Definitions and Frequently Asked Questions

General

See the Arizona Department of Health Services website for more information..

You will need to contact the Arizona Department of Health Services for assistance.

Medical marijuana dispensaries in Arizona are subject to state and local retail transaction privilege tax (TPT) on their sales of medical marijuana and other products sold at the dispensaries. They must therefore hold current TPT licenses with ADOR and file and pay retail TPT on these sales.

Adult use marijuana retail businesses in Arizona would be liable for filing and paying retail TPT on sales of adult use marijuana and other products sold at the businesses. They must therefore hold current TPT licenses with ADOR and file and pay retail TPT on these sales. However, in addition to TPT, adult use marijuana is also subject to a 16% state Marijuana Excise Tax (MET) which is reported on Form MET, not Form TPT-2. To be able to file and pay MET, an adult use marijuana retailer must register with ADOR in addition to applying for an adult use TPT license.

Dual use establishments in Arizona would be liable for filing and paying retail TPT on the sales of adult use marijuana, medicinal marijuana, and other products sold at the businesses. They must therefore hold current TPT licenses with ADOR and file and pay retail TPT.

View this video to learn how to properly file a power of attorney for a marijuana excise tax account.

How to Properly Complete a Power of Attorney for Marijuana Excise Tax

Licensing

Proposition 207 (the Smart and Safe Arizona Act) has become effective to govern the possession, sale, and taxation of adult use marijuana in Arizona. Marijuana is all parts of the plant, every compound, manufacture, salt, derivative, mixture or preparation of the plant or its seeds or resin. Marijuana products are composed of marijuana and other ingredients and that are intended for use or consumption, including edible products, ointments and tinctures.

Selling marijuana and products?

You must first contact the Arizona Department of Health Services (ADHS) to apply for a license. Once you receive your license to sell marijuana from ADHS,  you must apply for a license to report transaction privilege (TPT), excise and withholding tax by completing the Medical, Adult Use or Dual License Transaction Privilege/Use/Excise Tax Application (Form JTM-1) and mail to the address on the form.

Selling accessories or ancillary products (pipes, bongs, smoking devices, grow lights, etc.)?

If you are not selling marijuana, but you are selling accessories you will need a regular Transaction Privilege Tax (TPT) license with ADOR under the retail classification. For information on TPT, see https://azdor.gov/transaction-privilege-tax.

You must register to collect, file, and pay marijuana tax by completing Form JTM-1 and mailing the form and payment to the address on the form. You must obtain a marijuana excise tax license number and a marijuana transaction privilege tax license number.

 In Arizona, any business that wishes to sell medical marijuana or adult use marijuana products must first hold a license issued by the Arizona Department of Health Services (ADHS). Once the business has been issued a license from ADHS, the business can then apply for a transaction privilege tax (TPT) license with the Arizona Department of Revenue (ADOR). 

Even if a business already holds a TPT license, it should contact ADOR to make the necessary changes to the license that will allow it to file and pay taxes on sales of marijuana products. This is true even for existing medical marijuana dispensaries that have been filing and paying TPT on their sales, because these sales must be reported under a new business code. 

If the business holds an ADHS license that allows it to make adult use (non-medical) marijuana sales, the business must also register with ADOR to file and remit Marijuana Excise Tax (MET).

"Dual licensee" means an entity that holds both a nonprofit medical marijuana dispensary registration and a marijuana establishment license, both of which are issued by the Arizona Department of Health Services (ADHS). The term does not refer to any license issued by the Arizona Department of Revenue.

Collecting and Reporting

You must register to collect, file, and pay marijuana excise tax by completing Form JTM-1 and emailing the form to [email protected]. 

Adult Use Marijuana Retail businesses in Arizona are liable for filing and paying retail transaction privilege tax (TPT) on sales of adult use marijuana and other products sold at the businesses. They must therefore hold current TPT license(s) with ADOR to file and pay retail TPT on adult use marijuana sales and any non-marijuana sale separately on Form TPT-2.

In addition to retail TPT, retail sales of adult use marijuana are subject to a 16% state Marijuana Excise Tax (MET) on total sales to final customers which is reported on Form MET-1, not Form TPT-2. Medical marijuana is subject only to retail TPT and not MET.

An adult use marijuana retailer must be registered with ADOR for a transaction privilege tax license number and excise tax license number to link the two licenses for filing purposes.

Adult use marijuana retail businesses in Arizona are subject to a 16% state Marijuana Excise Tax (MET) on total sales to final customers which is reported on Form MET-1.

Report your Marijuana Excise Tax (MET) using the Arizona Marijuana Excise Tax Return (MET-1) reporting form. If there is no sale activity, the form must still be completed with zero sales but the inventory change schedule (Schedule 1) must still be completed as applicable.

The due date for filing the MET-1 form is the 20th of the month subsequent to the sale of the adult use marijuana and is deemed late if not received by the department within 10 calendar days of the due date.

You need: 

  • Total dollar amount of sales to final customers during the month being reported
  • Your linked Marijuana license number for the Adult Use Marijuana retail location 
    • An adult use marijuana retailer must separately register with ADOR for a TPT license number and the two licenses must be linked for filing purposes. 
  • The three−digit location code from your retail license number
  • A schedule of inventory changes for the reporting period must be completed. It includes: 
    • Sales amount, type of product sold
    • Unit of measure
    • Beginning inventory
    • Additions to inventory
    • Returns to manufacturer/processor
    • Transfers to other retail locations
    • Destruction of unsellable product amount
    • Samples and products used out of inventory.

An adult use marijuana business must determine which business code(s) to use on its TPT return based on the activity for which it derives gross receipts:

  • Receipts for Adult Use Marijuana Retail activity is reported using under business code 420.
  • Receipts for Adult Use Marijuana Manufacturing activity is reported using business code 017.
  • Receipts for Adult Use Cultivation activity is reported using business code 017 or 029.

Business code 203 for filing and payment of Medical Marijuana sales.  Sales of other items that are not marijuana should be reported using business code 017.

Yes.  Assuming your annual tax liability exceeds or will exceed $500, you are required to make electronic payments.  You can make electronic payments on AZTaxes.gov.  If you are unable to do so please contact the department for assistance.

You will report your gross receipts from sales of medical marijuana under business code 203 and enter any applicable deductions.  

If you also sell accessories, t-shirts, or any other tangible personal property, you should report your gross receipts from sales using business code 017.

You will report your gross receipts from sales of medical marijuana under business code 203 and enter any applicable deductions.  Then, you will report your gross receipts from sales of the accessories under 017 and enter any applicable deductions.

For adult use/recreational marijuana, you should file Form MET-1 as it relates to the 16% excise tax.  This should be completed first to determine your excise tax liability.  On Form MET-1, start with the net sales price (gross receipts less tax) and apply no deductions.

Next, you will report your gross receipts for adult use marijuana under business code 420 on the transaction privilege tax return and deduct the excise tax amount listed on Form MET-1 using deduction code 807. 

Then report your gross receipts for medical marijuana on the TPT return under business code 203 and enter any applicable deductions.

If you sell accessories or any other tangible personal property, you will report the gross receipts for those sales under business code 017 and take any applicable deductions.

Yes, you will report your gross receipts from sales using business code 017 and then deduct it out using deduction code 503, sales for resale.  Even though you do not have a tax liability when selling for resale, you must file a return monthly. You will document the exempt sale by obtaining Form 5000A from your customer claiming to resell your item.

A license by ADHS is only required if you sell marijuana or marijuana products as defined by statutes.  The statutory definition of marijuana and marijuana products specifically excludes industrial hemp products.  Products made from industrial hemp are not subject to the marijuana excise tax. See A.R.S 3-311(7) for the definition of industrial hemp. Although you will be required to collect and remit TPT on the sale of industrial hemp products as a retailer, an ADHS license is not required and marijuana excise taxes should not be collected on the sale of those products.

Terms to Know

Marijuana means all parts of the plant of the genus cannabis, whether growing or not, as well as the seeds from the plant, the resin extracted from any part of the plant, and every compound, manufacture, salt, derivative, mixture, or preparation of the plant or its seeds or resin.  It includes  cannabis as defined in A.R.S. § 13-3401.  It does not include industrial hemp, the fiber produced from the stalks of the plant of the genus cannabis, oil or cake made from the seeds of the plant, sterilized seeds of the plant that are incapable of germination, or the weight of any other ingredient combined with marijuana to prepare topical or oral administrations, food, drink, or other products.

Marijuana concentrate means the resin extracted from any part of a plant of the genus cannabis and every compound, manufacture, salt, derivative, mixture, or preparation of that resin or tetrahydrocannabinol. It does not include industrial hemp or the weight of any other ingredient combined with cannabis to prepare topical or oral administrations, food, drink, or other products.  

Marijuana products mean marijuana concentrate and products that are composed of marijuana and other ingredients that are intended for use or consumption, including edible products, ointments, and tinctures.

Gross receipts mean the total value collected or derived from the sale of marijuana, or any other item of tangible personal property, without any deduction on the cost of goods sold, expenses of any kind, or losses.  This includes taxes collected.

Net Sales to the final customer of marijuana or marijuana products means the sales price to the final customer and does not include taxes collected or factored.

Manufacturer means the performance as a business of an integrated series of operations that place tangible personal property in a form, composition, or character different from that it was acquired and transformed it into a different product with a distinctive name, character, or use.

Grower means the person who plants, cultivates and harvests the marijuana flower. 

Process and processing in relation to marijuana mean to harvest, dry, cure, trim, or separate parts of the marijuana plant.