Cannabis Taxes

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Definitions


"Cannabis" means marijuana, hashish, and other substances that are identified as including any parts of the plant Cannabis sativa and including derivatives or subspecies, such as indica, of all strains of cannabis, whether growing or not; the seeds thereof, the resin extracted from any part of the plant; and any compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin, including tetrahydrocannabinol (THC) and all other naturally produced cannabinol derivatives, whether produced directly or indirectly by extraction; however, "cannabis" does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted from it), fiber, oil or cake, or the sterilized seed of the plant that is incapable of germination. "Cannabis" does not include industrial hemp as defined and authorized under the Industrial Hemp Act. "Cannabis" also means cannabis flower, concentrate, and cannabis-infused products.

"Cannabis concentrate" means a product derived from cannabis that is produced by extracting cannabinoids, including tetrahydrocannabinol (THC), from the plant through the use of propylene glycol, glycerin, butter, olive oil or other typical cooking fats; water, ice, or dry ice; or butane, propane, CO2, ethanol, or isopropanol and with the intended use of smoking or making a cannabis-infused product. The use of any other solvent is expressly prohibited unless and until it is approved by the Department of Agriculture.

"Cannabis-infused product" means a beverage, food, oil, ointment, tincture, topical formulation, or another product containing cannabis that is not intended to be smoked.

"Craft grower" means a facility operated by an organization or business that is licensed by the Illinois Department of Agriculture to cultivate, dry, cure, and package cannabis and perform other necessary activities to make cannabis available for sale at a dispensing organization or use at a processing organization. A craft grower may contain up to 5,000 square feet of canopy space on its premises for plants in the flowering state. The Department of Agriculture may authorize an increase or decrease of flowering stage cultivation space in increments of 3,000 square feet by rule based on market need, craft grower capacity, and the licensee's history of compliance or noncompliance, with a maximum space of 14,000 square feet for cultivating plants in the flowering stage, which must be cultivated in all stages of growth in an enclosed and secure area. A craft grower may share premises with a processing organization or a dispensing organization, or both, provided each licensee stores currency and cannabis, cannabis flower, cannabis concentrate, or cannabis-infused products in a separate secured vault to which the other licensee does not have access or all licensees sharing a vault share more than 50% of the same ownership.

"Cultivation center" means a facility operated by an organization or business that is licensed by the Department of Agriculture to cultivate, process, transport (unless otherwise limited by Public Act 101-0027), and perform other necessary activities to provide cannabis and cannabis-infused products to cannabis business establishments.

"Dispensing organization" means a facility operated by an organization or business that is licensed by the Department of Financial and Professional Regulation to acquire cannabis from a cultivation center, craft grower, processing organization, or another dispensary for the purpose of selling or dispensing cannabis, cannabis-infused products, cannabis seeds, paraphernalia, or related supplies under this Act to purchasers or to qualified registered medical cannabis patients and caregivers. As used in this Act, dispensary organization shall include a registered medical cannabis organization as defined in the Compassionate Use of Medical Cannabis Pilot Program Act or its successor Act that has obtained an Early Approval Adult Use Dispensing Organization License.

"Medical cannabis" means cannabis and its constituent cannabinoids, such as tetrahydrocannabinol (THC) and cannabidiol (CBD), used as an herbal remedy or therapy to treat disease or alleviate symptoms. Medical cannabis can be administered by a variety of routes, including, but not limited to: vaporizing or smoking dried buds; administering tinctures or tonics; applying topicals such as ointments or balms; consuming infused food products, such as soda or teas; or taking capsules.

"Purchaser" means a person 21 years of age or older who acquires cannabis for a valuable consideration. "Purchaser" does not include a cardholder under the Compassionate Use of Medical Cannabis Pilot Program Act.

 "Sales price" means the consideration for a sale valued in money whether received in money or otherwise, including cash, credits, property, and services, and shall be determined without any deduction on account of the cost of the property sold, the cost of materials used, labor or service cost or any other expense whatsoever.

"Smoked" or "smoking" means changing cannabis from a hard, soft, or liquid form by combustion, heat, electricity, or batteries into a form that can be inhaled by the user [86 Ill. Adm. 423.105].

See 86 Ill. Adm. Code section 422.10586 Ill. Adm. Code section 423.10586 Ill. Adm. Code section 424.10586 Ill. Adm. Code section 425.105, and  86 Ill. Adm. Code section 429.105  for full listings. 

Tax rates


The Cannabis Cultivation Privilege Tax is imposed upon the privilege of cultivating cannabis at the rate of 7% of the gross receipts from the first sale of cannabis by a cultivator.

The Cannabis Purchaser Excise Tax is imposed upon purchasers for the privilege of using cannabis at the following rates:

  • Any cannabis, other than a cannabis-infused product, with an adjusted delta-9-tetrahydrocannabinol level* at or below 35% shall be taxed at a rate of 10% of the purchase price;
  • Any cannabis, other than a cannabis-infused product, with an adjusted delta-9-tetrahydrocannabinol level* above 35% shall be taxed at a rate of 25% of the purchase price; and
  • A cannabis-infused product shall be taxed at a rate of 20% of the purchase price.**
* Per 410 ILCS 705/65-10, any cannabis subject to Cannabis Purchaser Excise Tax (with the exception of cannabis infused products) is taxed using the "adjusted" THC content. The adjusted THC content is calculated by adding the percentage of delta-9-tetrahydrocannabinol plus .877 multiplied by the percentage of tetrahydrocannabinolic acid (410 ILCS 705/65-5).
** Per 86 Ill. Adm. Code 423.105, cannabis-infused products do not include cannabis concentrates. Cannabis concentrates shall not be taxed as cannabis-infused products at the rate of 20% of the purchase price. Instead the tax is based on the adjusted THC level* of the cannabis concentrate. Vape products containing cannabis should also not be taxed at the rate of 20% for cannabis-infused products but should be taxed based on the percentage of THC in the solution in the device.

The Medical Cannabis Cultivation Privilege Tax is imposed upon the privilege of cultivating medical cannabis at a rate of 7% of the sales price per ounce.

Retailers' Occupation Tax (sales tax): In addition to the statewide cannabis-specific taxes listed above, state and local sales taxes apply to cannabis. For sales tax rates, use the Tax Rate Database to look up location-specific sales tax rates for medical and adult use cannabis. Medical cannabis is taxed at the qualifying food and drug sales tax rate applicable in the jurisdiction in which the dispensary is located. Adult use cannabis is taxed at the general merchandise sales tax rate applicable in the jurisdiction in which the dispensary is located plus any additional municipal and county cannabis retailers' occupation taxes.

Local taxes


Locally-imposed sales taxes (e.g., home rule, non-home rule, county public safety, Regional Transportation Authority) apply to sales of adult use cannabis.  In addition, municipalities and counties may impose cannabis-specific sales taxes on adult use cannabis, which the department will collect. Counties may impose a County Cannabis Retailers' Occupation Tax and municipalities may impose a Municipal Cannabis Retailers' Occupation Tax on adult use cannabis. Counties and municipalities must file ordinances with the department and the ordinances must be approved before the department will administer and enforce the tax. Use the Tax Rate Database to look up cannabis sales tax rates including local cannabis rates.

As with most other locally-imposed taxes administered by the department, the municipality or county must file the ordinance with IDOR on or before April 1 for the imposition, discontinuation, or tax rate change to take effect July 1, or on or before October 1 for the imposition, discontinuation, or tax rate change to take effect January 1 of the following year. IDOR will send out a tax rate change bulletin twice a year prior to the implementation dates to notify cannabis retailers.

Registration


Prio
r to registering for a cannabis account with IDOR, cannabis cultivators and craft growers are required to be licensed by the Illinois Department of Agriculture and dispensaries are required to be licensed by the Illinois Department of Financial and Professional Regulation. IDOR requires the license number and the issue date of the license to register a cannabis account.

Register with Illinois Department of Revenue (IDOR) electronically using MyTax Illinois, available at mytax.illinois.gov.

  • To register a new business with Illinois, click on "Registration," and then "Register a New Business" to complete Form REG-1, Illinois Business Registration Application. After you receive an email that the application has been processed, allow one business day before signing up for a MyTax Illinois account. To create a MyTax Illinois account, return to MyTax Illinois, click the "Sign up Now" button, and then submit the requested information.
  • Corporations, S-Corps, Partnerships, or LLC organization types with active MyTax Illinois accounts can register for new tax types, or licenses, by simply logging into their MyTax Illinois account and clicking on "Register for New Tax Accounts" to complete the registration.
  • Sole Proprietorships must register using the "Register a New Business" link and complete Form REG-1, Illinois Business Registration Application, to add a cannabis account. Follow the instructions to register a new business above. 

Additionally, you may need to complete Schedule REG-1-MC, Medical Cannabis Cultivation Center and Dispensing Organization Information, Schedule REG-1-L, Illinois Business Site Location Information, and Schedule REG-1-R, Responsible Party Information.

If your business operates cultivation centers or dispensaries in more than one location, you only need to register for one account. Each location will be registered under that single account. Separate books and records should be kept for each cultivation center or dispensary you operate. To add a permanent location in MyTax Illinois:

  1. Under your cultivation or dispensary account, select "Maintain Locations".
  2. Select the "Add Permanent Sites" tab.
  3. Select "Add a Site"
  4. Add the Site Information. Be sure to check medical, adult use, or both types of cannabis categories that will be cultivated or dispensed, and provide the license number and issue date for each.
  5. When all the required fields are completed, select "Submit".
  6. The new site will be added to your account after a short processing delay.

If you have more than one business that operates cultivation centers or dispensaries, you must register each business separately to report and pay the cannabis taxes.

For information or assistance with registering your business, Contact IDOR's Central Registration Division by calling 217 785-3707 or emailing REV.CENTREG@illinois.gov.

Returns


Adult us
e cannabis cultivators or craft growers must use Form CC-1, Adult Use Cannabis Cultivation Privilege Tax Return, to report sales of adult use cannabis products. Adult use cultivators with multiple cultivation sites must also complete Schedule CC-2, Multiple Site Form for Adult Use Cannabis Cultivators, to report the taxable receipts from each cultivation site.

Cannabis cultivators selling medical cannabis must file Form MC-1, Medical Cannabis Cultivation Privilege Tax Return, to report sales of medical cannabis. Cultivators with multiple cultivation sites must also complete Schedule MC-2, Medical Cannabis Sales, to report sales from each cultivation site.

Cultivators with sales of both medical and adult use cannabis must file Form MC-1, Form CC-1, and any corresponding schedules that apply.

Cannabis dispensaries must file form CD-1, Cannabis Dispensary Tax Return, to report sales of medical and adult use cannabis. Multiple site dispensaries must also file Schedule CD-2, Sales and Use Tax Multiple Site Form for Cannabis Dispensaries, to calculate the Sales and Use Tax due on sales of adult use and medical cannabis from each dispensing site. Multiple site dispensaries must also file Schedule CD-3, Cannabis Purchaser Excise Tax Multiple Site Form for Cannabis Dispensaries, to report sales of adult use cannabis subject to Cannabis Purchaser Excise Tax from each dispensing site.

Dispensaries are also required to report their total receipts of cannabis and non-cannabis products sold on Form ST-1, Sales and Use Tax and E911 Surcharge Return. Receipts from cannabis sales should be claimed as a deduction on Schedule A of Form ST-1 and reported on Form CD-1.

Cannabis returns, along with any payment owed, are due on or before the 20th day of the month following the end of the reporting period. If the due date falls on a weekend or holiday, the return and payment are due the next business day.

Illinois law requires Forms CC-1, CD-1, and MC-1, and their corresponding schedules, to be filed electronically. You may use MyTax Illinois at mytax.illinois.gov to file electronically.

Payments


All cultivators, craft growers, and dispensaries will be required to make quarter-monthly (accelerated) estimated payments as of January 1, 2020. Quarter-monthly (accelerated) payments are due on or before the 7th, 15th, 22nd, and the last day of each month that a tax liability has occurred. Each quarter-monthly (accelerated) payment shall be the lower of either 22.5% percent of the actual liability for the month or 25% percent of the liability for the same month of the preceding year. If there is no liability in the same month of the preceding year, no quarter-monthly (accelerated) payment will be due. IDOR will notify the taxpayer when quarter-monthly (accelerated) payments are required.

Payments must be made electronically unless a waiver has been issued. Businesses that cannot pay electronically are required to request a waiver of the electronic payment mandate. Complete Form IL-900-EW, Electronic Waiver Request, which is available from IDOR by request at 217 782-7897, 1 800 732-8866, or 217 782-3336. If granted and unless renewed, this waiver is valid for not more than two years. An electronic payment waiver is not a waiver for the quarter-monthly (accelerated) payment requirement.

Electronic payments must be made through one of the following options: 

  • Make your electronic payment online at tax.illinois.gov. For your initial payment through MyTax Illinois, you must set up your account and follow the instructions provided.

    To make a payment in MyTax Illinois:
    1. Select an active period.
    2. Select "Make a payment".
    3. Choose method of payment (e.g., bank account debit).
    4. Select the type of payment you will be making
      • For Medical Cannabis Cultivators - MC-1 payment, MC-1-X payment, or Web Audit payment
      • For Adult Use Cannabis Cultivators - CC-1 payment, CC-1-X payment, or Web Audit payment
      • For Cannabis Dispensaries - CD-1 payment, CD-1-X payment, or Web Audit payment
    5. Enter information for the payment channel (i.e., routing number, bank account number, etc.). This information may be saved for future use.
    6. Enter payment details (i.e., payment date, amount, etc.).
    7. Select Submit.
    NOTE: Payments in MyTax Illinois may be scheduled in advance. To schedule a payment to a future date, simply change the payment date to a future date when adding a payment in MyTax Illinois. To ensure no late payment penalties are assessed, ensure that the future date used is on or before the payment due date.
  • Submit your payment through ACH credit (payments authorized through your financial institution). If you wish to set up or make changes to this option, you must first contact IDOR's Electronic Funds Transfer Division at 217 782-6257 for additional information.

Additional Forms & Resources

Questions?