Glossary of cannabis business sale terms

These definitions are written for people buying or selling a state-licensed cannabis business. They are educational, not legal or tax advice, and state rules change, so check the current statute or regulator page before relying on any entry. Figures are dated where they appear.

Licensing and regulatory terms

Adult-use

Adult-use is the state-licensed sale of cannabis to any adult aged 21 or over, without a patient card, also called recreational cannabis. It matters in a sale because adult-use marijuana is still a Schedule I substance under federal law: the April 2026 rescheduling order covered only FDA-approved products and marijuana under a state medical license. An adult-use business therefore remains subject to 280E, which lowers after-tax cash flow and the price a buyer can pay. Adult-use licenses usually carry higher revenue than medical ones, but also heavier excise taxes and, in open states, more competition. See rescheduling status for where the broader rule stands.

Canopy

Canopy is the area, usually measured in square feet, in which a cultivation licensee is allowed to grow flowering cannabis plants. States use it to size licenses: California and Washington tier grows by canopy, and Massachusetts caps any licensee at 100,000 square feet of canopy. Canopy matters in a sale because it sets the ceiling on production, but it is not value by itself. Buyers price a grow on what each square foot yields and what that yield costs against the wholesale price, as explained in cultivation valuation per square foot and per pound. Licensed canopy that cannot be run at a profit is a cost, not an asset.

Conditional license

A conditional license is a cannabis license that has been awarded but only becomes a full annual or operating license once the holder meets stated conditions, such as securing a site, finishing build-out, and passing inspection. The exact meaning differs by state, and some regulators use “provisional” for the same idea. In a sale it matters because many states restrict or freeze ownership changes until the license converts, and because deadlines to become operational can void the award. A buyer is paying for an option, not a business. Pricing and transfer limits are covered in selling a pre-revenue or provisional license and valuing a pre-revenue license.

Consumption lounge

A consumption lounge is a licensed premises where adults may lawfully consume cannabis on site, either attached to a dispensary or as a stand-alone venue. Lounges exist only where both the state has created the license class and the city or county has chosen to allow it, so the set of transferable lounge licenses is small. In a sale it matters because a dispensary license does not include lounge rights unless the lounge approval is separately issued, and because few lounges have an earnings record to value. Buyers usually treat the lounge as an add-on to a retail store. See consumption lounges for the state-by-state picture.

Cultivation license

A cultivation license is state authority to grow, harvest, dry, and wholesale cannabis to other licensees, within a canopy or plant-count limit. Michigan sizes grows by plant count, with a Class C license at 2,000 plants, while California and Washington tier by canopy. In a sale the license matters less than the economics: in open states, where anyone qualified can apply, the paper has little scarcity value and the price tracks earnings at current wholesale prices, or the value of the facility and equipment. Growers carry lighter 280E exposure than retailers because most production cost is inventory cost. See cultivation businesses and how much a cultivation license costs.

Delivery license

A delivery license is state authority to bring cannabis to the consumer’s door, either as a stand-alone non-storefront retailer or as an add-on to a dispensary. It matters in a sale because delivery rights are heavily shaped by local rules: a city can ban or restrict delivery businesses based within its borders even where the state allows the license class, and some states reserve delivery licenses for social equity applicants for a period. Buyers should confirm the licensed service area, the eligibility rules for owners, and the unit economics per order, which are thinner than in-store retail. See delivery businesses for how these businesses are valued and transferred.

Distribution license

A distribution license is state authority to move wholesale cannabis between licensees, and in some states to store it, arrange testing, and collect tax along the way. Not every state has this class; California makes distributors a required link in the supply chain, while many other states let growers and manufacturers ship directly using a transporter. In a sale it matters because a distributor’s main assets are customer relationships, vehicles, and receivables, and receivables from struggling retailers can be worth far less than book value. Buyers should age the receivables and test collections. See distribution and transport businesses.

Dual license

A dual license is the position of one operator holding both medical and adult-use authority, often at the same premises, whether on one license or two. Since the 28 April 2026 order placed state-licensed medical marijuana in Schedule III while adult-use stayed in Schedule I, a dual licensee has one activity outside 280E going forward and one inside it. Treasury’s 23 April 2026 release previews apportionment rules for these operators, but no formal IRS notice had issued as of September 2026. In a sale, buyers will ask how revenue and costs are split between the two channels. See rescheduling tax scenarios.

Extraction

Extraction is the process of separating cannabinoids and terpenes from plant material to make concentrates, using solvents such as butane, ethanol, or carbon dioxide, or solventless methods, under a manufacturing license. It matters in a sale because volatile-solvent rooms must meet hazardous-location standards, often called C1D1 or C1D2, plus fire-code and engineer sign-off, and a room that was never properly approved can halt production after closing. Buyers also review residual-solvent test failures and any recall history. See extraction facility requirements for what to verify on site and manufacturing and extraction valuation for how these businesses are priced.

License cap

A license cap is a limit set by statute, regulation, or local ordinance on how many cannabis licenses of a given type may exist in a state or locality. A separate kind of cap limits how many licenses one owner may hold; Massachusetts, for example, limits a person to three licenses in a class, except retail, which a 2026 law raised to six. Caps matter in a sale because scarcity is what gives a license value apart from its earnings, and because an ownership cap can disqualify the most obvious buyers. See license value in capped vs uncapped states and ownership caps and residency rules by state.

Limited-license state

A limited-license state is a state that issues a fixed or tightly controlled number of cannabis licenses, so the only practical way in is usually to buy an existing licensee. Florida, Illinois, and New Jersey are common examples; Oklahoma, Oregon, and Michigan have historically been open markets, although Oregon and Oklahoma have paused new grower applications. In a sale the distinction drives price: in limited-license states the license itself carries value, while in open states buyers pay only for cash flow and hard assets. It also shapes who can buy, because ownership caps bind sooner. See limited-license vs open-market states and selling a license in a limited-license state.

Manufacturing license

A manufacturing license is state authority to turn cannabis into finished products such as edibles, vapes, tinctures, topicals, and concentrates, and usually to package and label them. Many states split the class by whether volatile solvents are used. In a sale, value sits in brands, formulations, equipment, wholesale accounts, and a clean testing record, and the premises must hold the right occupancy and fire approvals for the processes run there. Manufacturers can treat more of their cost as inventory cost than retailers can, which softens 280E. See manufacturing businesses and 280E by license type.

Medical-only

Medical-only describes a state program, or a license, that permits cannabis sales only to registered patients and caregivers. It matters in a sale because the Federal Register order of 28 April 2026 placed marijuana subject to a state medical marijuana license in Schedule III, so qualifying medical activity is outside 280E going forward. That lifts after-tax earnings compared with an adult-use store with the same sales. The trade-offs are a smaller customer base and the chance that the state later adds adult-use sales, which changes both the market and the tax position. See how rescheduling would affect valuation.

Microbusiness

A microbusiness is a small cannabis license class that lets one operator grow, process, and sell cannabis under a single license, within hard size caps set by the state. California, Michigan, New York, New Jersey, and Minnesota each have a version, with different limits. In a sale it matters because the caps limit revenue, and eligibility rules often stop larger operators or holders of other licenses from buying, which narrows the buyer pool. These businesses are usually valued on owner earnings plus equipment and lease value, not on a license premium. See microbusinesses for state rules and who may buy one.

Provisional license

A provisional license is a cannabis license award that does not yet allow full operations, usually because a site, build-out, local approval, or final inspection is still pending. States use the word differently, and California used it for temporary operating authority during its transition to annual licenses. In a sale it matters because there is no cash flow to value; the price reflects the chance of reaching opening day, the time and capital left, and whether the state allows an ownership change before the license is final. Many do not, or allow it only in part. See selling a pre-revenue or provisional license.

Testing lab

A testing lab is an independent licensed laboratory that tests cannabis for potency and contaminants before it can be sold. States generally require accreditation to the ISO/IEC 17025 standard; California’s Type 8 testing laboratory license is one example. It matters in a sale because independence rules in states such as California and Michigan bar lab owners from holding any other cannabis license, so most operators cannot buy a lab. Buyers are usually other labs or outside investors. Value rests on recurring client volume, accreditation scope, equipment, and a record free of result-inflation findings. See testing laboratories.

Tier

A tier is a size class within a license type, set by canopy, plant count, or production volume, that determines what the licensee may do and what fee it pays. Washington and California tier cultivation by canopy; Michigan uses plant-count classes. In a sale it matters because the tier sets the production ceiling a buyer is paying for, and moving up a tier is often a new application with a new fee and sometimes a new local approval, not a box to tick after closing. Some states have also stopped issuing certain tiers. Confirm the tier on the license certificate matches the facility as built. See cultivation businesses.

Vertical integration

Vertical integration is common ownership of cultivation, manufacturing, and retail, so that one group controls product from plant to sale. State law varies: Florida requires its medical operators to be vertically integrated, Washington forbids producers and processors from owning retailers, and most states simply allow it within ownership caps. In a sale it matters because an integrated group can be sold whole or in parts, internal transfer prices can distort each unit’s margin, and the 280E burden falls differently on each layer. Buyers should rebuild each segment’s results at market prices. See vertically integrated groups and cannabis business models explained.

Local approval and real estate terms

Buffer zone

A buffer zone is a minimum distance that a cannabis premises must keep from sensitive uses such as schools, daycare centers, and youth centers. California’s default is a 600-foot radius from a K-12 school, daycare center, or youth center, unless the state or locality sets a different distance, and many cities add their own spacing rules between cannabis stores. It matters in a sale because a compliant site is scarce, which supports value, and because relocation options are limited to addresses that also clear the buffers. Buyers should confirm how the distance is measured and whether the site is grandfathered. See zoning, buffers, and conditional use permits.

Cannabis REIT

A cannabis REIT is a real estate investment trust that owns cultivation, processing, or retail properties and leases them to licensed operators, usually on long triple-net leases. Innovative Industrial Properties, the largest, reported a 12.8-year weighted-average remaining lease term at 31 December 2025 and a 14% fall in rental revenue in 2025 as several tenants defaulted. In a sale it matters because a REIT lease is a long-term fixed obligation that the buyer inherits, the landlord must consent to assignment, and rent set in stronger years can exceed what the business now supports. See sale-leaseback with cannabis REITs and landlords.

CUP

A CUP, or conditional use permit, is a local land-use approval that allows a cannabis business at a specific address subject to conditions such as hours, security, odor control, and parking. It is a zoning entitlement granted after a public hearing, not a cannabis license, and it is issued by the city or county, not the state regulator. In a sale it matters because some CUPs run with the land while others are personal to the operator and need a new hearing or an amendment when ownership changes. Conditions can also expire or be revoked for violations. Buyers should read the permit and its resolution of approval. See zoning, buffers, and conditional use permits.

Landlord consent

Landlord consent is the property owner’s written permission for cannabis use at the premises and for the lease to be assigned to, or controlled by, the buyer. It matters in a sale because most commercial leases prohibit illegal uses and restrict assignment, and many treat a change in control of the tenant as an assignment, so even a membership-interest sale can need consent. State regulators also commonly ask for proof of the right to occupy. A landlord who learns of the sale late can demand higher rent or refuse. Sellers should review the lease before going to market. See landlord consent and cannabis lease clauses.

Local approval

Local approval is the permission a city or county gives a cannabis business to operate within its borders, through a local license, permit, zoning clearance, or host agreement. Most states make it a condition of the state license. It is often scarcer than the state license: California’s Department of Cannabis Control tracks which jurisdictions allow each activity, and more than half of them allow no retail. In a sale it matters because the buyer usually needs its own local sign-off, on a separate clock from the state’s. A state approval with a local refusal is a failed closing. See local control and municipal approvals.

Opt-out

An opt-out is a decision by a city, county, or town to prohibit some or all types of cannabis business within its borders, as state legalization laws generally allow. Michigan’s adult-use law, for example, lets a municipality prohibit or limit establishments. Opt-outs matter in a sale in two ways. They protect existing stores in neighboring towns that opted in, which supports value, and they limit where a license can move. Opt-outs can also be reversed by a council vote or a ballot measure, which brings new competition. Buyers should check the status of surrounding jurisdictions, not just the host town. See local control and municipal approvals.

Sale-leaseback

A sale-leaseback is a transaction in which a business sells its real estate to an investor and at the same time signs a long-term lease to stay in the property. In cannabis it became a main source of capital because banks and the SBA would not lend against plant-touching real estate. In an acquisition it matters because a buyer can fund part of the price by selling the building at closing, and because a past sale-leaseback leaves the target with a long, fixed rent obligation that reduces earnings. The rent, escalators, guarantees, and cross-default terms need close review. See sale-leaseback with cannabis REITs and landlords and the seller-note and sale-leaseback calculator.

Ownership and disclosure terms

Background check

A background check is the regulator’s review of the criminal history, and often the financial and regulatory history, of each person who must be disclosed as an owner, officer, or controlling party of a cannabis licensee. It usually involves fingerprints and sworn disclosures. It matters in a sale because every new owner above the state’s threshold must pass before the transfer is approved, and one problem individual can stall the whole file. Disqualifying offenses, look-back periods, and exceptions for past cannabis convictions differ by state. Buyers should identify who will be disclosed and check eligibility before signing a letter of intent. See ownership eligibility, background checks, and residency.

Change of ownership

A change of ownership is the regulatory event in which a state cannabis agency reviews and approves new owners or controlling persons of a licensee. It is what actually transfers control, whatever the contract says. Thresholds and mechanics differ: California requires a new license application if every owner changes, while Illinois publishes change of ownership guidance for dispensaries. In a sale it matters because closing before approval can put the license at risk, so deals are built around the approval with contingencies and staged closings. See change of ownership approval explained and state license transfer rules.

Financial interest

A financial interest is an investment in, loan to, or right to share in the revenue or profit of a cannabis licensee that the state requires to be disclosed, even when the holder is not an owner. California’s rule on financial interest holders is an example, and it bars certain people from holding one at all. In a sale it matters because seller notes, earn-outs, profit-based rent, and revenue-share consulting deals can each make the seller, a lender, or a landlord a disclosable party after closing. Undisclosed interests are a common source of enforcement. See true party of interest and financial interest rules.

Holding period

A holding period is a span of time during which a cannabis license cannot be sold, or can be sold only to a limited class of buyers. New Jersey bars a change of more than 50% of ownership from application until at least two years after operations begin, with heir and surviving-spouse exceptions. Illinois makes a non-equity buyer of a social equity license within five years repay waived fees, state loans, and grants. In a sale it matters because it decides whether a deal can close now, must be structured as an option, or has to wait. See social equity license transfer restrictions.

Ownership disclosure

Ownership disclosure is the filing in which a cannabis licensee or applicant identifies everyone who owns or controls it, traced through every holding entity to the individual people at the top. Regulators typically ask for an organizational chart, operating agreements, a capitalization table, and the source of funds. In a sale it matters because the buyer’s structure has to be fully transparent: funds, trusts, and offshore entities slow a file, and in some states every individual above a small percentage must be vetted. A seller whose own disclosures are out of date should correct them before marketing, since buyers will compare the filed chart to the real one. See true party of interest and financial interest rules.

Residency requirement

A residency requirement is a state rule that some or all owners of a cannabis licensee live in the state, sometimes for a minimum period. Washington requires owners to have lived in the state for six months, and Oklahoma requires 75% ownership by state residents. Federal appeals courts are split on whether such rules are constitutional: the First and Second Circuits have applied the dormant Commerce Clause to cannabis, and the Ninth Circuit held otherwise in January 2026. In a sale it limits the buyer pool. See ownership caps and residency rules by state.

Social equity

Social equity refers to state and local programs that reserve cannabis licenses, or give priority, reduced fees, or funding, to people from communities most affected by past cannabis enforcement. It matters in a sale because these licenses usually come with transfer limits that ordinary licenses do not have: lock-up periods, a requirement that the buyer also qualify, minimum equity-owner percentages, or repayment of benefits if sold early, as under Illinois section 7-25. Management and financing agreements with outside investors are also reviewed for hidden control. See selling a social equity license and social equity license transfer restrictions.

Transfer approval

Transfer approval is the written consent of the state cannabis regulator, and where required the local authority, to a license changing hands or a licensee changing owners. It matters in a sale because it is the central closing condition: no private contract, court order, or local business filing can substitute for it. Review times run from weeks to many months depending on the state and the completeness of the file, and the agency can ask for more information, impose conditions, or refuse. Deals handle the wait with approval contingencies, escrow, and outside dates. See regulatory-approval contingencies and the sale timeline from LOI to close.

True party of interest

A true party of interest is any person or entity that a state treats as having an ownership stake in, or control over, a cannabis licensee, and who must therefore be disclosed and vetted. Washington defines the term in WAC 314-55-035, and New York publishes a True Parties of Interest hub; both reach beyond shareholders to include some people with rights to profit or control. In a sale it matters because lenders, managers, spouses, and sellers with ongoing payments can all be swept in, and an undisclosed party can sink an application or a license. See true party of interest and financial interest rules.

Track-and-trace and operations terms

Agent badge

An agent badge is a state-issued credential, also called an agent card, worker permit, or employee registration, that a person must hold to work in a licensed cannabis business. It matters in a sale because the rules on whether badges survive differ: in some states the badge belongs to the individual and moves with them, and in others it is tied to the employing licensee and must be reissued when the license or employer changes. In an asset sale, a gap can leave a store without legally badged staff on the first day. Buyers should map each employee’s credential and file early. See employee transfer and agent badges.

BioTrack

BioTrack is a seed-to-sale software vendor whose government product has served as the mandated state track-and-trace system in several states, and whose commercial product is used as point-of-sale and inventory software. In 2025 Metrc and BioTrack formed a partnership under which a Metrc affiliate took over nine BioTrack state contracts. New York moved its licensees from BioTrack to Metrc during 2025 and 2026. In a sale it matters because a multi-year revenue review may span two systems, and the buyer needs complete exports from both. See track-and-trace systems and transactions.

METRC

METRC is the most widely used state-mandated cannabis track-and-trace system, which records every tagged plant and package from cultivation to retail sale. As of August 2025 it held government contracts in 24 states plus Washington, D.C., Guam, and the U.S. Virgin Islands. In a sale it matters for two reasons. Its records are the most reliable evidence of what a business actually sold, so buyers reconcile them to the point-of-sale system, bank deposits, and tax returns. And inventory is tied to a license number, so it can reach a buyer only through the state system. See verifying revenue with track-and-trace data.

Seed-to-sale

Seed-to-sale is the regulatory principle that every cannabis plant and product must be accounted for from the moment it is planted or received until it is sold to a consumer or destroyed. It is the idea behind state track-and-trace systems, and the phrase is also used for the software that implements it. In a sale it matters because unexplained inventory variances, large adjustments, or missing destruction records point to either weak controls or diversion, and both are compliance risks a buyer inherits in an equity deal. California, for example, requires licensees to reconcile physical inventory to the system on a set schedule. See compliance audit before a sale.

Track-and-trace

Track-and-trace is the state-run system that assigns a unique tag to each cannabis plant and package and records every movement, test, sale, and disposal under a specific license. Metrc and BioTrack are the main vendors. In a sale it matters because accounts and inventory belong to the license, not to the owners: after an approved ownership change the inventory stays where it is, but in an asset sale to a new license the regulator must authorize a transfer, and without that the stock may have to be sold down or destroyed. Closing-day inventory counts should match the system. See track-and-trace systems and transactions and inventory and biomass at closing.

Tax and banking terms

280E

280E is section 280E of the Internal Revenue Code, which disallows all deductions and credits for a business that consists of trafficking in Schedule I or II controlled substances. State legality is no defense, as the Ninth Circuit confirmed in Olive v. Commissioner. Adult-use operators remain subject to it as of September 2026; qualifying state-licensed medical activity left it going forward when the April 2026 order moved that activity to Schedule III. In a sale it cuts after-tax cash flow, inflates tax liabilities, and drives price and structure. See 280E explained for buyers and sellers and the 280E effective tax rate calculator.

Cashless ATM

A cashless ATM is a payment terminal at a dispensary that processes a customer’s debit-card purchase as if it were an ATM cash withdrawal, usually rounded up to a set increment, with change given in cash. Card networks treat this as miscoding: Visa warned against it in 2021 and Mastercard told institutions in 2023 to end cannabis debit activity, as law-firm summaries describe. In a sale it matters because revenue that depends on a processor that can be shut off overnight is less durable, and sales often dip when a store reverts to cash. Buyers should ask what share of sales runs through each payment method. See cash handling and payment processing.

COGS

COGS, or cost of goods sold, is the direct cost of acquiring or producing the inventory a business sells. It is subtracted from gross receipts to arrive at gross income, so it is not a deduction and 280E cannot disallow it. The IRS position, in Chief Counsel Advice 201504011, is that cannabis businesses compute it under the inventory rules as they stood when 280E was enacted: purchase price and direct production costs, not general overhead or selling expenses. In a sale it matters because aggressive COGS allocations create tax exposure that buyers price in or hold back. See cannabis financial statements under 280E.

Cultivation tax

A cultivation tax is a state tax charged to growers, either on the weight of harvested cannabis or as a percentage of the grower’s first sale. Illinois charges a 7% cultivation privilege tax on the first sale by a cultivator, and Michigan added a 24% wholesale excise tax on adult-use product on 1 January 2026. California no longer levies its former weight-based cultivation tax. In a sale it matters because a weight-based tax does not fall when prices fall, so it bites hardest in oversupplied markets, and unpaid amounts can follow the business. See cannabis excise and potency taxes by state.

Decoupling

Decoupling is a state’s decision to let cannabis businesses deduct ordinary business expenses on the state income tax return even though federal 280E still disallows them. Illinois, New York, and New Jersey decoupled for tax years beginning on or after 1 January 2023, and California, Colorado, Oregon, Michigan, Maryland, Massachusetts, and others have their own versions with different dates and scopes. States without a net income tax, such as Washington and Nevada, have nothing to decouple. In a sale it matters because state tax is part of after-tax cash flow, and a buyer comparing targets in two states should model each state’s rule. See state 280E decoupling for statutes and dates.

Excise tax

A cannabis excise tax is a state or local tax charged specifically on cannabis, on top of general sales tax, at the retail sale, the wholesale transfer, or both. In 2026 retail rates range from 6% in Missouri to 37% in Washington; California’s rate is 15% under AB 564 until 30 June 2028. In a sale it matters because the retailer or distributor is usually the collector, so unremitted excise tax is a trust-type liability that can attach to a successor, and because a rate change can shift margins after closing. Buyers ask for a tax clearance. See cannabis excise and potency taxes by state and tax liabilities and holdbacks.

FinCEN guidance

FinCEN guidance means FIN-2014-G001, the 14 February 2014 memorandum in which the Treasury’s Financial Crimes Enforcement Network set out how banks and credit unions can serve marijuana-related businesses while meeting Bank Secrecy Act duties. It requires customer due diligence and ongoing suspicious activity reports on every such account. It still governs in September 2026; the April 2026 rescheduling order did not replace it, and the SAFE Banking Act of 2026 is introduced, not enacted. In a sale it matters because the buyer must pass its own bank onboarding. See cannabis banking status and opening a bank account after acquisition.

Potency tax

A potency tax is a cannabis tax whose rate or amount depends on the THC content of the product instead of, or as well as, its price. Illinois is the main example: its retail excise is 10% for cannabis at or below 35% THC, 25% above 35% THC, and 20% for infused products. Connecticut has taxed per milligram of THC, with a flat-rate replacement scheduled for 1 October 2026. In a sale it matters because a store’s blended tax rate, and its margin after tax, depend on its product mix, so a shift toward concentrates and vapes raises the effective rate. See cannabis excise and potency taxes by state.

SAR

A SAR, or suspicious activity report, is a confidential report a financial institution files with FinCEN when it knows or suspects that a transaction involves funds from illegal activity. Because marijuana sales remain federally illegal in whole or part, FIN-2014-G001 has banks file one of three types on every marijuana-related account: Marijuana Limited, Marijuana Priority, or Marijuana Termination. FinCEN counted 816 banks and credit unions serving such businesses in the fourth quarter of fiscal 2024. In a sale it matters because this workload is why cannabis accounts cost more and why a bank re-underwrites the account when owners change. See cannabis banking status.

Valuation and market terms

Basket size

Basket size is the average amount a customer spends per transaction at a cannabis retailer, calculated as sales divided by the number of transactions. Headset reported an average U.S. basket of $47.29 for the 12 months ending June 2026. In a sale it matters as a diagnostic, not as a valuation method: together with transaction counts it shows whether revenue growth comes from more customers or higher spend, and a falling basket alongside heavy discounting signals price pressure. Buyers compare it with the state or regional norm and with the store’s own trend over 24 to 36 months. See cannabis benchmarks and dispensary valuation multiples.

Cost per pound

Cost per pound is the fully loaded cost to produce one pound of dried, sellable cannabis flower, including labor, utilities, nutrients, rent, and facility overhead. It is the key measure of a grow’s competitiveness. Public grower Grown Rogue reported indoor costs of $277 per pound in Michigan, $326 in Oregon, and $670 in New Jersey for the quarter ended 30 June 2026. In a sale it matters because a grow whose cost per pound is above the local wholesale price loses money on every harvest, whatever its canopy. Buyers rebuild the figure from the ledger and harvest records. See the cultivation cost-per-pound calculator and cultivation valuation.

EBITDA (pre-280E)

EBITDA (pre-280E) is a cannabis business’s earnings before interest, taxes, depreciation, and amortization, stated before the extra income tax that 280E causes. It is the figure most multiples are quoted on, but it overstates what an owner keeps: because 280E taxes something close to gross profit, an adult-use retailer can owe income tax that absorbs most of its pre-tax profit. In a sale it matters because buyers pay for after-tax cash flow, so two stores with the same EBITDA can be worth different amounts depending on license type, state decoupling, and medical share. See how 280E affects valuation and cannabis valuation worked examples.

License value

License value is the portion of a cannabis business’s price that is attributable to the license itself, apart from earnings, equipment, inventory, and real estate. It exists where licenses are scarce: in capped states and in cities with few permitted sites, a license with no operations can still command a price. In open states, where a qualified applicant can obtain a new license for the application fee, it is often close to zero and buyers pay only for cash flow and assets. In a sale it matters for pricing and for tax, since the amount allocated to the license is an intangible on Form 8594. See license value in capped vs uncapped states and selling the license only.

MSO

An MSO, or multi-state operator, is a cannabis company that holds licenses and runs operations in more than one state, usually through separate state subsidiaries because product cannot cross state lines. The larger ones are publicly traded, mostly on Canadian exchanges and U.S. over-the-counter markets. In a sale it matters because MSOs are one class of buyer: they can pay with stock as well as cash, they bring experience with regulator approvals, and they are limited by state ownership caps and by their own balance sheets. Stock consideration carries lock-up and liquidity risk. See selling to an MSO vs a private buyer and MSOs and consolidation.

Oversupply

Oversupply is a market condition in which licensed cultivation capacity produces more cannabis than legal in-state demand can absorb, pushing wholesale prices down toward, or below, the cost of production. It recurs in open-license states because product cannot lawfully leave the state. Michigan adult-use flower averaged $60.33 an ounce at retail in August 2026. In a sale it matters because buyers in these markets pay for defensible cash flow, low unit cost, and protected retail locations, not for the license. See selling in an oversupplied market and how oversupply and price compression affect value.

Price compression

Price compression is a sustained fall in the wholesale and retail price of cannabis as a legal market matures and supply grows faster than demand. It squeezes margins first at cultivation and then at retail. The same phrase is used for the fall in deal valuations: Viridian Capital reported a median of 5.1x enterprise value to 2026 EBITDA for larger public MSOs in November 2025, down from 7.8x forward EBITDA in June 2024. In a sale it matters because trailing results overstate the future when prices are still falling, so buyers weight recent months more heavily. See how oversupply and price compression affect value.

QoE

A QoE, or quality of earnings report, is an accountant’s analysis, usually commissioned by the buyer, that tests whether a company’s reported earnings are accurate, recurring, and supported by cash. In cannabis it goes beyond the usual add-back review: it reconciles revenue to track-and-trace and point-of-sale data and bank deposits, tests the cost of goods sold allocation used for 280E, and estimates unrecorded tax exposure. In a sale it matters because its findings often reset the price or the holdback. A seller can commission a sell-side version first to find problems early. See verifying revenue with track-and-trace data and the cannabis due diligence checklist.

Revenue multiple

A revenue multiple is a valuation measure equal to the price or enterprise value of a business divided by its annual revenue. In cannabis it is used when earnings are negative, unreliable, or distorted by 280E, and as a cross-check on an earnings multiple. It is a blunt tool, because two stores with the same sales can have very different margins, rent, and tax burdens, and reported cannabis retail deals span a wide range. In a sale it matters mainly as a sanity check and for comparing a target with reported transactions, where revenue is often the only figure disclosed. See dispensary valuation multiples and cannabis valuation methods by license type.

SSO

An SSO, or single-state operator, is a cannabis company that holds licenses and operates in only one state, often with several stores or a vertically integrated footprint there. In a sale it matters because SSOs are frequently the most realistic buyers for a single store or facility: they already know the regulator, have local management and supply, can add a location without new overhead, and may have room under the state’s ownership cap when larger groups do not. They are usually private and pay with cash, seller notes, or a mix. SSOs are also acquisition targets for multi-state groups entering a state. See single-license vs multi-license portfolio and multi-state platform building.

Wholesale price

The wholesale price is the price at which licensed growers and manufacturers sell cannabis to other licensees, most often quoted per pound of flower. It varies widely by state because each state is a closed market. The national Cannabis Benchmarks spot index was $1,088 per pound on 4 September 2026, and oversupplied states trade well below that. In a sale it matters because it sets a cultivator’s revenue and a retailer’s input cost, so its direction changes the value of both. State regulator dashboards and price-reporting services are better evidence than anecdotes. See cannabis benchmarks and dispensary vs cultivation as an acquisition.

Deal documents and structure terms

APA

An APA, or asset purchase agreement, is a contract under which a buyer acquires chosen assets of a business, and assumes only the liabilities it agrees to, instead of buying the company that owns them. In cannabis the license is the hard part: many states do not let a license be assigned, so the buyer either applies for its own license at the same premises or the state approves a transfer, and inventory needs regulator sign-off to move. An APA limits inherited liabilities, including past 280E exposure, though some tax debts can still follow the assets. The price must be allocated on Form 8594. See asset sale vs membership-interest sale.

Blind teaser

A blind teaser is a one- or two-page summary of a business for sale that describes it without naming it or giving details that would identify it. For a cannabis business it typically gives the license type, state or region, revenue and earnings ranges, real estate position, and reason for sale, and leaves out the name, address, and license number. It matters because a leak can unsettle employees, vendors, the landlord, and competitors before there is a deal. Interested buyers sign a nondisclosure agreement, and are screened for eligibility and funds, before receiving more. See selling a cannabis business confidentially and how a cannabis business sale works.

CIM

A CIM, or confidential information memorandum, is the detailed marketing document given to qualified buyers after they sign a nondisclosure agreement. It describes the business, its licenses and compliance history, facilities, management, customers, financial results with adjustments explained, and the proposed process. In a cannabis sale it should also cover the transfer rules that apply, local approvals, lease terms, the 280E tax position, and track-and-trace reconciliation, because those are the first things an informed buyer asks. It matters because a complete, accurate CIM draws better offers and fewer price cuts later; claims in it are tested in diligence. See preparing a cannabis business for sale and documents needed to sell.

Earn-out

An earn-out is a part of the purchase price that is paid after closing only if the business meets agreed targets, such as revenue, earnings, or a regulatory milestone. It bridges a gap between what a seller expects and what a buyer will pay up front. In cannabis it matters for three reasons: targets are hard to hit in markets with falling prices, the buyer may not control operations until the regulator approves the transfer, and a payment tied to profit can make the seller a disclosable financial interest holder. Sellers should negotiate clear metrics, reporting rights, and operating covenants. See earn-outs in cannabis deals and cash vs stock vs seller note.

Escrow pending approval

Escrow pending approval is an arrangement in which some or all of the purchase price, and sometimes the signed transfer documents, are held by a neutral escrow agent until the cannabis regulator approves the change of ownership. It matters because the gap between signing and approval can run for months, and neither side wants to perform first: the seller wants proof the money exists, and the buyer does not want to pay for a license it may never be allowed to own. The escrow agreement sets the release triggers, the outside date, and what happens if approval is denied. Some escrow agents and banks decline cannabis funds, so arrange one early. See staged closings and escrow pending approval.

Holdback

A holdback is a portion of the purchase price that the buyer retains, or that sits in escrow, for a set period after closing to cover specified risks. In cannabis deals the usual risks are unpaid income, excise, and sales taxes, open compliance matters, working-capital adjustments, and breaches of the seller’s representations. It matters because 280E makes tax exposure larger and harder to measure than in most industries, and federal assessments can generally reach back three years or more. The amount, the release schedule, and the claims process are negotiated. See tax liabilities and holdbacks in a sale and reps, warranties, and compliance indemnities.

LOI

An LOI, or letter of intent, is a short document in which a buyer and seller set out the main terms of a proposed deal before drafting the definitive agreement. It is mostly non-binding, except for terms such as exclusivity and confidentiality. It covers price, structure, payment terms, diligence period, and conditions. In a cannabis sale it should also deal with regulatory and local approval as conditions, who files and pays for the applications, what happens to the deposit if approval is denied, and any interim management arrangement. It matters because terms left vague at this stage are hard to win back later. See the letter of intent guide and regulatory-approval contingencies.

MIPA

A MIPA, or membership interest purchase agreement, is a contract under which a buyer acquires the ownership interests of a limited liability company, and so acquires the company with everything in it. It is the LLC version of a stock purchase. In cannabis it is common because the license, local permits, lease, and track-and-trace accounts stay in the same entity, and the state reviews a change of ownership instead of a new license. The cost is that all liabilities stay with the company, known or not, including past 280E exposure, so buyers rely on diligence, indemnities, and holdbacks. See asset sale vs membership-interest sale and reps, warranties, and compliance indemnities.

MSA (management services agreement)

An MSA, or management services agreement, is a contract under which one party provides management or operational services to a cannabis licensee for a fee. In deals it is used to let a buyer help run the business between signing and regulatory approval. It matters because a manager who takes control or a share of profits before approval can be treated as an undisclosed owner, which puts the license at risk. States police this differently; Nevada’s Cannabis Compliance Board, for example, requires approval of agreements that give a non-licensee significant control or a share of overall profits. See interim management services agreements.

NDA

An NDA, or nondisclosure agreement, is a contract in which a prospective buyer agrees to keep a seller’s information confidential and to use it only to evaluate the deal. It is signed after the blind teaser and before the buyer learns the name of the business. In a cannabis sale a good NDA also bars contact with employees, the landlord, vendors, and regulators without consent, and bars soliciting staff for a period. It matters because many buyers are competitors in the same state, and because a rumor of a sale can cost staff and wholesale accounts. It does not replace judgment about what to disclose and when. See NDA and confidentiality.

Security interest in a license

A security interest in a license is a lender’s or seller’s claimed lien on a cannabis license as collateral for a debt. Under UCC 9-408 a security interest can attach to a license that is not assignable, but it is not enforceable against the licensing agency and gives no right to use or transfer the license. A few states address the point directly; Maryland has a rule on security interests in a cannabis license. In a sale it matters because a seller carrying a note cannot simply take the license back on default; stepping in needs regulator approval. See seller notes and security interests.

Seller note

A seller note is a promissory note under which the buyer pays part of the purchase price to the seller over time, with interest. It is common in cannabis because SBA loans are unavailable to marijuana businesses and bank acquisition debt is rare. It matters because the seller becomes a lender to a business it no longer controls: collateral is usually a pledge of the buyer’s equity, liens on equipment and other non-cannabis assets, real estate, and personal guarantees, and any remedy that changes control needs regulator approval. The note may also need to be disclosed to the state as a financial interest. See seller financing in cannabis deals and seller notes and security interests.

Distress terms

ABC (assignment for benefit of creditors)

An ABC, or assignment for the benefit of creditors, is a state-law process in which an insolvent company voluntarily transfers all of its assets to an independent assignee, who sells them and pays creditors in order of priority. It is used in cannabis because federal bankruptcy is generally closed to plant-touching businesses. It is usually faster and less public than a receivership, but there is no automatic stay of creditor lawsuits, and the assignee cannot operate under or sell the license unless the state regulator allows it and approves the buyer. For buyers it is a source of discounted assets with limited warranties. See assignment for benefit of creditors and wind-down vs sale.

Bankruptcy gap

The bankruptcy gap is the practical inability of a plant-touching cannabis business to use federal chapter 7 or chapter 11 bankruptcy, because a trustee or debtor in possession would have to administer assets that are illegal under federal law. Courts have dismissed such cases since In re Arenas in 2015. A Delaware court’s chapter 15 recognition of The Cannabist Company’s Canadian proceeding in May 2026 involved holding companies, not operators. In a sale it matters because distressed owners and their creditors must use state tools, and buyers cannot get a federal free-and-clear sale order. See receiverships and the bankruptcy gap.

Receivership

A receivership is a state-court proceeding in which a judge appoints a neutral receiver to take control of a company’s assets, run or wind down the business, and sell it for the benefit of creditors. It is the main insolvency tool for cannabis businesses because federal bankruptcy is generally unavailable. It matters because the receiver must be accepted by the cannabis regulator to operate the license, and any buyer still needs ordinary transfer approval, so a court-approved sale is not the last step. Sales are typically as-is with few warranties, and tax liens can outrank other claims. See cannabis receivership sales explained and buying a license out of receivership.

Federal law and hemp terms

Ancillary business

An ancillary business is a company that serves the cannabis industry without growing, making, handling, or selling marijuana itself. Examples include software, packaging, equipment, staffing, security, consulting, and real estate. In a sale it matters because an ancillary business does not hold a cannabis license, so there is no regulator approval of the buyer, 280E does not apply, and conventional financing and federal bankruptcy are more available, although lenders and the SBA look closely at businesses that earn their revenue from marijuana customers. Value depends on customer concentration in a sector with many weak payers. See ancillary cannabis businesses and plant-touching vs ancillary investment.

CBD

CBD, or cannabidiol, is a non-intoxicating cannabinoid found in cannabis, most often extracted from hemp and sold in oils, topicals, and other consumer products. The FDA’s position is that CBD cannot lawfully be added to food or sold as a dietary supplement, and the agency has approved only one CBD prescription drug. In a sale it matters because a CBD business’s product claims, labels, and state registrations are diligence items, and because the federal hemp redefinition taking effect mainly on 11 December 2026 caps total THC per container, which affects full-spectrum products. See hemp and CBD businesses and selling a hemp or CBD business.

Delta-8 / intoxicating hemp

Delta-8 and intoxicating hemp refer to products containing delta-8 THC and similar intoxicating cannabinoids that are made from hemp, usually by chemically converting CBD, and sold outside state marijuana systems. The FDA has warned about them, and many states ban or restrict them. Under P.L. 119-37, cannabinoids the plant cannot naturally produce lose hemp status on 12 November 2026, and the total-THC test, per-container cap, and converted-cannabinoid exclusion take effect on 11 December 2026. In a sale, a buyer should value only the product line that remains lawful afterward. See intoxicating hemp products: regulatory status.

Farm Bill

The Farm Bill, in cannabis usage, means the Agriculture Improvement Act of 2018, which removed hemp from the Controlled Substances Act and defined it as cannabis with no more than 0.3% delta-9 THC by dry weight. That definition, in 7 U.S.C. 1639o, opened the door to hemp-derived intoxicating products. Congress rewrote it in P.L. 119-37, enacted 12 November 2025. After a one-month delay signed 2 September 2026, most of the change takes effect on 11 December 2026, while cannabinoids the plant cannot naturally produce lose hemp status on 12 November 2026. See hemp vs marijuana: legal distinction for buyers.

Hemp

Hemp is cannabis that falls within the federal statutory THC limit in 7 U.S.C. 1639o and is therefore not a controlled substance. Until late 2026 the test is no more than 0.3% delta-9 THC by dry weight. P.L. 119-37 replaces it with a total-THC test that counts THCA, limits finished products to 0.4 milligrams of total THC per container, and excludes converted cannabinoids, effective 11 December 2026; cannabinoids the plant cannot naturally produce are excluded from 12 November 2026. In a sale it matters because a hemp business is valued on the products it can still sell under the new line and under state law. See hemp vs marijuana and selling a hemp or CBD business.

Rescheduling

Rescheduling is the act of moving a drug from one schedule of the federal Controlled Substances Act to another. On 28 April 2026 a Federal Register order placed FDA-approved marijuana products and marijuana subject to a state medical license in Schedule III. Adult-use marijuana remains in Schedule I: the hearing on broader rescheduling ran from 29 June to 15 July 2026, and no recommendation or final rule had issued as of mid-September 2026. In a sale it matters mainly through 280E, since Schedule III activity is outside it, and sellers must decide whether to wait for an uncertain rule. See rescheduling status and what it changes and selling before or after rescheduling.

Schedule I / III

Schedule I and Schedule III are two of the five classes of the federal Controlled Substances Act. Schedule I covers drugs treated as having no accepted medical use and high abuse potential; Schedule III covers drugs with accepted medical use and lower abuse potential. Since the 28 April 2026 order, FDA-approved marijuana products and state-licensed medical marijuana are in Schedule III, while adult-use marijuana stays in Schedule I, as CRS explains. In a sale the schedule decides whether 280E applies. Schedule III status does not legalize interstate sales, open SBA lending, or change bank reporting. See federal cannabis law and business sales and the rescheduling impact calculator.