Arizona Cannabis Industry Faces Second Straight Year of Sales Decline

The Arizona marijuana market is experiencing a significant downturn, with total sales dropping nearly 10% in 2024. This decline marks a departure from three consecutive years of at least $1.4 billion in legal cannabis sales and represents a second consecutive year of reduced revenue.

Total marijuana sales for the year amounted to $1.3 billion, which is almost a 14% decrease from 2022’s record of $1.5 billion. As the industry matures, the gulf between medical and recreational cannabis sales is widening. In 2021, when recreational sales began, the two segments were nearly on par, with medical users accounting for 48% of total purchases.

However, the recreational segment quickly gained traction. By 2022, it commanded nearly 66% of total sales, rising to 73% in 2023 and reaching 81% in 2024. Consequently, medical marijuana sales have plummeted to less than a third of what they were during the inaugural year of recreational sales.

In 2024, recreational sales hit nearly $1.1 billion, down by almost $43 million from the previous year. Medical marijuana sales saw a staggering drop of $114 million, declining nearly 40% from 2023. With only $243 million in sales to medical cardholders, the sector is now a mere shadow of its former self, compared to over $733 million sold in 2021.

The state collects a 16% excise tax on recreational sales, in addition to a standard 5.6% sales tax. In contrast, medical patients only pay the state sales tax, while local jurisdictions typically impose an additional 2% tax on all marijuana transactions.

Revenue generated from the excise tax plays a vital role in funding community initiatives. One-third is allocated to community colleges, while 31% supports public safety initiatives, including police and fire departments. Additionally, 25% goes to the Arizona Highway User Revenue Fund, and 10% is earmarked for a justice reinvestment fund aimed at providing services to communities disproportionately impacted by marijuana-related arrests.

In total, cannabis tax collections for 2024 approached almost $190 million, with roughly $170 million derived from adult-use sales and a little over $20 million resulting from medical purchases.