309-740-4033 tom@collateralbase.com
Select Page

Cannabis Cultivation Privilege Tax and Cannabis Purchaser Excise Tax i

What does the law say about cannabis cultivation privilege tax and cannabis purchaser excise tax in Illinois?

Article 60 and 65 breaks down how taxes have been imposed on cannabis businesses in Illinois. Section 60 talks about Cannabis Cultivation Privilege Tax in Illinois, which explains how much tax is charged, what products are eligible for taxation as well as how payments are made and returns filed by cannabis cultivators. Section 65, on the other hand, describes the Cannabis Purchaser Excise Tax in Illinois, what it entails and how it is collected from cannabis purchasers.

Read on to learn more about Articles 60 & 65 taxes in Illinois.

What is the Imposed Cannabis Cultivation Privilege Tax in Illinois?

From the first day of September 2019, a 7% cannabis cultivation privilege tax will be imposed on the first sale of cannabis by cultivators in Illinois. The Department of Revenue reserves the right to determine the price of cannabis when;

(i) The seller and buyer are affiliates

(ii) The transfer of the cannabis is not through an arm’s length transaction

(iii) A buyer transfers the cannabis to their own dispensing organization or infuser such that the value of the cannabis cannot be established.

The article further provides that the price set by the Department should correspond to the value of other products with similar quality, character, and use in the area. And if there are no such products, the Department can consider products in different regions of Illinois.

Under the Cannabis Cultivation Privilege Tax in Illinois, it is the responsibility of the person making the first sale (cultivator) to pay the imposed tax. Subsequent purchasers like processing organizations are not entitled to pay this tax. The law, however, allows cultivators to reimburse themselves by charging an additional tax liability in their prices.

Registration of Cultivators

All cannabis cultivators who pay the cannabis cultivation privilege tax in Illinois are required to apply for certification through the Department of revenue. These applications are to be made online as per the requirements of the Department.

It is also important to note that only licensed applicants under the Cannabis Regulation and Tax Act can qualify to be offered a certificate.

Return and Payment of Cannabis Cultivation Privilege Tax

People, who pay the cannabis cultivation privilege tax in Illinois, are required to make a return on or before every 20th for the preceding month. The return should state:

(1) Name of taxpayer;
(2) Taxpayer’s address, and physical address of the business;
(3) Monthly sale receipts of cannabis for the previous month; 
(4) Amount received from time sales;
(5) Deductions as required by law;
(6) Gross receipts of the month following the filing month which are to be used to calculate tax;
(7) Amount of tax owed;
(8) Signature of taxpayer; and
(9) Any other details as may be required by the department.

All the returns and payments are to be made electronically. Taxpayers who find it hard to pay electronically may petition the Department for a waiver of the electronic platform.

Such taxpayers may be required to file their return separately or combine it with the return for the tax under the Compassionate Use of Medical Cannabis Pilot Program Act.

Taxpayers are required to make a payment quarterly on or before dates 7, 15, 22, and final day of every month. If a taxpayer fails to make quarterly payments in time or pays an amount less than is required, he may face penalties or interests. In case the paid fee exceeds the tax liability needed, one can request a credit memorandum before the expiry of 30 days after the payment date.

All the payment for the cannabis cultivation privilege tax is channeled to the Cannabis Regulation Fund.

What Constitutes Cannabis Purchaser Excise Tax in Illinois?

The Cannabis Purchaser Excise Tax in Illinois will start being imposed on January 1, 2020. The tax will be imposed on purchasers of cannabis in different rates as follows;

(1) Any cannabis, other than a cannabis-infused product, with an adjusted delta-9-tetrahydrocannabinol level at or below 35% will accrue a tax which will be 10% of the cost of the cannabis.
(2) Any cannabis, other than a cannabis-infused product, with an adjusted delta-9-tetrahydrocannabinol level above 35% will accrue a tax which will be 25% of the cost of the cannabis.; and
(3) A cannabis-infused product will be taxed 20% of the purchase amount.

How Cannabis Purchaser Excise Tax in Illinois is Collected

According to the act, purchaser excise tax is collected by retailers. They do this by adding a tax liability to the price the purchasers pay to obtain the cannabis from the retailer.
The amount of tax collected is charged at the rates stated above, which should then be remitted to the Department of revenue.
If a retailer charges a purchaser more tax than is required by the Cannabis Purchaser Excise Tax in Illinois, the purchaser has a right to request for a refund. And in cases where a purchaser is not charged the tax, then the purchaser should make the payment on or before 20th of the month following the purchase month.
According to the constitution, it is the responsibility of the retailer to collect the Cannabis Purchaser Excise Tax in Illinois. Whether a cannabis retailer collects tax or not, all the tax that ought to be collected will translate to a debt that the retailer must pay to the state.

Registration of Cannabis Retailers

All retailers who collect tax under the Cannabis Regulation and Tax Act must apply electronically for certification.
The constitution states that for a retailer to be eligible for certification, they must be licensed.

Cultivation Center Agent Identification Card

This is an identification document that will be issued to cultivation center agents responsible for managing and ensuring that these centers are compliant with the law. This document will be issued by the Department of Agriculture.

Record Keeping

Every retailer is required to keep an accurate record of cannabis purchased, held, sold, or disposed of. They should also maintain all invoices, sales records, bills, and other pertinent papers that relate to buying selling and disposition of cannabis.
These documents of purchase must be maintained in licensed premises for not less than 90 days from the day of purchase unless there is a waiver from the Department of revenue communicated by writing.
The documents should also be present at the premises during regular business hours and must be available for inspection from the Department’s employees and authorized agents.
The Department’s employees have the power to arrest, search cannabis businesses, or seize cannabis from a retailer who violates any provision of this act.
The taxes imposed on cannabis to regulate its use in Illinois are directly imposed to the cultivator and the purchaser of cannabis. The cultivator of cannabis pays the Cannabis Cultivation Privilege Tax in Illinois for the privilege of earning from the crop, while the purchaser pays the Cannabis Purchaser Excise Tax in Illinois for the privilege of using cannabis.
How to Win a Cannabis License

How to Win a Cannabis License

  How Do I Win a Cannabis License? It’s application season in Illinois and competition is fierce! With only 75 licenses to award, every point in an application counts. Applying for a license is costly, competitive, and in most cases a one time opportunity. This week...

Thomas Howard

Thomas Howard

Cannabis Lawyer

Thomas Howard has been in business for years and can help yours navigate towards more profitable waters.

Thomas Howard was on the ball and got things done. Easy to work with, communicates very well, and I would recommend him anytime.

R. Martindale

Cannabis Industry Lawyer is a Stumari designed website for Tom Howard’s law practice at the central Illinois lawyers firm of Hall, Rustom & Fritz.

Need A Cannabis Attorney?

Our cannabis business attorneys are also business owners.  They can help you structure your business or help protect it from overly burdensome regulations.

REACH US BY EMAIL

9 + 8 =

0/5 (0 Reviews)
Share This