That’s the tax you'll shell out locally on a bag of cannabis-infused caramels.
According to record cannabis sales statewide, with more than $1 billion in retail sales last year alone, this is the price some folks are willing to pay to get relax, ease pain or sleep through the night.
The demand is padding Arizona and its local economies with coffers bulging with excise tax monies, the recreational-use marijuana tax through Proposition 207: 2021 sales of licensed recreational and medical marijuana hit $1.35 billion, $320 million more than the state’s medical-only dispensaries sold in 2020, according to the Arizona Department of Revenue.
Factor in that excise tax rate of 16%, and the increase suddenly makes sense. Not a bad boost for the state, and certainly a dynamic that affects Sahuarita, too.
Hana Dispensary in Sahuarita opened seven years ago, three years after medical marijuana was legalized. Medical users (ages 18 and up) were subject to paying regular state sales tax on their purchases, but nothing close to the rate that recreational adult (ages 21 and up) customers are shelling out now that cannabis is legal.
While slapping an excise tax on recreational purchases doesn't impact Hana as a business – they pay the same Transaction Privilege Rate either way – Hana's director of retail, Jill Rodriguez, admits pairing Sahuarita's 8.1% sales tax with the excise tax is significant.
“Those taxes are going to great things, we love community colleges,” she said, “but it’s costing them [customers] more money.”
Steph Vrona, Hana's associate marketing director, agreed.
“There are still significant benefits to obtaining or renewing your medical marijuana card, such as a lower tax rate on cannabis purchases, access to a greater selection of products and doses, and even legal protections for some,” she said. “We encourage many of our patrons to obtain or retain their medical marijuana card.”
But despite not having to pay the excise tax as an MMJ cardholder, statistics show a decline in card applications and use over time.
There were just under 130,000 medical marijuana (MMJ) card applications in 2016, according to the state Department of Revenue. Four years later, the number of applications had more than doubled. But in 2021, MMJ card applications – and medical marijuana sales – started declining. As of February 2022, the number of qualifying patients had decreased by 19% within the past year.
Hana has been affected, too.
“Mirroring the overall cannabis sales data in the state of Arizona, our store has seen a steady decline in MMJ (medical marijuana) cardholders," Vrona said. "Currently, we're seeing that about 25% of transactions at our stores are made by an MMJ cardholder,” she said.
Riding the tail end of the first year of COVID-19, the legalization of marijuana for recreational adult use came at a pivotal time.
“At the beginning of the pandemic we saw a significant increase in cannabis sales," Vrona said. "Covid-19 affected many people in many ways, including mental health. We saw a lot of new patrons looking for a healthy solution to cope with stress, depression, and anxiety,” she said.
The folks looking to Hana for a highly customized cannabis experience are mostly locals who spend around $70 to $80 per visit, depending on the season, according to Rodriguez.
“The majority of our patrons are local to the Green Valley and Sahuarita area," Vrona said.
"However, we do see a large number of patrons from more southern areas such as Nogales, Rio Rico, Amado, Arivaca and Tubac. We also have a pretty loyal following of patrons who make the drive from Tucson,” Vrona said.
What's to be done with local excise taxes?
Statewide, most of them will end up in Prop. 207's Smart and Safe Arizona Fund, which was designed to fund a variety of different purposes, including expunging pre-dating marijuana charges, pooling marijuana-related fees, civil penalties, excise taxes and penalties related to selling and testing marijuana. Any money left over is to be allocated to community colleges, municipal police and fire departments, fire districts and county sheriffs' departments, the Arizona highway user revenue fund and public and behavioral health.
Mark Febbo, communications director for the town of Sahuarita, said the town finance director estimated the collection of a total around $100,000 in Prop. 207 money by the end of the fiscal year.
As of June 13, the town had received $57,403 in Prop. 207 dollars, and was awaiting the second and final deposit any day.