For people who purchase marijuana (legally, anyway), there’s much confusion surrounding where, exactly, they’re buying their weed. In other words, what’s the difference between a dispensary vs. collective?

Dispensaries vs. Collectives

Dispensaries are typically for-profit entities that sell marijuana to anyone who can legally possess it (over twenty-one in recreational states). Dispensaries in medicinal states also sell to those with a valid medical marijuana card, but the “profit” changes. Many states don’t allow medical marijuana dispensaries to be for-profit. In Arizona, for example, Proposition 203 mandates that all medical marijuana dispensaries be formed as non-profit entities. Collectives are often non-profits that involve a group of people working together for a common goal.

Collectives are not limited to the cannabis industry by any means; collectives exist in all sorts of industries.

Regardless, both dispensaries and collectives often provide consumers with the same type of products. You can expect access to a wide-range of flowers, a variety of strains, and a discussion of terpene profiles, cannabinoids, and THC percentages.You can also purchase concentrates, edibles, smoking devices, etc. This isn’t to say all the products are the same across the board. Just as one liquor store may sell a brand of vodka that another does not, there is no hard, fast rule. But, in general, you should be able to find what you’re after. In fact, when shopping, many patrons can’t tell the difference between a dispensary and a collective. Unless it’s in their name, of course. That kind of gives it away. Some collectives do ask for a “donation” rather than payment or offer membership. That’s a sign too.

Finances: Dispensaries vs. Collectives

If you’re not drooling for data or you don’t enjoy noshing on numbers, you might want to smoke up for this. Collectives, at least in California (which is home to many), are allowed to exist because of California Health and Safety Code 11362.775. This permits patients and caregivers to work together to “collectively” cultivate marijuana. It’s confusing, especially when you throw in Co-ops. In fact, it’s so confusing that California’s AG tried to clarify it by stating, “…a collective should be an organization that merely facilitates the collaborative efforts of patient and caregiver members – including the allocation of costs and revenues. As such, a collective is not a statutory entity, but as a practical matter it might have to organize as some form of business to carry out its activities.”

Collectives typically involve the following:

• A membership agreement
• The mission of the collective
• Agreements between members in regards to things like transportation and cultivation
• Profits that are not distributed to the members (those involved, assuming they’re not volunteers, earn a salary but they’re not allowed to put extraneous profits in their pockets)

The latter applies to all non-profits, a term that is a bit misleading. Non-profits do make a profit (hopefully, at least), but, unlike for-profits, they can’t give these profits to a private individual. Essentially, the individual benefit is eliminated because non-profits are created to aid the public, not one person. Many non-profits don’t pay taxes, but cannabis businesses do. They’re not eligible for tax exemption. Shocking that Uncle Sam didn’t budge on this.

Some states allow members of a collective to grow their own weed and take it to the collective to share or sell. Other’s don’t like this idea. Colorado, for instance, has put the kibosh on growing weed for others (even without people actively selling it in stores). HB 17-1221 was signed into law on June 8^th of this year, though it was only introduced in March. Its expediency was likely a nod to the lawmakers’ desire to squash any black-market activity legal marijuana has buoyed.Dispensaries, on the other hand, are usually owned by one person (or partners) and they are for-profit (recreational, anyway); owners can get rich when business is booming. And it is indeed booming: per Marijuana Business Daily, nearly 90 percent of infused product companies, dispensaries, and wholesale growers reported that they were out of the red back in 2016. At the very least, they were breaking even. The product-makers and growers were the most profitable when surveyed; over a quarter reported that they were “very profitable” (note to self, buy some Scott’s Miracle Gro).

Most marijuana businesses, no matter the type, should always be formed through an entity legal under the law. That provides the company with protections, like business limited liability, and allows them to comply with cannabis law and regulations. In other words, you can call it a dispensary or you can call it a collective, but the Lemon Haze Stand you’ve set up in your driveway probably won’t cut it.