Despite Recreational Legalization, Arizona Has More Medical Pot Patients Than Ever

Arizona dispensaries sold nearly $3 million in recreational weed at the end of January.
Arizona dispensaries sold nearly $3 million in recreational weed at the end of January. Jacob Tyler Dunn
The number of registered medical marijuana patients in Arizona topped 300,000 for the first time ever last month — a record that comes even as recreational sales clearly make a dent in the medical side.

In spite of the record-high number of patients, the latest report from the Arizona Department of Health Services shows also shows that medical marijuana sales were lower in February 2021 than they were the previous February. It appears to be the first drop in year-over-year medical marijuana sales figures since dispensaries opened in 2013.

But the stores definitely sold more total marijuana for February this year, combining medical and recreational sales. Exactly how much can't yet be determined. But tax figures from the Arizona Department of Revenue show that dispensaries sold $2.9 million worth of recreational weed alone in the last 10 days of January.

The new law means anyone 21 and older can now buy and possess up to an ounce of flower, or up to five grams of concentrated cannabis. Many dispensaries began offering recreational sales to the public on January 22, while others started in February.

The state releases monthly taxable sales figures, but how much pot is now being sold by Arizona's 123 currently operating dispensaries won't be as easy to calculate as it has been in the past. The weight of sold cannabis doesn't correspond directly to revenue figures, and going forward, the tax department's monthly figures will be skewed by the fact that dispensaries may miss reporting some months or may file late for several months.

Observers of Arizona's state-legal marijuana industry have gotten used to seeing detailed monthly reports from the state DHS, which oversees the pot programs. Those reports will keep coming, the state says, but won't include any information about recreational sales. The reason is simple: The Arizona Medical Marijuana Act that voters approved in 2010 required the state to develop a verification system to track and report certain details about the program, like patient numbers and their qualifying conditions, and the dispensaries have to report their sales totals. But the Smart and Safe Act approved in November doesn't have any such requirements.

"Since this information is not reported to the Department, we will not be able to produce reports for adult use sales data," said DHS spokesperson Holly Poynter.

According to the January and February DHS reports:

* The number of patients hit a new milestone in February with more than 300,000 patients. That means Arizonans remained interested in the medical program even after recreational sales began. But interest could be slowing down. The total number of patients in February, 301,612, is an increase of only 0.86 percent increase over January's total of 299,054 patients. Last year, February's total patient number was 1.5 percent higher than in the previous month.

* Dispensaries sold 214,500 total ounces of cannabis products in February, including flower, edibles, and concentrates. That's about a 10 percent decrease compared to February of 2020, and a radical change from the normally large year-over-year increases. The February 2020 total of 238,183 total ounces, for instance, was 28 percent higher than the total in February 2019. But, to repeat, those are just the medical-side numbers — dispensaries are undoubtedly selling more cannabis now than ever under the recreational law.

Sam Richard, executive director for the Arizona Dispensaries Association, agreed that the dip in medical marijuana sales reflects the shift to recreational sales, but said it's difficult to quantify that shift. Despite the increase in patients, some patients must not have renewed their medical cards and chosen to buy as recreational customers instead. Richard says he will also look at the state revenue department's monthly figures to help determine how the industry as a whole is doing.

Combined, medical and recreational marijuana sales brought in $2,077,436 in total taxes for January.

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"The net gain has been significant" since recreational sales started, he said, but the medical program is likely to stay "quite strong" for the foreseeable future.

New data from the revenue department show $16,012,587 in medical marijuana sales for January was reported by dispensaries, and an additional $2,904,762 reported for recreational sales. So, with recreational sales only being available for 10 days in January, it took up 15 percent of dispensaries' total sales. The percentage of recreational sales compared to medical will be much higher for February, when those numbers get released.

The revenue department's monthly report details how much money the state made in transaction privilege tax (TPT), otherwise known as sales tax. Medical marijuana users pay sales tax, which is 5.6 percent for the state, plus another percent or so for county and city tax. Recreational customers also pay a 16 percent excise tax.

Combined, medical and recreational marijuana sales brought in $2,077,436 in total taxes for January. That includes $226,355 in recreational sales tax and another $522,520 in recreational excise tax.

The Department of Revenue classifies medical marijuana taxes under Code 203, the proposition number for the 2010 medical marijuana act, and recreational taxes under — that's right — Code 420.

Michelle Carella, DOR spokesperson, said the department reserved the number 420 a few years ago, when it seemed clear tax-producing marijuana would be a reality at some future date. Now that the time has come, tax officials wanted a label that would be "a little special, to make it easier for taxpayers to remember."
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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.
Contact: Ray Stern