Some composting toilets are tested by the National Sanitation Foundation (NSF) to ensure that they function as described by the manufacturer. Other national testing agencies such as Underwriters Laboratory may also test. The rules in Arizona from the state Department of Environmental Quality (DEQ) require that composting toilets be tested by such a lab. You should check if your state DEQ or local building department has rules.
I don't have a composting toilet, but I have used some in others' homes and have not noticed any odors. If they are operated per the instructions there is no sanitation problem.
For more information:
Read Green Home Guide's Know-How article "5 Tips for choosing a low-flow toilet" to learn more about water-saving toilets.