Cannabis occupation tax rate changes July 1

The Illinois Department of Revenue (IDOR) released an informational bulletin for all dispensaries engaged in the business of selling adult use cannabis at retail in taxing jurisdictions that have enacted municipal or county cannabis retailers’ occupation taxes.

Effective July 1, 2024, certain taxing jurisdictions have, by ordinance, imposed or changed their Municipal or County Cannabis Retailers’ Occupation Tax on the gross receipts from sales of adult use cannabis. These taxes are in addition to Illinois Retailers’ Occupation Tax on general merchandise (6.25%) and any locally imposed retailers’ occupation tax on general merchandise, which also apply to sales of adult use cannabis.

Cash registers and computer programs must be adjusted so that beginning on July 1, 2024, the corrected tax rate is collect and paid. To verify combined state and local retailers’ occupation tax rates (i.e., state and local taxes) on adult use cannabis, go to the MyTax Illinois Tax Rate Finder and select rates for July 2024.

What is taxed?

Municipal and County Cannabis Retailers’ Occupation Taxes are imposed on gross receipts from adult use cannabis sold at retail. These taxes, however, are not imposed on cannabis purchased under the Compassionate Use of Medical Cannabis Program Act.

What is the tax rate that counties and municipalities can impose by ordinance on retail sales of cannabis?

Municipalities may impose a tax on retail sales of cannabis, other than medical cannabis, at a rate that may not exceed 3%, imposed in one-quarter percent (0.25%) increments. Counties may impose a tax (also in one-quarter percent increments) on retail sales of cannabis, other than medical cannabis, at the following rates:

• In unincorporated areas of the county, the rate may not exceed 3.75%.
• In a municipality located in the county, the rate may not exceed 3%.

For implementation of the tax by the Illinois Department of Revenue (IDOR), municipalities and counties must submit ordinances to IDOR by April 1 for July 1 implementation and by October 1 for implementation on the following January 1.

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