Rec’ing Ball: Recreational cannabis filling state coffers as weed sales get higher

Despite an industry-wide whiplash start to adult-use recreational sales in January, the marijuana market in Arizona is righting itself and filling state tax coffers with infusions of cannabis cash that will only continue to rise as the recreational market matures.

The preliminary numbers are likely to adjust upwards as dispensary owners learn the ropes of the new system, but at first blush, tax revenues collected by the Arizona Department of Revenue are quickly accruing as sales continue to rise.

Through July, ADOR received more than $95 million in tax revenues from overall pot sales, based on a preliminary report posted to a new webpage on the department’s website.

That total comes from a 22% sales tax on recreational purchases, compared to a 6% sales tax on medicinal. (Recreational customers pay an additional 16% sales tax on top of the 6% that medical customers pay, in addition to local taxes.) Broken down, the recreational sales tax brought in nearly $25 million while the state’s medical program generated nearly $30.5 million overall during that time.

Adult-use sales for the first six months of the year—sales that began on Jan. 28—totaled nearly $248 million, while on the medical side from January to June the total was about $363 million.

 
According to Prime Leaf CEO Brian Warde, once dispensary owners learn to navigate the new tax system, those numbers should only increase in the last two quarters of the year.

“Something that’s kind of lost is that Arizona was the fastest rec market rollout of any state that’s [legalized adult-use],” he said. “I think those numbers are actually going to go up substantially over the third and fourth quarter just because you had a January turn date, and most dispensaries didn’t [start recreational sales right away]. The other side of that is, it takes time for people to understand how the state wanted those tax dollars reported.”

Warde, who has been in the business since 2014 and opened his second Prime Leaf location on Park Avenue about a year ago, has seen 10% to 15% growth on the recreational side, but thinks that will level out and patients will remain in or return to the medical side due to possession limits, as senior citizens and veterans are more likely to remain in the medical program. Warde also believes there will be growth in the target demographic, 25- to 30-year-old males, entering the MMJ program to allow them access to higher THC concentrates.

“A core group of the medical patients will stick around,” he said. “A third of our patients prefer concentrates, and it’s much more cost-effective. I don’t think that’s ever going to go away: It might actually grow a little bit on the medical side and probably hold, but you’re definitely going to see there’s going to be a transition.”

According to the ADHS, as of the end of July, there were 313,906 qualified medical marijuana patients, with 1,857 new applications and 740 renewals in July. Year-to-date, more than 19,000 people applied for the first time and nearly 1,000 had renewed in 2021, as the first round of two-year certifications expired. 

 

In July alone, medical patients purchased nearly 12,000 pounds of cannabis, with 10,418 pounds in leaf, 193 pounds in edibles and 1,373 pounds in other types of cannabis.

Medical cannabis sales for the year through July totaled 96,923 pounds of various types of weed.

As to the future of the market in Arizona, Warde is preparing for more growth as his organization gears up to do more marketing on the recreational side and works to streamline the process to continue to provide a steady supply of weed to both medical patients and adults who enter his dispensaries.

“I think Arizona is set to be one of the quickest to the $1 billion [in annual] sales mark,” he said. “It took Colorado two or three years to get there, if anybody wants to put it into historical perspective. This is a fast-growing market and it’s going to continue to go up for quite some time.”

As the calendar turns to the end of 2021, Prime Leaf will continue its work within the community, sponsoring events and working with the Tucson Symphony, preparing to compete in an industry that will not allow anyone to rest on their laurels.

“It’s been one of the most chaotic years in history, at least in my history,” he said. “But we had lived through that and to make the switch [to adult-use] was pretty impressive. I was impressed by my team.”

In addition to his work with the Tucson Symphony Orchestra, Warde throws in his support for several other nonprofits, including the Therapeutic Ranch for Animals and Kids, the Crohns and Colitis Foundation and several other music and festival nonprofits. Warde is also president of the board of directors for the Tucson Heirloom Farmers Markets. 





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