Do AZ Cities That Ban Marijuana Still Get Tax Revenue from Statewide Sales?

AZ Recreational Cannabis

Arizona dispensaries will be able to sell recreational marijuana by April 5, 2021. However, many cities are banning aspects of the recreational marijuana market, whether it be the use, sale, delivery, and/or cultivation of it.

Will the Arizona cities that ban recreational marijuana sales still receive tax revenue from marijuana sales that happen around the state?

This issue is playing out in Oregon, the Associated Press reported:

A county in Central Oregon has filed a complaint against the state over marijuana tax revenue the county believes it should be paid, despite its moratorium on marijuana processing and growing facilities.

Deschutes County’s legal department filed a complaint in state tax court against the Oregon Department of Revenue, the Oregon Liquor Control Commission and Department of Administrative Services, The Bulletin reported.

Marijuana tax revenue has not been paid to the county since the Deschutes County Commission placed a moratorium on approving new marijuana processing and producing facilities in August 2019. And in November, residents voted to uphold the moratorium.

But, a county only receives the tax revenue if it allows all licensed recreational cannabis activity to happen in the county, according to Mark Pettinger, a spokesman for the Oregon Liquor Control Commission.

In response to the legal complaint, Pettinger said the commission did not have a comment “because it’s a legal matter.”

Before the moratorium, the county was receiving about 4% of the revenue from the state’s cannabis revenue fund that gets shared with the counties. If the moratorium was not in place, the county would have received roughly $514,000 from December 2019 to this September, said Richard Hoover, a spokesman for the state Department of Revenue.

The county is asking the state to declare the statute does not preclude Deschutes County from receiving its disbursements from the state’s marijuana tax revenue fund, given that the moratorium and the opt -out election did not impact existing marijuana-related facilities, according to the court filing.

The Department of Administrative Services and the Department of Revenue did not respond to requests for comment.

To date, multiple Arizona cities and towns — including Chandler, Gilbert, Mesa, Sahuarita (near Tucson), Scottsdale, and Yuma — have put some type of restriction on recreational marijuana whether it be the use, sale, delivery, and/or cultivation. It is very likely that these cities are forfeiting some or all of the tax revenue generated from the state’s 16% excise tax on recreational marijuana sales.

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