State: $10 Million So Far in Cannabis Sales Tax Revenue

State: $10 Million So Far in Cannabis Sales Tax Revenue

The Illinois Department of Revenue announced this week that adult-use cannabis sales generated $7,332,058 in cannabis tax revenue during the month of January — with an additional $3,147,928.29 generated in retail sales tax revenue.

The state’s recently released budget conservatively estimated the state would collect $28 million in cannabis tax revenue during the remainder of the fiscal year, ending June 30, 2020.

This week’s announcement puts the state on track to surpass that estimate.

Once administrative fees are accounted for, state officials say 45% of the adult-use cannabis tax revenue will be reinvested in communities disproportionately impacted by the failed war on drugs and used to fund substance abuse and mental health programs.

The $3,147,928.29 in sales tax revenue will be divided between the state’s general revenue fund and the local governments where purchases were made.

The state collects cannabis revenue in two ways: a variable excise rate dependent on THC potency and type of product, and a 7% cultivators excise tax imposed on the sale of cannabis to retailers.

Earlier this month, the state announced that over $39 million in adult-use cannabis product was sold at retail stores.

Last Wednesday, the state released its Fiscal Year 2021 budget. As the industry matures, revenues are estimated to grow to $127 million in FY21, of which $46 million will go to General Funds.

Background

CANNABIS TAX RATES

  • Cannabis Cultivation Privilege Tax:
    • 7% of the gross receipts from the sale of cannabis by a cultivator or a craft grower to a dispensing organization.
  • Cannabis Purchaser Excise Tax:
    • 10% of the purchase price – Cannabis with a THC level at or below 35%.
    • 20% of the purchase price – All cannabis infused products.
    • 25% of the purchase price – Cannabis with a THC level above 35%.
    • This tax is not imposed on cannabis that is subject to tax under the Compassionate Use of Medical Cannabis Pilot Program Act.

ALLOCATION OF STATE REVENUE

  • Minus administrative costs, the remaining state revenue will be allocated as follows:
    • 35% for the General Revenue Fund.
    • 25% for the Criminal Justice Information Projects Fund to support the R3 program.
    • 20% for the Department of Human Services Community Services Fund to address substance abuse and prevention, and mental health concerns.
    • 10% for the Budget Stabilization Fund to pay the backlog of unpaid bills.
    • 8% for the Local Government Distributive Fund to support crime prevention programs, training, and interdiction efforts, including detection, enforcement, and prevention efforts, relating to the illegal cannabis market and driving under the influence of cannabis.
    • 2% for the Drug Treatment Fund to fund public education campaigns and to support data collection and analysis of the public health impacts of legalizing the recreational use of cannabis.

SOURCE: state of Illinois news release