Cannabis Cultivation Privilege Tax and Cannabis Purchaser Excise Tax
Cannabis Cultivation Privilege Tax – What does the law say about cannabis cultivation privilege tax and cannabis purchaser excise tax in Illinois?
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.
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:
(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.
Registration of Cannabis Retailers
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.
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.
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