 
• A proposal establishing the ability to secure premises reasonably located to allow patient access through existing infrastructure. 

Exhibit D – Proof of the ability to maintain accountability of all raw materials, finished products, and any by products to prevent diversion or unlawful access to or possession of these substances TAC §12.11(b)(7)(C) 

Prevention of cannabis diversion from licensed to illegal channels is an incredibly important issue in the modern cannabis industry. When cannabis is diverted to illicit markets, it can cause tremendous harm not only to the individuals involved but also to society as a whole. Cannabis that is illegally distributed often comes from sources that are unregulated and untested, making it potentially dangerous to consume. Additionally, taxes from illegal sales of cannabis cannot be collected, leading to a significant loss in revenue for the states and municipalities that have legalized or decriminalized marijuana.

As a result, to open a Texas dispensary, the application requires the following proofs to prevent diversion of medical marijuana:

1. Floor plan of each facility or proposed floor plans for proposed facilities, including: 
   1. Locking options for all means of ingress and egress consistent with life safety requirements. 
   2.  Alarm systems. 
   3. Video surveillance. 
   4. Name, layout and function of each room; and e. Storage, including safes and vaults. 
2. Diversion prevention procedures. 
3. Emergency management plan. 
4. System for tracking source plant material throughout cultivation, processing, and dispensing. 
5. Inventory control system as required by Title 37, TAC §12.8. 
6. Policies and procedures for recordkeeping. 
7. Electronic vehicle tracking systems. 
8. Vehicle security systems. 
9. Methods of screening and monitoring employees. 
10. Employee qualifications and experience with chain of custody or other tracking mechanisms. 
11. Waste disposal plan. 
12. Recall procedures for any product that has a reasonable probability of causing adverse health consequences based on a testing result, patient reaction, or other reason. 
13. Access to specialized resources or expertise regarding data collection, security, and tracking. 

Exhibit E Proof of the financial ability to maintain operations for two (2) years from the date of application TAC §12.11(b)(7)(E) 

Running a dispensary for medical marijuana is an expensive venture that requires significant capital investment. The costs of setting up and running a dispensary during the first two years can be substantial, and business owners must carefully consider these expenses before they make the commitment.

First and foremost, there are licensing costs associated with operating a dispensary. In most states, dispensaries must register with the state’s Marijuana Regulatory Agency and submit an application for licensure. The licensing process typically involves paying both an initial license fee and annual renewal fees, as well as providing detailed financial information about the business. This information should include proof of the financial ability to maintain operations for two years from the date of application.

The application required to open a dispensary in Texas requires the applicant provide the following for proving their financial ability:

1. Description of applicant’s business organization, and corporate structure if applicable. 
2. List of all owners of any non-corporate applicant, or all shareholders of a corporate applicant. 
3. List of all individuals and entities with control over the applicant. 
4. Projected two (2) year budget. 
5. Description of available assets sufficient to support the dispensing organization activities. 

Exhibit F Proof of the technical and technological ability to cultivate, process, and/or dispense low-THC cannabis, evidenced by experience in the areas listed below TAC §12.11(b)(7)(A) 

Processing cannabis into low THC oils requires highly technical and complex operations. The process involves extracting the desired chemical compounds from the plant material with advanced extraction techniques such as supercritical CO2 extraction, steam distillation, or hydrocarbon extraction. After the desired chemical compounds have been extracted, they must be further refined in order to remove any impurities or unwanted compounds. Finally, these purified chemicals are typically used to create a variety of products such as tinctures, edibles, and topical creams.

Organizations looking to dispense low-THC cannabis must have the necessary technical expertise in order to meet the requirements specified in TAC §12.11(b)(7), including:

1. Cultivation, analytical organic chemistry and micro-biology; and analytical laboratory methods. 
2. Patient education and interaction, and the handling of confidential information including familiarity with the requirements of the Health Insurance Portability and Accountability Act (HIPAA) 

Exhibit G Proof of infrastructure reasonably located to dispense low-THC cannabis to registered patients TAC §12.11(b)(7)(D) 

In Texas, dispensaries must have an efficient and secure communication system in order to meet the requirements specified by the Texas Administrative Code (TAC) §12.11(b)(7). All dispensaries must have a well-planned floor plan that allows for easy access to all areas of the dispensary. This includes areas such as patient waiting rooms, product storage, and sales areas. Additionally, dispensaries must have adequate security measures in place to meet the requirements specified by TAC §12.11(b)(7). These include video surveillance systems, access control systems, and alarm systems. Furthermore, dispensaries are required to maintain accurate records of all patient information as specified by HIPAA regulations.

The application required to open a dispensary in Texas requires:

1. A Map showing the location of the applicant’s proposed dispensing facilities with streets; property lines. buildings; parking areas; outdoor areas, if applicable; fences; security features; fire hydrants, if applicable; and access to water and sanitation systems. 
2. Floor plan of the actual or proposed building or buildings where dispensing activities will occur showing areas designed to protect patient privacy and areas designed for retail sales, with proposed hours of operation. 
3. Detailed description of HIPAA compliant computer network utilized by all facilities. 
4. Identifying descriptions of any vehicles to be used to transport product. 
5. Description of all communication systems. 

Exhibit H Project Schedule and Plan 

1. A plan detailing how the applicant would stand up operations if licensed including timelines, deliverables, milestones, and projected date for filling prescriptions. 
2. The plan must also identify how the applicant would provide statewide coverage for patients.

Conclusion

The time to get your application in for a medical cannabis dispensary license in Texas is now. With only three dispensaries currently operational in the entire state, the market potential is significant. RSD will begin accepting applications on January 16, 2023 and stop on April 28, 2023 – so start gathering all of the required documentation now. If you need help putting together a complete and compelling application, our team at Collateral Base can assist you every step of the way. Contact us today to learn more about how we can help you open a dispensary in Texas as quickly and efficiently as possible.