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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
AMENDED
medical marijuana; pesticides; inspections; information
Purpose
Subject to voter approval, limits pesticide products used in cultivating medical marijuana. Authorizes the Department of Health Services (DHS) to inspect a nonprofit medical marijuana dispensary (dispensary) during normal business hours and requires DHS to share specified information with the Arizona Department of Revenue (ADOR) on request. Establishes the medical marijuana transaction privilege tax (TPT) classification.
Background
In 2010, Arizona voters approved the Arizona Medical Marijuana Act to establish a regulatory system for dispensaries to possess, cultivate, manufacture, transport, supply, sell or dispense medical marijuana to a qualifying patient or designated caregiver. A dispensary must register with DHS and is subject to DHS inspection upon reasonable notice (A.R.S. §§ 36-2801; 36-2803; and 36-2804).
Beginning November 1, 2020, a dispensary must test medical marijuana and medical marijuana products to confirm the potency of the marijuana and determine unsafe levels of microbial contamination, heavy metals, pesticides, herbicides, fungicides, growth regulators and residual solvents (A.R.S. § 36-2803).
TPT is a gross receipts tax levied on certain persons for the privilege of conducting business in Arizona and is imposed upon the seller of a taxable item. TPT is currently imposed on 16 separate business classifications, including the retail classification, which is taxed at a rate of 5.6 percent (A.R.S. § 42-5010). A 2011 Attorney General opinion determined that the proceeds of medical marijuana sales are taxable under the retail classification of TPT (Attorney General Opinion I11-004).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Replaces the requirement that DHS provide reasonable notice of an inspection to a dispensary with authorization for DHS to inspect a dispensary during normal business hours to determine compliance with the Arizona Medical Marijuana Act and related rules.
2. Limits, beginning November 1, 2020, pesticide products a dispensary may use in cultivating medical marijuana to pesticide products exempt from federal regulation under the minimum risk exemption regulations.
3. Establishes the medical marijuana TPT classification, comprised of the business of selling marijuana by a dispensary to be taxed at a rate of 5.6 percent.
4. Specifies that the tax base of the medical marijuana TPT classification is the gross proceeds of sales derived from the business.
5. Requires DHS, on request, to share with ADOR information regarding a registered dispensary, including:
a) the dispensary name, registry identification number and physical address;
b) the cultivation site and transaction privilege tax license number; and
c) information about the supplier and all sales data.
6. Prohibits DHS from sharing specific information collected from the dispensary regarding registered qualifying patients.
7. Allows DHS to suspend, revoke or refuse to renew the registration of a dispensary that does not comply with statutory tax requirements, as reported by ADOR.
8. Defines nonprofit medical marijuana dispensary.
9. Designates this legislation as the Medical Marijuana Reform Act.
10. Makes technical changes.
11. Requires the Secretary of State to submit the proposition to the voters at the next general election.
12. Becomes effective if approved by the voters and on proclamation of the Governor.
Amendments Adopted by Committee
1. Establishes the medical marijuana TPT classification, taxed at a rate of 5.6 percent.
2. Allows DHS to suspend, revoke or refuse to renew the registration of a dispensary that violates statutory tax requirements.
3. Defines nonprofit medical marijuana dispensary.
4. Makes technical and conforming changes.
Senate Action
COM 2/20/20 DPA 7-1-0
Prepared by Senate Research
February 24, 2020
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