Marijuana Business Magazine April 2020

Marijuana Business Magazine | April 2020 106 Main measures State tax requirements Sampling of state licensing & application fees HB 1438 (2019) Local sales tax: ≤3.5% State sales tax: 6.25% Retail tax: 10% to 25%, depending on type of product and THC content Total tax: 19.55%- 34.75% Existing medical cannabis license holders: Application (nonrefundable) Cultivators: $100,000 Retailers: $30,000 Fee existing license holders pay into the state Cannabis Business Development Fund Cultivators: $750,000 or 5% of total sales— whichever is less—between June 1, 2018, and June 1, 2019, with a minimum fee of $250,000. Retailers: First license: $100,000 or 3% of total sales—whichever is less— between June 1, 2018, and June 1, 2019. Second license: $200,000 New entrants to market: Application (nonrefundable) Craft growers: $5,000 Infusers: $5,000 Retailers: $5,000 Transporting organizations: $5,000 License Craft growers: $40,000 Infusers: $5,000 Retailers: $60,000 (biannually) Transporting organizations: $10,000 Fee waivers of up to 50% toward nonrefundable application and initial licensing fees are available through the Department of Financial and Professional Regulation and the Department of Agriculture to social equity applicants meeting certain requirements.   What to watch Retail outlets will continue to open in Illinois, which will impact month-over-month sales. The state has developed a complex system to roll out recreational retail outlets. While existing medical dispensaries were given priority to apply for recreational licenses in 2019, the remaining retailers will be licensed in a series of waves. The maximum number of retailers allowed by the end of 2020 is 185. Sales are likely to increase as more cannabis stores open across the state, but they might not grow as quickly as in other states, given that towns and municipalities have the ability to opt out of retail activity. Illinois aims to have one of the most socially equitable recreational systems in terms of ownership. The state’s licensing system was designed to place strong emphasis on social equity ownership. License applicants who own more than 51% of the company and have a previous cannabis conviction eligible for expungement earn extra points, as do applicants living in areas disproportionally impacted by cannabis-related arrests, convictions and incarcerations. The Cannabis Business Development Fund was created to offer low-interest financing to business startups as well. “Strawman” agreements have cropped up in other states’ social equity programs, where an applicant owns 51% or more of an operation on paper to qualify for equity points but has no true control or authority over the business. Illinois will initiate a disparity study in May to evaluate the system. Illinois began recreational marijuana sales Jan. 1, 2020, with long lines and enthusiastic customers generating $11 million in sales that day. During the first two months, recreational sales in Illinois reached nearly $75 million, a figure that is likely to increase over time as the market develops. The medical marijuana program is expected to stay strong given the large discrepancy in tax rates between the two systems: Medical patients pay only 1% in taxes while recreational customers pay up to 34.75% depending on product, potency and location of purchase. Marijuana Business Daily estimates Illinois’ recreational sales could reach $2.5 billion annually when the market matures. – Maggie Cowee MarketAtAGlance | Illinois Photo Courtesy of Dispenary 33