“We are on pace to hit $250 million this year”
More than a decade ago, the seeds of a new industry were planted in the Grand Canyon State. Voters approved Proposition 203, which created Arizona’s medical marijuana program. The law allowed patients with qualifying conditions to purchase cannabis products from licensed dispensaries. To address demand for medical cannabis, the Arizona Department of Health Services (ADHS) was given regulatory powers over the nascent sector. In the years since, a robust cannabis industry has grown in Arizona within the bounds of Prop 203.
In 2020, the state’s voters returned to the ballot box to pass Proposition 207, which fully legalized recreational cannabis consumption for adults ages 21 and older. Medical dispensaries were able to apply for dual licensure, which meant they could begin selling cannabis that met Prop 207’s requirements to recreational users. The difference between the two types of users lies in the approved levels of tetrahydrocannabinol (THC), the psychoactive chemical that produces an intoxicated state when smoked, vaporized or ingested. Patients in the medical program are allowed to possess larger quantities of cannabis and can purchase edibles with higher concentrations of THC.
Recreational cannabis purchases also carry a higher tax than medical products. Both are subject to transaction privilege taxes — which are general retail sales taxes levied by the state, county and municipalities — but recreational purchases also include a 16% excise tax. According to the Arizona Department of Revenue, the state has received $115,701,426 from taxes collected through medical and recreational cannabis sales as of August 2021.
Sam Richard, executive director of the Arizona Dispensary Association, puts this revenue collection into perspective. “During the Prop 207 campaign, we said that within a few years, the entire cannabis program would contribute $300 million of tax revenue to the state. More than $115 million has been collected as of August, so we are on pace to hit $250 million this year,” he notes.
“The final revenue number will be more than just a doubling of the first half of the year, partly because we didn’t start recreational adult use sales until Jan. 22,” Richard explains. “Furthermore, not every dispensary with one of the state’s currently awarded 143 licenses is open and ready for business. In the last 30 or so days, two more dispensaries opened their doors, and over the course of the next 45 to 90 days, there’ll be at least three additional stores that begin operations.”
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