Arkansas Marijuana Business

What is the Demand for Marijuana in Arkansas?

The legal sale of medical cannabis in Arkansas began in 2019 following the approval of the Arkansas Medical Marijuana Amendment of 2016 (AMMA) by 53% of state voters in 2016. However, recreational marijuana is still illegal. Since the legal sales of marijuana began in Arkansas, demand for cannabis has continued to increase, as evident in the number of applications submitted for medical marijuana registry cards.

In the Fiscal Year 2019 (FY 2019), 10,773 patients applied to the Arkansas Department of Health (ADH) for medical marijuana registry cards. These numbers increased significantly in FY 2020 (July 1, 2019, to June 30, 2020), as 47,002 patients submitted applications for Arkansas medical marijuana registry identification cards. In FY 2021, the ADH received medical marijuana registry applications from 94,142 patients. This trend indicates an increased demand for medicinal cannabis in Arkansas. As the state’s medical marijuana sector matures, the number of new applicants has leveled off while the number of renewals keep growing. In the ADH’s 2022 report, 86,380 patients applied for Arkansas’ medical marijuana ID card while 50,228 patients applied to renew their current ID cards.

According to a Yahoo report in October 2022, medical marijuana patients in Arkansas spent about $31 million in 2019 at Arkansas cannabis dispensaries. In 2020 and 2021, medicinal marijuana purchases made by patients in the state totaled $182 million and $264.9 million, respectively. The October 2020 Yahoo report also revealed that Arkansas's 38 medical cannabis dispensaries sold about $205 million worth of medical marijuana between January and September 2022.

How is Marijuana Taxed in Arkansas?

Under the Arkansas Medical Marijuana Amendment (AMMA), medical marijuana sales are subject to local and state taxes. According to the Arkansas Department of Finance and Administration (DFA), Arkansas collects a 4% privilege (excise) tax on every medical marijuana sold by dispensaries, cultivation facilities, or other marijuana businesses. The state also collects a 6.5% sales tax on every patient's medical marijuana purchase.

Specific percentages of Arkansas medical marijuana sales tax are designated for certain expenditures, and according to an AMMA implementation document, Arkansas medical marijuana sales tax is distributed as follows:

• 1% to the Arkansas Medical Marijuana Commission

• 2% to the Alcohol Beverage Control Administrative Division

• 2% to the Alcohol Beverage Control Enforcement Division

• 5% to the Arkansas Department of Health

• 10% to the Department of Career Education's Skills Development Fund

• 50% to the state's Vocational and Technical Training Special Revenue Fund

• 3% to Arkansas General Revenue Funds

Due to the illegal status of recreational marijuana in Arkansas, the state does not currently collect taxes on the recreational use of cannabis. However, if the Arkansas Marijuana Legalization Initiative on the ballot as a constitutional amendment succeeds in November 2022, the state could impose up to 10% sales tax on recreational cannabis. This would be in addition to existing local and state taxes. The initiative would require the Arkansas Alcoholic Beverage Control Division to create rules to regulate the state's recreational marijuana businesses.

What is the Agency Taxing Marijuana Businesses in Arkansas?

The Revenue Division of the Arkansas Department of Finance and Administration (DFA) is responsible for collecting medical marijuana taxes in the state. The Department uses a percentage-of-price system, in which the tax is calculated using marijuana sales price at the time of purchase in taxing cannabis. The DFA does not accept medical cannabis tax payments online through the Arkansas Taxpayers Access Point (ATAP). Instead, it accepts only cash for marijuana tax payments through the Central Revenue Office at:

Arkansas State Revenue Administration Office

Ragland Building

1900 W 7th Street, Room 2062

Little Rock, AR 72201

Phone: (501) 682-7087

Fax: (501) 682-7094

The DFA also provides contact details for other Arkansas revenue offices and the counties they serve.