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Illinois Marijuana Business

Illinois Cannabis
Illinois Marijuana Business

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What is the Demand for Marijuana in Illinois?

With the legalization of recreational marijuana in Illinois, residents aged 21 and older can now legally purchase marijuana at state marijuana dispensaries within the provisions of the law. The law allows Illinois residents aged 21 and older to possess up to 30 grams (about one ounce) of marijuana plant materials. Adult residents can also possess up to, but not exceeding 500mg of THC cannabis edibles and up to 5 grams of cannabis concentrate products. Adult non-Illinois residents are only allowed to purchase half of the amounts permitted for Illinois residents.

Illinois does not record any official data detailing the exact demand for recreational marijuana, but a private survey by Statista provides an estimated percentage of the users of marijuana in the state. According to the Statista's Survey on Marijuana use among US adults by state 2018-2019 conducted in Illinois, an estimate of 16.38% of the respondents (around 70,000) aged 18 years and above consumed marijuana.

Since 2019 when Illinois legalized recreational marijuana, the cannabis market in the state has grown significantly. Illinois reported a total cannabis tax revenue of $297.7 million in 2021. In 2022, cannabis tax revenue grew to $445.3 million. Illinois Governor JB Pritzker announced that the state’s recreational cannabis sales grew from $1 billion to $1.5 billion between 2021 and 2022.

How is Marijuana Taxed in Illinois?

In Illinois, all tax revenue generated is deposited in the new Cannabis Regulation Fund maintained by the Department of Revenue. The taxes due on sales of cannabis in the State of Illinois are as follows:

Cannabis Cultivation privilege tax - This tax is imposed upon the privilege of cultivating cannabis at a charge of 7% of the gross receipts from a cultivator or craft grower's first sale of adult-use cannabis to a registered cannabis dispensary.
Cannabis purchaser excise tax - It is levied on purchasers who use cannabis, cannabis concentrate, cannabis flower, and cannabis-infused products. Cannabis dispensaries are required to collect and remit the purchaser excise tax on all retail sales of adult-use cannabis. The rates of this tax are as follows:
10% of the purchase cost – Cannabis with a THC level at or below 35%
20% of the purchase cost – All cannabis-infused products
25% of the purchase cost – Cannabis with a THC level above 35%

The cannabis purchaser excise tax is not levied on cannabis that is subject to tax under the Compassionate Use of Medical Cannabis Pilot Program Act. The tax shall be in addition to every other privilege, occupation, or excise tax levied by the State of Illinois or any municipal corporation or political subdivision.

Municipal Cannabis Retailers' Occupation Tax - Following the legalization of recreational marijuana in January 2020 by ordinance, corporate authorities of municipalities may impose a tax on persons engaged in cannabis business activities at retail store locations within the municipalities. This tax may be levied on the gross receipts from these sales.
If imposed, tax shall be levied in 0.25% additions
The maximum tax rate that these municipalities may charge is 3% of the gross receipts from cannabis sales
Cannabis County Retailers' Occupation Tax - This taxing system allows corporate authorities of counties to, by ordinance, impose a tax on persons engaged in cannabis business activities at retail store locations within the counties. The tax is levied on the gross receipts from these sales.
If imposed, the tax shall be levied in 0.25% additions
The maximum tax rate is as follows:
3.75% of the gross receipts of sales made in unincorporated areas of the county.
3% of the gross sales receipts made in a municipality located in a home rule county.
0.75% of the gross receipts of sales made in a municipality located in a non-home rule county.

Note that both medical cannabis and adult-use cannabis are subject to Retailers' Occupation Tax.

After the taxes have been deposited into the Cannabis Regulation Fund, the state agencies responsible for administering the adult-use cannabis program will receive funds to cover their administration costs. The remaining revenue will be shared as follows:

2% will be allocated to the Drug Treatment Fund to finance public education campaigns and promote data collection and analysis of the public health impacts of legalizing the recreational use of cannabis.
8% will be allocated to the Local Government Distributive Fund to support crime prevention projects, training, and interdiction efforts, including enforcement, detection, and prevention efforts, pertaining to the illegal cannabis market and driving under the influence of cannabis.
10% will be allocated to the Budget Stabilization Fund to settle the accumulation of unpaid bills.
20% will be allocated to the Department of Human Services Community Services Fund to deal with substance abuse, prevention, and mental health concerns.
25% will be allocated to the Criminal Justice Information Projects Fund to support the R3 program.
35% will be allocated to the General Revenue Fund.

What is the Agency Taxing Marijuana Business in Illinois?

According to HB 1438 – The Cannabis Regulation and Tax Act, the Illinois Department of Revenue (IDOR) is responsible for enforcing and collecting taxes associated with the sale of cannabis in the state. The IDOR is a section of the Illinois state government that collects state taxes, handles the state lottery, oversees the state's casino industry, directs the state's thoroughbred, and harnesses horse racing industries. The IDOR also regulates the distribution of alcoholic beverages, including liquor, beer, and wine all over Illinois.

The IDOR uses the forms listed below in the collection of cannabis taxes:

For inquiries, access the Taxpayer Answer Center online or call (800) 732-8866 or (217) 782-3336. Representatives can be reached Monday through Friday, between 8 am and 5 pm. The TDD (telecommunication device for the deaf) number is (800) 544-5304. To receive assistance by email, use the information below the Taxpayer Assistance on the Contact Us page of the IDOR.

The Regional Office Locations and Contact Information of the Illinois Department of Revenue are as follows:

Springfield (Headquarter)

Willard Ice Building

101 West Jefferson Street

Springfield, IL 62702

Phone: (800) 732-8866 and (217) 782-3336

Office hours: 8:30 am - 5:00 pm

Chicago

James R. Thompson Center - 7th Floor

100 West Randolph Street

Chicago, IL 60601-3274

Phone: (800) 732-8866