A marijuana plant

Colorado officials, pot businesses clash over inventory tracking

On the cusp of recreational marijuana sales in Colorado, business owners and state regulators are at odds over a high-tech system that is supposed to track the substance from seed to sale.

The inventory tracking system is incompatible with software many stores already use and requires the purchase of nonreusable tags from the state’s contractor, prompting industry complaints about cost, waste and monopolization.

But state officials say their goal is to enforce the rules, and keeping things simple improves the odds of success when recreational-pot shops open Jan. 1.

“There’s a lot of misinformation out there,” said Julie Postlethwait, spokeswoman for the state Marijuana Enforcement Division. “It’s not the big bad scare everyone is expecting.”

The program Marijuana Inventory Tracking Solutions, or MITS, was supposed to be in place after the state began regulating medical marijuana in 2010. But budget shortfalls led to the program’s being mothballed.

So far, the state says it has paid about $1.2 million to its contractor, Franwell Inc. of Lakeland, Fla., to develop the tracking system.. Company officials began training business owners Nov. 12 and are expected to finish this week.

Postlethwait said owners have begun entering data into MITS and ordering radio-frequency identification tags bearing 24-digit unique codes they must attach to plants and packaging.

State enforcement officers can walk into businesses on compliance checks, point an RFID gun at plants and product and instantly confirm through MITS whether all is where it should be.

Businesses must input data into MITS to document transfer of medical marijuana inventory to the recreational side, and then account for all marijuana moved from grow to center to customers and patients on a daily basis.

All medical marijuana businesses — not just those expanding into recreational pot sales — are required to use MITS by Dec. 31.

Many businesses complain that their existing inventory software will not be fully integrated with MITS, at least initially.

Ryan Cook, general manager of The Clinic medical marijuana centers, said information must be entered manually daily because his tracking software isn’t integrated with the state’s.

He said The Clinic may need to hire an employee at each of its 11 locations — which includes dispensaries and grows — to plug in data.

“We’re all on board. We want the tracking,” Cook said. “We want to get through this. We just don’t want to make it where it’s so cumbersome that companies can’t do it.”

Amy Poinsett, CEO of MJ Freeway Software Solutions, whose product is used by The Clinic and dispensaries across the state, said Franwell has indicated it can start uploading daily sales numbers through other systems as soon as week’s end. But there is no time- table on fully integrating the systems.

“I wish we could say we were fully integrated now, but I know Franwell is doing everything they can to get us there,” she said.

Franwell officials did not respond to requests for comment.

The state is drawing criticism for requiring businesses to purchase tags from Franwell and not reuse them, which business owners say could lead to higher prices and fuel the black market.

“It’s incredibly expensive to comply with this,” said Mike Elliott, executive director of the Medical Marijuana Industry Group. “Businesses just want to be able to go out and find the best deals they can on these tags.”

Business owners also say a prohibition on transfers of more than 1 pound of marijuana per package will require them to buy more bags and more tracking tags.

Postlethwait, with the marijuana enforcement division, said the state worked hard to get tag costs down to 45 cents for plant stakes and 25 cents for packages. She said each tag is designed to be resistant to indoor grows’ tropical environment.

The division will consider outside vendors and recycling tags in the future, but for now regulators want to make sure the system works, she said.

State officials repeatedly told industry officials not to spend money on tracking software expecting to meet a regulatory mandate, Postlethwait said. Some still use pen and paper, she said.

While the state has agreed to at least 10 industry requests for tweaking the system, she said, “This isn’t a system for the industry. This is one of the regulatory mandates they have to meet.”

In some corners of the industry, doubts persist about whether the tracking will stop marijuana from flowing out of state.

“People can have plants all over and not tag them,” said Mitch Woolhiser of Northern Lights Cannabis Co. in Edgewater. “Sure, it’s on a camera. But until someone comes looking and conducts an audit, no one is going to know.”

Toni Fox, owner of 3-D Cannabis Center in Denver, has no complaints over the cost of the tags or the system.

“If that is what it’s going to take to show the rest of the world we are trying to track every marijuana pot out there, we will do whatever we have to do,” she said. “I will do whatever they tell me to do.”

Eric Gorski: 303-954-1971, egorski@denverpost.com or twitter.com/egorski

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