Marijuana Businesses Need to Pay Their Bills, MED Warns

On March 9, the state Marijuana Enforcement Division announced that total marijuana sales had cleared the $14 billion mark in February, nine years and two months after Colorado became the first state in the country to allow recreational pot sales. In a separate memo sent to business owners the same day, however, the tone wasn't as celebratory.

Stuck in a recession for nearly two years, Colorado's marijuana market is in such financial distress that state enforcement officials issued the memo to remind businesses to pay their debts and honor contracts with vendors and service providers.

Rumors of vendor contracts going unpaid have floated around Colorado's pot industry since 2022, but now the MED gave the problem official recognition. Sent to all licensed marijuana business owners on March 9, the memo was crafted "in response to a series of reports regarding licensees not paying invoices" to other marijuana business vendors, according to the MED.

Annual dispensary sales in Colorado dropped around 21 percent from 2021 to 2022, from $2.23 billion to $1.7 billion, according to data from the state Department of Revenue. During that same span, the average price per pound of marijuana flower fell nearly 62 percent, hitting a record low, while medical marijuana sales also hit record lows in 2022.

The financial dropoff has led to a burst of marijuana business closures and takeovers, with corporations closing large operations in Denver and southern Colorado and a handful of dispensaries getting shut down because of unpaid sales taxes. Other dispensaries have reportedly closed because they were unable to stock their stores. Despite the closures, however, well over a half-billion dollars went to marijuana business acquisitions in Colorado last year.

According to the March 9 memo, the MED has received inquiries regarding whether marijuana business owners could pursue unpaid sales and vendor contracts in court because of the plant's federal prohibition. Since commercial marijuana is considered a lawful activity in Colorado, the legal remedies "are similar to those available to businesses that operate outside the Regulated Marijuana industry."

Although marijuana regulators don't engage in contract disputes between business owners, the MED memo notes, failure to make payments can lead to indications of non-compliance, which could result in administrative action.