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Marijuana remains illegal for residents of South Dakota, where only specific types of prescribed medical cannabis products are legally permitted. However, for those interested in starting a business in the production or sale of the non-psychoactive cannabinoid CBD, the federal hemp laws present South Dakota—home to Mount Rushmore and Badlands National Park—as an attractive option.
Data suggests the U.S. CBD market is expected to grow at a CAGR (Compound Annual Growth Rate) of 28.6% through 2029. Given this information, you might wonder about the best approach to obtain a CBD license in South Dakota and establish a business. In this guide, we’ll provide you with the most current information on South Dakota’s permitting and licensing requirements, helping you to successfully launch your new business
How to Start a CBD Business in South Dakota
In 2020, Governor Kristi Noem signed House Bill 1008 into law, a significant move for the hemp industry in South Dakota. Under this bill, it is now legal to cultivate, manufacture, and distribute hemp-sourced CBD products within the state. The Department of Agriculture & Natural Resources (DANR) requires that anyone growing and processing hemp products — which, according to federal law, must contain less than 0.3% THC — obtain a license. If you find this business opportunity appealing, here’s how you can get started:
Register your business and obtain all necessary permits. Once you’ve decided on the structure of your business, the next step is to register it. Upon registration, the Internal Revenue Service (IRS) will issue you an Employer Identification Number (EIN) for tax purposes. After this, you can obtain your South Dakota CBD license from the Department of Agriculture and Natural Resources.
Analyze the market: A thorough market analysis should provide a clear view of your target audience, demand, and competition. After identifying your audience and product offerings, create a business plan that outlines the structure of your business, startup capital, and revenue projections. Your business can be run as a sole proprietorship, partnership, LLC, or another structure.
Market your business. While CBD is legal and in demand in South Dakota, this does not automatically ensure a customer base. Effective marketing is essential to attract, convert, and retain customers. Be sure to observe all CBD marketing regulations, including laws pertaining to CBD usage and the types that are legal in South Dakota. Recommended marketing channels include affiliate programs, influencer marketing, and social media platforms. Focus your efforts on the platforms most frequented by your target audience and consider their peak activity times for engagement.
Partner with a payment processor. Online shopping has become mainstream, and the CBD landscape is no exception. If you want to reach a wider market and grow your CBD business, you need an eCommerce platform. To create a reliable online presence, you need a CBD merchant account. You can partner with a payment processor to benefit from multiple secure payment solutions and seamless integration options.
Read and Understand CBD-Specific Guidelines
The best CBD material to start with is the U.S. Farm Bill 2018 to learn all the federal legal parameters, such as the THC content, as well as packaging and marketing guidelines, then you can check out South Dakota’s state regulations regarding hemp as well. This will give you further insight into the specifics of the rules and regulations.
For example, you can only sell CBD products to individuals over the age of 18 in the state, and if you’re a grower, you’ll need a state permit from the South Dakota Department of Agriculture and Resource Management. Here are some more important things to consider when starting your business:
Find a CBD vendor (or make your own). When starting a CBD business, you can either grow and process hemp-derived CBD products in-house or outsource production from a licensed dealer (if you grow and manufacture your own, you’ll need a grower’s permit in South Dakota). Ensure your 3rd party CBD products meet all quality requirements as well as contain less than 0.3% THC. Once you have your product you can then use a reputable laboratory to test your CBD products for potency and purity levels.
Meet all labeling and packaging guidelines. Meet both federal and South Dakota guidelines on CBD labeling and packaging. The guidelines in South Dakota require merchants to use sustainable packaging materials and provide accurate information on product labels, such as THC content, batch numbers, manufacturer details, reputable third-party certifications, and any required disclaimers.
Define your shipping and pricing models. You should partner with reliable logistic carriers and shipping vendors, as well as develop a solid pricing model based on realistic and attainable profit margins.
Stay informed and adapt. The CBD industry has yet to mature. New laws and regulations are enacted regularly, making the CBD industry high-risk. You need to stay up-to-date with new laws and regulations and comply with all guidelines. Monitor the market trends and adjust your business accordingly.
How to Get a South Dakota CBD License
A CBD license indicates you meet all federal and state standards required to run a CBD business. Here are a few steps to follow to obtain a CBD license in South Dakota:
1. Determine the permit you need. You can apply for a South Dakota CBD/Hemp license to grow or process industrial hemp through the DANR website. We recommend working with your merchant service provider or consulting with a business attorney or accountant to help you determine the best course of action for your specific situation if it’s unique in any way.
2. Make a license application. CBD license applications in South Dakota are made through the DANR (Department of Agriculture and Natural Resources). The DANR charges a non-refundable $50 application fee for both growers and processors licenses. A grower’s license requires a fee of $200, while a processor’s license costs $2,000.
3. Undergo background checks. The South Dakota Division of Criminal Investigation and FBI will need to conduct criminal background checks on key members of the business entity.
CBD License Application Requirements for South Dakota
South Dakota’s DANR requires CBD license applicants to provide the following when submitting their applications:
- A complete federal and state background check
- Contact information of key players in the business
- The legal description of the business, including its name and location
- A non-refundable $50 fee
- The planned harvest use of hemp
- A copy of the Good Standing certificate from the South Dakota Secretary of State
Laws and Regulations for Selling CBD in South Dakota
Under the provisions of House Bill 1008, it is legal to buy, sell, and use CBD in South Dakota. However, there are stringent laws and regulations you must observe when selling CBD in South Dakota:
- CBD products legal in South Dakota must be derived from hemp and contain less than 0.3% THC content.
- Merchants can resale out-of-state CBD products in South Dakota provided they meet all federal and state-of-origin cultivation and production standards.
- Only DANR-approved merchants are authorized to grow and process hemp-derived CBD products.
- Businesses can only sell CBD products to persons who are 18 or older.
Additionally, it is illegal to sell marijuana-derived CBD products for personal use in South Dakota. The only exception is for state-approved medical purposes.
How to Renew Your CBD License in South Dakota
CBD licenses in South Dakota expire 15 months after the date of issuance. Businesses should apply for renewal through the Department of Agriculture and Natural Resources. Upon approval of the renewal request and payment of any applicable fees, DANR will issue the renewed license via US Mail.
Start Selling CBD in South Dakota
Remember, it is illegal to start selling CBD products in South Dakota without a valid CBD license. Interested individuals and business entities can obtain this license from the Department of Agriculture and Natural Resources. Approval of the license is contingent upon a successful criminal background check and the payment of application fees.
Before entering the promising but risky CBD industry, be sure to do your due diligence. This involves understanding the legal requirements, market trends, and consumer needs. Once you are well-informed, consider opening an online store to reach a broader market. Additionally, partnering with a CBD merchant service provider can significantly improve a customer’s payment experience.
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South Dakota CBD License: FAQs
Is CBD legal in South Dakota?
Yes, CBD is legal in South Dakota, provided it’s derived from hemp and contains less than 0.3% THC on a dry weight basis.
How much does a CBD license cost in South Dakota?
The cost of a South Dakota CBD license varies depending on the CBD business. A grower license costs $500, while a processor license goes for $2,000. There’s also a non-refundable $50 application fee.
Can you sell CBD without a license in South Dakota?
No, you cannot sell CBD in South Dakota without a license from the South Dakota Department of Agriculture and Natural Resources.
How long is a CBD license valid in South Dakota?
A CBD license in South Dakota is valid for 15 months from the date of issue.