Kendra Langford Shaw loved running a small business.

It was a part-time endeavor with only six customers. Her product was medical marijuana, which she felt her customers relied on for their well-being.

When new regulations brought more costs in 2018, she thought things still might pencil out. She worked to comply with new state laws and had an inspection of her grow operation in the basement of her Billings home. She told her cardholders they had to look elsewhere.

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In its first year of taxing the medical marijuana industry, Montana raked in over a million dollars in revenue.

The state of Montana collected $1.8 million in the first year of taxing the medical marijuana industry, according to government officials. The Montana Department of Revenue also reported that the state’s medicinal cannabis businesses had generated approximately $45 million in sales during the first year of taxation.

State revenue director Gene Walborn told local media that the department was happy with the rollout of taxes on Montana’s medical marijuana industry.

Medical marijuana providers in Montana will start testing, labeling and tracking their products as new rules take effect Tuesday for state officials to keep close tabs on pot plants from seedlings until they’re sold.

The sweeping regulations cover everything from employee ID badges to pesticide testing, and aim to regulate the industry after voters in 2016 reversed severe restrictions previously passed by lawmakers.

Kate Cholewa, spokeswoman for the Montana Cannabis Industry Association, said the providers who make up her organization’s membership have been preparing for the new rules but won’t know if they are fully in compliance until they are inspected.

“I think people are as ready as they can be,” she said.

Because of concerns from Montana’s lawmakers, this state’s medical marijuana program might be delayed.

Montana’s legislature seems to be suffering from some last-minute indecisiveness just weeks before the state implements changes to rules governing legal medical cannabis. Slated to take effect on April 10, now this state’s medical marijuana program might be delayed.

The hangup has to do with rules governing the production end of the cannabis industry. The concern from lawmakers is that larger producers can grow so much cannabis, they’ll drive out smaller producers.

Montana Lawmakers Say “Canopy Limit” Rules Are Bad For Small Businesses

The state health department tweaked its medical marijuana program rules for testing, fees and other areas before releasing its final draft Feb. 9.

The rules define much of the inner workings of the multimillion-dollar industry, adding to a 2016 ballot initiative and a bill in the 2017 Montana Legislature that set up the system.

The rules specify what kinds of contaminants labs will test for in the marijuana, how providers will secure their businesses and how marijuana will be labeled, among other things.

Despite snowy conditions in Helena on Friday, dozens of people visited the Montana State Capitol to take part in a statewide conference on the medical marijuana industry.

Organizers said the Montana Cannabis Conference is intended as a free educational event for people involved in the industry and for those who simply want to learn more about it.

“We wanted to give a one-day ability for folks to learn about farming and cultivation science and testing labs and medicine,” said state Rep. Ellie Hill Smith, a Democrat from Missoula and a board member of The Cannabis Way, Montana Chapter, a nonprofit group that sponsored the event.

The state health department has drafted proposed regulations for the medical marijuana industry, setting rules for quality testing, tracking and increasing fees.

The Department of Public Health and Human Services plans a public hearing in Helena on Nov. 30.

Agency spokesman Jon Ebelt says the state sought input from Montana providers and researched practices in states that have legalized marijuana use.

Under the rules, providers would have to have their products tested for levels of THC along with metals and pesticides.

Annual licensing fees would be $5,000 for providers with more than 10 registered patients, $1,000 for smaller providers and $2,000 for testing labs. The patient fee would be raised from $5 to $30.

The state health department released a pack of proposed rules for the medical marijuana industry, which will be the subject of a public hearing later this month.

The rules provide new information about how the industry would be regulated in areas like employment, product tracking and testing, security and fees. They focus on the production, sales and testing side of the business rather than patients.

Health department spokesman Jon Ebelt said in an email that DPHHS took input from the Montana industry and researched practices in "all states" that have marijuana programs.

Twenty-nine states have legalized recreational or medical marijuana. Ebelt said they provided blueprints, especially for more intensive parts of the Montana program like testing.

Montana medical marijuana providers paid about $300,000 in taxes for the first quarter, which ended in September.

The tax was the first of its kind on the Montana medical marijuana industry, which is seeing a resurgence in enrollment after the passage of more comprehensive regulatory laws this spring.

About 315 providers made tax payments at 4 percent on their gross sales receipts.

"It works out to be about $7.5 million in gross revenues," said Mary Ann Dunwell, spokeswoman for the Montana Department of Revenue.

Dunwell said that most providers paid an average of $800 in taxes for that first quarter. But a few of the larger providers had large tax bills.

One provider brought $30,000 in cash to the revenue department in Helena, Dunwell said.