What Are the Cannabis Licensing Requirements in Arizona? (May 2024)

Arizona, often renowned for its arid deserts and stunning landscapes, has emerged as a significant player in the evolving cannabis industry. Both medical and adult-use marijuana are legal in the state, with clear regulations governing their use, distribution, and cultivation. Let's dive into the details of Arizona's cannabis licensing requirements, covering both medical and recreational aspects.

Medical Marijuana in Arizona

Arizona entered the world of medical marijuana in 2010 when it legalized the use of cannabis for patients with specific qualifying conditions. Physicians have the authority to prescribe “allowable amounts” of marijuana, typically set at 2.5 ounces of usable marijuana every two weeks. Impressively, as of January 2022, over 280,000 Arizona residents have registered as medical marijuana users. The delivery of medical marijuana to qualified patients is allowed, provided dispensaries adhere to the established guidelines.

Employment protections are also in place for qualified medical patients. Employers cannot discriminate against or penalize employees based on their medical marijuana cardholder status. Furthermore, patients cannot face penalties for testing positive for marijuana unless they used it at their workplace or during working hours.

Adult-Use Marijuana in Arizona

On November 30, 2020, Arizona voters ushered in a new era by legalizing the commercial sale and adult-use of recreational marijuana through Proposition 207, also known as the Smart and Safe Act. Remarkably, Arizona achieved a historic milestone as it swiftly transitioned from voter approval to the state-licensed sale of marijuana. The first state-licensed sale of adult-use cannabis occurred on January 22, 2021.

Under the Smart and Safe Act, recreational users can possess up to one ounce of marijuana, with up to five grams in the form of marijuana concentrate. Additionally, adults are permitted to grow up to six cannabis plants at home and can transfer the same amounts to other adults over the age of 21, provided it's not in exchange for payment. Notably, there's a 16% excise tax levied on the retail sale of adult-use marijuana, though no such tax applies to medical marijuana sales.

Regulation and Licensing

The Arizona Department of Health Services plays a pivotal role in overseeing the licensing of marijuana establishments, which includes retail locations, off-site cultivation, and off-site manufacturing facilities, as well as marijuana testing facilities. The department operates under specific rules, including limitations on the number of licenses issued.

Obtaining a marijuana establishment license is a mandatory requirement for anyone or any entity intending to engage in commercial marijuana cultivation within the state. Arizona Revised Statutes (A.R.S) Section 36-2850(18) defines a marijuana establishment as an entity authorized by the Arizona Department of Health Services (ADHS) to operate the following facilities:

• A single off-site growing location where the license holder can cultivate marijuana, process marijuana, and manufacture cannabis-infused products. However, this facility is not allowed to sell or transfer marijuana and marijuana products directly to consumers.
• A single retail location where the license holder can cultivate marijuana, process marijuana products, and sell marijuana and marijuana-infused products directly to consumers.
• A single off-site location where the licensee can manufacture marijuana products, package, and store marijuana-infused products. However, this facility cannot sell or transfer marijuana and marijuana-infused products to consumers.

Cultivation for Personal and Medical Use

Under the Smart and Safe Act (Proposition 207), adults aged 21 and older in Arizona are permitted to cultivate up to six cannabis plants for personal and recreational use. In households with two or more adults, a maximum of 12 plants can be grown. Similarly, the Arizona Medical Marijuana Act (Proposition 203) allows registered medical patients to grow up to 12 marijuana plants for personal medical use if they reside more than 25 miles from the nearest marijuana dispensary. It's important to note that these plants must be kept out of public view, preferably in locked containers. Commercial marijuana growers, like individual growers, must adhere to specific regulations and can only cultivate marijuana plants in enclosed and securely controlled spaces, obviating the need for a separate cultivation license.

Types of Cultivation Licenses

Arizona offers a single type of license for marijuana cultivation, known as the marijuana establishment license. To become a marijuana grower in Arizona, an individual or entity must first own a dispensary. While technically Arizona primarily issues dispensary licenses, the state provides registration options allowing licensees to cultivate marijuana. This requires submitting supplementary applications for cultivation.

Eligibility to Cultivate Marijuana in Arizona

In Arizona, the license for commercial-scale marijuana cultivation is granted to adults aged 21 and older who have been residents of the state for at least three years prior to their application date. Medical dispensaries that also cultivate marijuana must employ Arizona-licensed doctors to oversee their cultivation sites.

Working at any state-licensed marijuana establishment in Arizona requires holding a valid marijuana facility agent license. A marijuana facility agent is typically an individual (employee, board member, principal officer, or volunteer) of a marijuana establishment who is at least 21 years old and does not have a conviction for an excluded felony offense.

Additionally, registered medical patients in Arizona can grow up to 12 marijuana plants at home for personal use, provided they live more than 25 miles from the nearest marijuana dispensary. Proposition 207 also permits adults aged 21 and older to cultivate up to six marijuana plants (or up to 12 in households with two or more adults) for recreational purposes.

How to Obtain a Marijuana Cultivation License in Arizona

To apply for an Arizona marijuana cultivation license, an individual or entity must first become a dispensary. Arizona initially issued marijuana business licenses between January 19, 2021, and March 9, 2021, to early applicants who applied through the Marijuana Facility License Portal. Afterward, these applicants received marijuana establishment licenses through a random selection process. Early applicants may include entities aiming to operate a marijuana establishment in counties with fewer than two registered active nonprofit medical marijuana dispensaries or registered nonprofit medical marijuana dispensaries in good standing with the Arizona Department of Health (ADHS). Good standing means they are not subject to a pending Notice of Intent to Revoke from the ADHS.

To obtain an initial marijuana establishment license for cultivation, applicants must electronically submit the following to the ADHS during an open application period:

• Detailed information as specified by the ADHS, including the proposed marijuana establishment's legal name, county, and location address.
• Applicant's information, including the entity's name, business type, mailing address, contact information, and the names, birth dates, and residence addresses of each principal officer or board member (for non-publicly traded entities).
• An attestation of the accuracy of the information provided.
• Consent for the ADHS to request additional information.
• A declaration to abide by all A.R.S. Title 36, Chapter 28.2 requirements.
• Information about principal officers eligible for at least 10% of the establishment's profits (for publicly-traded entities).
• Signatures of each board member and principal officer, along with dates.
• A statement from the municipality certifying compliance with local zoning restrictions.
• Marijuana facility agent license documents for each listed principal officer or board member.

Applicants must also provide documentation from a financial institution confirming that they or a principal officer or board member have at least $500,000 in liquid assets, per A.R.S. § 6-851, under their control for a minimum of 30 days before the application date. Proof of good standing from the Arizona Corporation Commission (ACC) is required, along with documentation regarding the physical location's ownership and authorization from the landlord.

Application and Approval Process

Applicants must submit their applications via the Marijuana Facility License Portal and pay any applicable fees. The application process typically takes 60 business days, including 30 days for administrative completeness and 30 days for substantive review by the ADHS. Approval to operate as a marijuana establishment requires an additional 30 days for administrative completeness and 60 days for substantive review, resulting in a total application timeframe of 90 business days.

It's essential to note that Arizona may open opportunities for new marijuana cultivation licenses when the state's medical marijuana program expansion is deemed necessary. Such announcements are made by the ADHS, and successful applicants are selected through a competitive process.

Cost of Marijuana Cultivation Licenses in Arizona

The initial non-refundable fee for a marijuana establishment license in Arizona is $25,000, with a renewal fee of $5,000. Changing the physical address of a cultivation site or adding a cultivation site to an existing marijuana establishment incurs a fee of $2,500. All application fees requiring payment can be processed online through the ADHS.

Holding Multiple Cannabis Licenses in Arizona

In Arizona, a marijuana cultivation facility cannot operate without being licensed as either a marijuana dispensary or a marijuana establishment. This means that entities authorized to grow marijuana in the state automatically hold permits to operate a marijuana establishment or dispensary, effectively merging the licensing categories.

Conclusion

Arizona's cannabis licensing requirements have transformed the state into a thriving hub for both medical and adult-use marijuana. With clear regulations in place, it offers opportunities for entrepreneurs and serves as a model for effective cannabis governance. As the industry continues to evolve, Arizona remains an exciting destination for those looking to venture into the green frontier.