How to Start a Dispensary in Colorado: Store License, 1,000-Foot Rule, 15% Special Sales Tax

Opening a marijuana store in Colorado means stacking several approvals in the right order. You form your entity with the Colorado Secretary of State, open a Department of Revenue account for taxes, get approval from your city or county, and then apply to the Marijuana Enforcement Division (MED) for the state store license. Colorado has no single general business license, so the work is in sequencing. This guide covers the order most applicants use, the costs you can confirm, and the mistakes that cost people months.

This is informational content, not legal or tax advice. Cannabis law is complex and changes often. Talk with a Colorado cannabis attorney and a CPA before you sign a lease, buy property, or file anything.

What You Need Before You Start

Gather these items before Step 1 so you are not stopping partway through the process:

• A budget that covers fees and build-out. The retail application fee in statute is $5,000, split $2,500 to the state and $2,500 to the local government. The state may change that figure, so confirm it with MED. Add the cost of the build-out, inventory, security, and working capital.
• Ownership records for every owner. MED reviews owners individually. Check with MED for the exact disclosure and background requirements.
• A shortlist of addresses. You will need zoning information from the city or county for each one.
• A federal Employer Identification Number (EIN). The IRS issues EINs at no charge.
• A Colorado registered agent. This is covered in Step 2.
• Filing funds. The Secretary of State charges $50 to file Articles of Organization for an LLC. A name reservation costs $25 and holds a name for 120 days.

Step 1: Confirm Your Location Is Allowed

This step comes first because it can stop the whole project. Local approval comes before state approval, and a city or county may prohibit marijuana stores entirely (C.R.S. 44-10-104 and 44-10-301). Some localities ban stores outright. Others allow them only in certain zones or only through a public process.

Get a written answer from the city or county planning or zoning office before you sign a lease, buy a building, or pay for design work. Ask them directly whether stores are permitted at the address you are considering.

Next, apply the 1,000-foot rule. Under C.R.S. 44-10-311, a retail store generally must stay at least 1,000 feet from schools, alcohol or drug treatment facilities, college campuses, and residential child care facilities. Localities can vary this distance, so the local rule may differ from the state default. Ask the locality how it measures the distance (property line to property line, or door to door) and whether it publishes a buffer map. Also check with the Colorado Department of Early Childhood (CDEC) whether a nearby residential child care facility is licensed, since that can affect your buffer.

Step 2: Form Your Entity With the Secretary of State

Most operators form an LLC, though you can also form a corporation. Confirm the entity choice with your CPA and attorney.

1. File Articles of Organization. The filing fee is $50, and online filings through the Secretary of State's online filing system at coloradosos.gov are processed in real time. A corporation files Articles of Incorporation for a Profit Corporation at the same $50 fee.
2. Choose a compliant name. An LLC name must include a term such as Limited Liability Company, LLC, or Ltd. Liability Company (C.R.S. 7-90-601). The name must also be distinguishable from existing names on Secretary of State records. Punctuation and capitalization do not count, so ABC Inc and abc inc are treated as the same name.
3. Reserve the name if you need time. A name reservation costs $25 and holds the name for 120 days. Details are at the Secretary of State's entity name FAQ.
4. Name a registered agent. The agent must consent to the appointment. An individual agent must be at least 18, hold a current Colorado driver's license or state ID, and either live in Colorado or have a usual place of business there. The agent's name and ID number must be entered exactly as they appear on the credential. The registered agent address must be a physical Colorado street address where documents can be received during business hours. A P.O. box does not qualify.
5. File a trade name if you need one. If your store will operate under a name different from your entity name, file a Statement of Trade Name. Trade names are filed statewide with the Secretary of State, not the county. The fee is $20 online and $5 to renew. See the trade name FAQ.

Step 3: Get Local Approval and Any Local License

Local approval is the gate for everything that follows. The process varies widely. Some cities and counties hold public hearings, notify neighbors, and vote on applications. Others run an administrative review. Contact the city or county clerk or licensing office to learn the process, the local application fee, and the hearing schedule. Your local share of the $5,000 application fee is $2,500, so budget for it here as well.

Many home rule cities issue their own licenses, and some counties do too. Start your research with the cannabis licensing pages of the city or county where you plan to operate, then confirm everything directly with the jurisdiction, because local rules change.

Step 4: Apply for the State Medical or Retail Store License

After local approval, apply to MED for a medical or retail store license under C.R.S. 44-10-401. The statute sets the retail application fee at $5,000, with $2,500 going to the state and $2,500 to the local government (C.R.S. 44-10-803). The state can change that fee, so confirm the current amount on the MED site. State license fees are set by MED according to owner level. Check with MED for the current fee schedule, because the amount depends on your ownership structure. Visit the Marijuana Enforcement Division for application forms and the current rules.

Build the sales limit into your operations from day one. A retail store may not sell more than 1 ounce of retail marijuana, or its equivalent, in a single transaction (C.R.S. 44-10-601). Your point-of-sale setup and staff training should enforce this.

Step 5: Register With the Department of Revenue

Register with the Colorado Department of Revenue, Taxation Division, at tax.colorado.gov. A dispensary sells tangible goods, so you will almost certainly need a sales tax license. Apply at the sales tax license page.

• State and local sales tax. The state sales tax rate is 2.9%, plus special district taxes where they apply. The state license does not cover home rule cities, including Denver, Aurora, Colorado Springs, Boulder, and Fort Collins. Those cities collect and license their own city sales tax, so you must apply to them directly.
• Retail marijuana special sales tax. A 15% special sales tax applies on top of state and local sales tax (C.R.S. 39-28.8-202). Your point-of-sale system must calculate all three layers correctly.
• Recent change to the special sales tax. HB26-1409, signed June 4, 2026, ends the local government share of special sales tax revenue starting July 1, 2026. Confirm with the Department of Revenue how the revenue is now distributed and how your returns should reflect it. Do not build your pricing model on an older split.
• Income tax. An LLC's income passes through to its owners. Colorado's individual and corporate income tax rate is a flat 4.40%. Ask your CPA how it applies to your entity.
• Withholding. If you will have employees, the Department of Revenue administers state income tax withholding. Check with the Department of Revenue on the account setup and filing schedule.

Step 6: Register Employees and Payroll

Before your first hire, register with the Colorado Department of Labor and Employment for unemployment insurance and confirm your FAMLI premium obligations with the FAMLI Division. Premium rates and registration steps can change, so check with those agencies for current figures. Set up payroll withholding through the Department of Revenue account from Step 5.

Step 7: Build Out the Space

Colorado does not license general contractors, roofers, HVAC contractors, handymen, or home inspectors at the state level. Cities and counties do that work through their building departments, so your build-out permits come from the local building department. Electricians and plumbers are licensed by the state through DORA's Division of Professions and Occupations. Verify each license before you hire.

If you plan to make or handle edibles or other food products on site, check with the Colorado Department of Public Health and Environment about health requirements before you finalize your floor plan.

Step 8: Keep the Entity in Good Standing

The Secretary of State requires a $25 Periodic Report each year, due in your entity's periodic report month. You may file as early as two months before that month and as late as two months after it without penalty. A new LLC or corporation does not file a periodic report in its first year, so your first report is due in the second year. An entity that does not file becomes Delinquent. Pair this with your Department of Revenue filing calendar so nothing slips.

Tips for a Smoother Process

• Sequence your work. Local zoning, then entity formation, then local approval, then state application.
• Ask the locality for its buffer measurement method in writing.
• Ask MED to confirm current fees and the owner disclosure list before you assemble your package.
• Build a tax calendar covering sales tax, special sales tax, withholding, and the annual periodic report.
• Set up your point-of-sale system to enforce the 1 ounce per transaction limit and to apply all three tax layers.

Common Mistakes to Avoid

• Signing a lease before zoning is confirmed. A lease you cannot use is an expensive lesson.
• Assuming state approval is enough. Colorado requires local approval first, and the locality can say no.
• Measuring the buffer yourself. Use the locality's method, not your own.
• Skipping the home rule city sales tax. If you are in Denver, Aurora, Colorado Springs, Boulder, or Fort Collins, the state sales tax license is not the end of the tax registration.
• Forgetting the 15% special sales tax in your pricing. Build it into your margin model from the start.
• Using a P.O. box for your registered agent. The address must be a physical Colorado street address.
• Filing a trade name with the county. Trade names go to the Secretary of State.
• Hiring unlicensed trades. Verify electrician and plumber licenses through DORA.

What Results to Expect

A well-prepared application may move through the process more smoothly, but timelines depend on the locality, MED, and the complexity of your ownership and build-out. Neither the state nor the locality guarantees an approval date, so plan your cash flow for a long runway. Confirm current review periods directly with MED and your city or county.

On the product side, avoid health or medical claims in your marketing. The FDA has not approved marijuana for most uses, and the rules restrict what can be said about products. Describe your products and services factually, and have counsel review your advertising before launch.

Next Steps

Start with the zoning question for your top candidate address, because the answer determines whether the rest of the plan is worth pursuing. If the location passes, form your entity, register with the Department of Revenue, and build your application package with a Colorado cannabis attorney and a CPA. Before you sign anything, confirm every figure in this guide with the agency that issues it, since fees, rules, and tax distributions change.