HB 2557 to be Amended to Tax Medical Marijuana 100%
I heard a news report on the radio yesterday that quoted Arizona state legislator Steve Farley as saying that HB 2557 will be modified to tax sales of medical marijuana a a mere 100%. Whoopee! See Ray Stern’s story called “Medical Marijuana Tax Proponent Aims Lower; State Rep. Steve Farley Now Wants 100 Percent Tax, Not 300 Percent.”
The following is the text of a February 7, 2011, report from the House Ways & Means committee about HB 2557. The Bill is now sponsored by only three legislators – Farley, Ash, Chabin:
Overview
HB 2557 creates a nonprofit medical marijuana dispensary transaction privilege tax classification and imposes a transaction privilege tax (TPT) and a use tax on dispensaries.
History
Approved by the voters at the November 2, 2010 general election, Proposition 203, known as the Arizona Medical Marijuana Act, allows qualifying patients with debilitating medical conditions to obtain certain amounts of marijuana from nonprofit medical marijuana dispensaries.
TPT is Arizona’s version of sales tax. Under this tax, the seller is responsible for remitting to the state the entire amount of tax due based on the gross proceeds or gross income of the business. While the tax is commonly passed on to the consumer at the point of sale, it is ultimately the seller’s responsibility to remit the tax. Currently, there are 16 different transaction privilege tax classifications that are mostly taxed at a rate of 6.6 percent (except the mining classification) of their respective tax bases.
Use tax is paid by persons who use, store or consume any tangible personal property upon which tax has not been collected by a retailer. Scenarios in which use tax is collected include out-of-state retailers or utility businesses making sales to Arizona purchasers, Arizona purchasers buying goods using a resale certificate where the goods are used, stored or consumed in Arizona contrary to the purpose stated on the certificate, or where a purchase is made in another state and the sales tax or excise tax imposed is less than the Arizona use tax rate.
fiscal impact
A fiscal note prepared in 2010 by the Joint Legislative Budget Committee for SB 1222 (medical marijuana; transaction privilege tax) estimated that annual reported medical marijuana sales in Arizona would be $25,500,000.
Provisions
- Establishes a transaction privilege tax classification for nonprofit medical marijuana dispensaries, comprised of the business of selling or dispensing medical marijuana to qualified patients.
- States that the tax base for the nonprofit medical marijuana dispensary classification is the gross proceeds or gross income derived from the business.
- Sets the tax rate for the tax base at 300 percent.
- Stipulates that anyone engaged in business as a nonprofit medical marijuana dispensary who sells other tangible personal property at retail must separately account for those sales.
- Specifies that if separate records of sales of other tangible personal property are not kept, the tax shall apply to the person’s entire gross proceeds or gross income from the business.
- Excludes the tax revenues collected under the nonprofit medical marijuana dispensary classification from being designated for the statutory distribution base of TPT revenues (A.R.S. § 42-5029).
- Exempts medical marijuana dispensed by a registered nonprofit medical marijuana dispensary from the TPT imposed under the retail transaction privilege classification.
- Levies an excise (use) tax on the storage, use or consumption of tangible personal property purchased from a nonprofit medical marijuana dispensary at a tax rate of 300 percent of the sales price.
- Specifies that for manufactured buildings used in the state but purchased outside Arizona, the tax rate is a percentage of 65 percent of the sales price.
- Makes technical and conforming changes.
Watch the video of the portion of the February 8, 2011, Ways & Means committee hearing dealing with HB 2557. Click on the last link on the bottom left.