Arizona’s Cannabis Industry Faces Tough Times with Q1 Sales Down 13% from 2024 Highs

Arizona’s marijuana sales continued to decline in the first quarter of 2025, with a notable drop of over 13% compared to the previous year. This downturn was primarily driven by a significant decrease in recreational cannabis sales, which plummeted to $82 million in March—nearly $20 million less than in March 2024. While sales figures may be revised next month, such adjustments usually reflect minor changes.

In the first three months of 2025, total adult-use marijuana sales reached $261 million, marking a decrease of more than $27 million or 9.6% from the same period last year. The medical marijuana sector fared even worse, experiencing a staggering 28.3% year-over-year decline. Medical sales for the quarter totaled $52 million, almost $21 million lower than in 2024.

The combined sales of medical and recreational cannabis in 2024 stood at $1.3 billion, a figure almost 10% lower than in 2023 and approximately 14% less than in 2022. As the market matures, the disparity between medical and recreational sales keeps widening. In 2021, when recreational sales first initiated, medical purchases accounted for 48% of the market. However, as the adult-use market grew, its sales surged to 66% in 2022, 73% in 2023, and then to 81% in 2024. Consequently, medical sales now contribute less than one-third of what they did at the industry’s inception.

The state imposes a 16% excise tax on recreational marijuana, in addition to a 5.6% sales tax, while medical patients only pay the standard sales tax. Local governments add approximately 2% to all marijuana sales. Revenue from this excise tax supports various initiatives, including community colleges (33%), public safety (31%), and the Arizona Highway User Revenue Fund (25%). Furthermore, 10% is allocated to the justice reinvestment fund, aimed at providing necessary services in communities negatively impacted by marijuana criminalization.

In 2024, total cannabis tax collections reached nearly $190 million. Of that, about $170 million originated from adult-use sales, while just over $20 million came from medical marijuana transactions.