An overwhelming majority (60%) of Arizona voters approved Proposition 207 (the Smart and Safe Act) in 2020, which legalized cannabis for adult use in the state. The successful 2020 measure came four years after voters in Arizona rejected a separate recreational cannabis legalization measure in 2016.
“Proposition 207 allows adults to possess up to 1 ounce of cannabis and to possess up to six mature plants at home. Cannabis sales are subject to the normal sales tax rate of 5.6% in addition to a 16% excise tax. The excise tax revenue is used to support regulation by the Arizona Department of Health Services and Department of Public Safety.” states the Marijuana Policy Project (MPP) about Arizona’s legalization and taxation model.
“The remaining revenue is split among the following: community colleges (33%), police and fire departments (31.4%), the state highway fund (25.4%), a justice reinvestment fund (10%), and the attorney general for enforcement (0.2%).” MPP also stated.
Before Arizona approved recreational cannabis legalization, the state had legalized medical cannabis. Proposition 203, which legalized medical cannabis in Arizona, was approved by voters by a narrow margin (50.13% voted ‘yes’) in 2011.
The first legal adult-use cannabis sale occurred in Arizona in January 2021. Much like other legal states in the Western U.S., Arizona’s combined medical and adult-use market value increased for a period, but has deflated in recent years.
“Marijuana sales in Arizona slid faster in the second quarter of 2025 than they did in the first quarter, marking the largest year-over-year decrease since voters approved recreational cannabis use in 2020.” reported AZMirror in its local coverage. “Combined sales for the state’s medical marijuana program and the adult-use market totaled about $298 million, a 13.7% dip over the same three-month period in 2024. That’s also $30 million less than in the first quarter. (Revised figures for the first quarter show its $328 million in sales was 9.1% lower than the prior year.)”
“The decline was led by a sharp drop in recreational cannabis sales in June. Adults purchased just $71 million of marijuana products for the month, almost $14 million less than they did in 2024. Those sales reports are likely to be revised upward next month, though how much the figure will increase remains to be seen.” the outlet also reported. “For the quarter, adult-use marijuana sales were $250 million — down almost $30 million, a 10.7% drop from last year.”
According to an analysis published in May 2025, the Marijuana Policy Project determined that legal recreational cannabis sales in Arizona generated $951,076,657 in tax revenue between January 2021 and March 2025.