Filing Requirements
Business Codes
| Business Code | Description | Reporting Purpose |
|---|---|---|
| 017 | Retail | Retail sales of non-marijuana tangible personal property (e.g.,marijuana accessories, jars, grow lights, etc.). |
| 203 | Retail - Medical | Retail sales of medical marijuana (flower/leaf, edibles, etc.). Purchaser must have a prescription and marijuana medical card. |
| 420 | Retail - Adult Use | Retail sales of adult use marijuana and marijuana products (21+ years) (flower, edibles, etc.). |
| 030 | Use Tax | Cost/value of items used from inventory (free product give-aways, testing, etc.). |
| 029 | Use Tax | Items purchased from an out-of-state vendor on which no Arizona TPT is collected. |
Forms
Form MET-1 is the form used to report the adult use marijuana excise tax. The form has an inventory schedule required by statute and should be completed before computing the marijuana excise tax amount. The marijuana excise tax amount is deductible from the retail tax base for TPT purposes. Accordingly, Form MET-1 should be completed prior to completing the TPT return. While all inventory (adult use and medical) is reported on Form MET-1, only the adult use sold to the final consumer is included in column H and used in the tax computation.
The TPT return is the form used to report and remit state/county and city TPT liabilities on all retail sales including the sale of medical or adult use marijuana and anything else sold by the business.
How to File
After a taxpayer obtains an ADHS license to sell medical and/or adult use marijuana and an ADOR TPT license and a MET registration number, as applicable, has been obtained (see licensing above), the taxpayer must report and remit their tax liability monthly on the TPT return. Additionally, the taxpayer must also report and remit the marijuana excise tax using Form MET-1.
The reporting and remitting of transaction privilege and excise taxes must be completed online at www.AZTaxes.gov.
Marijuana Excise Tax Return (MET-1)
Form MET-1 should be completed before the TPT return. Form MET-1 reports the inventory changes of all marijuana and marijuana products of the business (adult use and medical) in a reporting period. It also reports net sales to the final consumer of adult use/recreational marijuana and calculates the marijuana excise tax due in a reporting period.
Reporting Inventory Changes
Inventory (Form MET-1 Section II) is reported by the taxpayer’s TPT location (similar to reporting TPT). The taxpayer will report the inventory movement by type. The three reporting types are marijuana, edibles, and other. Marijuana includes all flower or leaf products. Edibles include such items as brownies, gummies, etc. Other is reserved for all types which do not fit in marijuana or edibles; for example, THC infused oils.
Taxpayers are required to report the inventory in either pounds or ounces. As a result, products that are sold in grams will need to be converted to pounds or ounces (total grams divided by 453.592). For example, if a taxpayer sells 500 packages of gummies containing 15 grams of THC, then the inventory will be reported as having sold 16.53 pounds.
7,500 (packages x grams) grams divided by 453.592 equals 16.53.
The starting inventory is reported under Column K. If you have previously filed MET-1 returns, then this should be the ending inventory on your last MET-1 return (Column R). The taxpayer will then report all inventory added to this location. This could be inventory received from the manufacturer or inventory transferred to this reporting location from another one of the business’ locations. The inventory going out is divided into five reported categories:
- Returns to manufacturer/processor (product returned, recalls, etc.);
- Transfers to other retail locations (this includes sale for resale or intercompany location transfers);
- Products removed from inventory (testing, samples to customers/employees, etc.);
- Quantity sold to medical cardholders
- Quantity sold for adult use/recreational.
Note: amounts listed as giveaways, taken out of inventory, etc., are subject to use tax and should be reported on the taxpayer’s TPT return.
Excise Tax - Reporting Net Sales of Adult/Recreational Marijuana and Calculating Excise Tax Due
Taxpayers should then report the net sale to the final customer in column (H). This amount should not include any tax collected. Only the sales amount to the final customer, by type. This is tallied and brought forward to the excise tax computation on page 1, section III. This amount is multiplied by 16% for the excise tax due. Please note, line 4 is for ‘excess tax’ and should not be misread as the adult use marijuana excise tax. That is, any excise tax collected over 16% is considered additional/excess (not to be confused with TPT collected) and should be reported on line 4 and remitted to the Arizona Department of Revenue.
Once Form MET-1 is completed the taxpayer should complete the TPT form.
TPT - Reporting Sales of Medical and Adult/Recreational Marijuana
To report sales for medical marijuana, report gross receipts (see definition) using business code 203 on the TPT return. If any deductions are applicable, they should be deducted on this form. TPT collected or factored is deducted using deduction code 551. See A.R.S. § 42-5061 for a full list of retail deductions and the corresponding deduction codes.
To report sales for adult use marijuana, report gross receipts using business code 420. If any deductions are applicable, they should be deducted on this form as mentioned above. Form MET-1 provides the excise tax liability, which was previously reported and remitted. Deduct this amount from the TPT return using deduction code 807 as excise tax collected. TPT collected or factored is deducted using deduction code 551.
To report sales of other tangible personal property, like marijuana accessories, report gross receipts using business code 017 on the TPT return. If any deductions are applicable, they should be deducted on this form (Note: exempt sales should be documented with an exemption certificate.) TPT collected or factored is deducted using deduction code 551.
The cost of the marijuana that was destroyed for testing or given away as samples, etc., is reported under business code 030 on the TPT form. See example below.
Filing Example
Taxpayer, located in Phoenix, sells both adult use and medical marijuana. Starting inventory for the tax period is:
- 15,000 lbs of marijuana.
- 100 packages of brownies (25 grams THC/package).
- 1,000 packages of gummies (15 grams THC/package).
Inventory activity for the tax period:
- Received shipment of 80,000 lbs of marijuana.
- Gave away 70 samples of 5 grams of marijuana (cost of $600).
- 1 pound of marijuana was sent for testing and was ultimately destroyed (cost of $450).
- Received shipment of 200 packages of brownies. 0
- Received shipment of 500 jars of budders (22 grams THC/jar).
- Returned 50 packages of brownies to the manufacturer.
Inventory sales include:
- Sold 20,000 lbs for medical use and 40,000 lbs of marijuana for adult use. Adult use net sales of $24,000,000.
- Sold 200 packages of gummies for medical use and 300 packages of gummies for adult use. Adult use net sales of $9,600.
- Sold 50 packages of brownies for adult use and 75 packages of brownies for medical use. Adult use net sales of $250.
- Sold 135 jars of budders for medical use and 275 jars of budders for adult use. Adult use net sales of $11,000.
Taxpayer now prepares the Form MET-1 inventory and net sales starting with the inventory schedule:
Inventory Schedule
Note: The Excise Tax Due is reported on the TPT return as a deduction from gross receipts if included in the gross receipts amount.
The additional information in total sales for medical marijuana include the following:
Additional Sales
- Marijuana sales for medical use of $12,000,000.
- Gummy sales for medical use of $6,400.
- Brownie sales for medical use of $375.
- Budder sales for medical use of $5,400.
- Paraphernalia (hats, vape pens, etc.) of $4,500.
Taxpayer completes the State/County Transaction Detail, the City Transaction Detail and the Schedule A Deductions - State/County and the Schedule A Deductions - City.
State/County Transaction Detail
*Please note:
- Electronic TPT filers are able to claim an accounting credit of 1.2 percent of the tax due, up to a maximum credit of $12,000, during a calendar year.
- Paper TPT filers are able to claim an accounting credit of 1 percent and a total calendar year credit of $10,000.
Taxpayers who do not file all their TPT returns electronically for the calendar year do not qualify for the additional $2,000 accounting credit.
City Transaction Detail
Schedule A Deductions - State County
Schedule A Deductions - City
When to File
The Form MET-1 and TPT returns are due on the 20th day of the month following the taxable activity month. Form MET-1 is delinquent if the Department does not receive the form by the 10th day after the due date. (note this is only the MET-1 return). The TPT return is due on the 20th of the month. For taxpayers that are required to file and pay electronically, the TPT return is delinquent if not received by the Department on or before the last business day of the month.
Payment Waiver Application
All taxes, except individual income, are required to be remitted through the Electronic Funds Transfer (EFT) system if a taxpayer’s liability is greater than or equal to $500 in tax year 2021 and after. See A.R.S. 42-5014(N). However, any taxpayer subject to these rules, including a marijuana establishment, may apply for an annual waiver from the electronic payment requirement. The waiver application must be received by December 31 of each year. The director may grant the waiver if any of the following apply:
- Taxpayer does not have a computer.
- Taxpayer has no internet access.
- Any other circumstance considered to be worthy by the director exists, including:
- Taxpayer has a sustained record of timely payments, and,
- Taxpayer does not have any delinquent tax accounts with the Department.