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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
AMENDED
medical marijuana; pesticides; inspections; information
Purpose
Subject to voter approval, makes various changes to the Arizona Medical Marijuana Act (AMMA) relating to the use of pesticides for cultivating medical marijuana, inspections of nonprofit medical marijuana dispensaries (dispensaries) and authorized uses of Medical Marijuana Fund (Fund) monies. Requires the Arizona Department of Health Services (DHS) to develop warning labels for medical marijuana. Establishes the medical marijuana transaction privilege tax (TPT) classification.
Background
In 2010, Arizona voters approved the AMMA 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 may be an impact to the state General Fund (GF) as a result of requiring state TPT revenues from the medical marijuana classification to be credited to the state GF and annually appropriated to the Arizona Health Care Cost Containment System (AHCCCS). Currently, medical marijuana is taxed under the retail TPT classification, and distributed to municipalities, counties and the state GF pursuant to a statutory formula.
Provisions
Medical Marijuana TPT Classification Requirements and Revenues
1. 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.
2. Specifies that the tax base of the medical marijuana TPT classification is the gross proceeds of sales derived from the business.
3. Requires the State Treasurer to credit, from the TPT distribution base, the total amount of state TPT revenues received from persons conducting business under the medical marijuana classification to the state GF.
4. Requires the Legislature to annually appropriate monies credited to the state GF from medical marijuana TPT revenues to the AHCCCS for non-Medicaid seriously mentally ill services.
Medical Marijuana Warning Labels
5. Requires DHS to develop warning labels based on the U.S. Department of Health and Human Services Office of the Surgeon General's warnings on marijuana.
6. Directs DHS to require the labels to be affixed to the packaging of any medical marijuana dispensed to a qualified patient or designated caregiver.
Fund Monies and Marijuana Research Study Grants
7. Authorizes Fund monies to be used for grants relating to marijuana research studies.
8. Requires DHS to provide grants from Fund monies for marijuana research studies on the safety and efficacy of using marijuana for medical purposes and the side effects of marijuana, specifically focused on the:
a) relationship between marijuana use and schizophrenia; and
b) correlation between marijuana use and violent behavior, considering specified factors.
9. Exempts marijuana research study grants from statutory requirements relating to the solicitation and awarding of grants.
10. Requires DHS to post all research conducted using marijuana research study grants on the DHS website.
11. Prohibits a person who receives a grant for a marijuana research study and any of the person's employees, when working on the research study, from being charged with or prosecuted for possession of marijuana that is cultivated for medical use.
Information Sharing
12. Requires DHS, on request, to share with the Arizona Department of Revenue (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.
13. Prohibits DHS from sharing specific information collected from the dispensary regarding registered qualifying patients.
DHS Special Services Unit
14. Requires DHS to establish a special services unit to ensure compliance with the Medical Marijuana Act.
15. Requires the special services unit to have at least one peace officer who may assist with criminal investigations and coordinate with law enforcement agencies.
Miscellaneous
16. 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 AMMA and related rules.
17. 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.
18. 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.
19. Defines nonprofit medical marijuana dispensary.
20. Designates this legislation as the Medical Marijuana Reform Act.
21. Makes technical changes.
22. Requires the Secretary of State to submit the proposition to the voters at the next general election.
23. 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.
Amendments Adopted by Committee of the Whole
1. Requires DHS to develop warning labels based on the U.S. Department of Health and Human Services Office of the Surgeon General's warnings on marijuana.
2. Requires DHS to require the labels to be affixed to the packaging of any medical marijuana dispensed to a qualified patient or designated caregiver.
3. Requires the State Treasurer to credit the total amount of state TPT revenues received from persons conducting business under the medical marijuana classification to the state GF.
4. Requires the Legislature to annually appropriate monies from medical marijuana TPT revenues to the AHCCCS for non-Medicaid seriously mentally ill services.
5. Requires DHS to provide grants from Fund monies for marijuana research studies and post all research conducted using the grants on the DHS website.
6. Exempts grants provided for marijuana research studies from statutory requirements relating to the solicitation and awarding of grants.
7. Prohibits a person who receives a marijuana research study grant and any of the person's employees when working on the research study from being charged with or prosecuted for possession of marijuana that is cultivated for medical use.
8. Requires DHS to establish a special services unit with at least one peace officer who may assist with criminal investigations and coordinate with law enforcement agencies to ensure compliance with the Medical Marijuana Act.
9. Makes technical and conforming changes.
Senate Action
COM 2/20/20 DPA 7-1-0
Prepared by Senate Research
March 5, 2020
MH/gs