AndreTaxCo, PLLC

Arizona Cannabis & Hemp Industries 

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IRC § 280E Analysis / R&D Tax Credit Eligibility

• Does Section 280E Apply to state individual income tax?

  • Yes. Arizona conforms to the Internal Revenue Code. There is no provision that states Section 280E does not apply.

• Does Section 280E apply to state corporate income tax?

  • Yes. The starting point for the Arizona corporate income tax is Federal taxable income as reported on line 30. There is no provision that states Section 280E does not apply. 

• Are State R&D Tax Credits Potentially Eligible for "Plant Touching" (e.g. producers, cultivators, manufacturers, retailers) Cannabis Companies?

  • No, see IRC § 280E restrictions.  

• Are State R&D Tax Credits Potentially Eligible for Industrial Hemp Companies & "Non-Plant Touching" Separate Trade or Businesses (e.g. testing laboratories)?

  • Yes​, subject to further 280E analysis regarding company activities, structure, and applicable state laws.

• See Arizona R&D Credit Summary​

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State Law Background

(1) Hemp State Law Authority & Background​

• SB 1098 (2018) / Ariz. Rev. Stat. Ann. § 3-311 to 3-320    

  • Authorizes a pilot program for the research, growth, cultivation and marketing of industrial hemp and establishes the Industrial Hemp Trust Fund.

  • Directs the Arizona Department of Agriculture (AZDA) to adopt rules for the licensing, production and management of hemp and hemp seed, to set fees to fund AZDA’s activities, and to establish an industrial hemp advisory council.

  • Allows for commercial hemp production, processing, manufacturing

 

(2) Medical Marijuana State Law Authority & Background

• Statutory Language (year) - Proposition 203 (2010)

  • Patient Registry or ID cards - Yes

  • Allows Dispensaries - Yes

  • Specifies Conditions - Yes

  • Recognizes Patients from other states - Yes, for AZ-approved conditions, but not for dispensary purchases.

  • State Allows for Retail Sales/Adult Use – N/A

• Are sales of medical marijuana subject to sales tax?

  • Yes. Medical marijuana sales are taxable under the retail classification of Arizona's transaction privilege (sales) tax. For reference: Statement from Arizona Attorney General

• Is medical marijuana subject to an excise tax?

  • No.

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(3) Recreational Marijuana State Law Authority & Background​ - N/A

• Are sales of recreational marijuana subject to sales tax?

  • N/A​​

• Is recreational marijuana subject to an excise tax?

  • N/A

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(4) Does the State impose a Stamp Tax or Controlled Substances Tax?

• No.​