Illinois Administrative Code › Title 86 - REVENUE › Part 422 - CANNABIS CULTIVATION PRIVILEGE TAX › Section 422.110 - Tax Imposed

Current through Register Vol. 48, No. 28, July 12, 2024
a)
Beginning September 1, 2019, the 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.
[410 ILCS
			 705/60-10(a)] For purposes of this
			 Section, "first sale" does not include a transfer of cannabis or cannabis
			 concentrate by a cultivator to an infuser pursuant to an agreement that
			 provides that the cultivator will retain title to the cannabis or cannabis
			 concentrate and the infuser will create cannabis-infused products on behalf of
			 the cultivator for an agreed-upon fee or rate.
EXAMPLE 1: A cultivator grows cannabis and sells the grown
				cannabis to an infuser for $200. The cultivator owes $14 in Tax on the cannabis
				sold to the infuser.
EXAMPLE 2: A craft grower grows cannabis and sells 100 quarter
				ounces of the grown cannabis to a cultivator for $5000. The craft grower is
				liable for Tax in the amount of $350. The cultivator subsequently sells 50
				quarter ounces of this cannabis to a dispensary for $55 per quarter ounce. The
				cultivator has no Tax liability on the sale of cannabis to the
				dispensary.
EXAMPLE 3: A cultivator sells cannabis and cannabis concentrate
				to an infuser for $1,000. The infuser makes cannabis-infused products from the
				cannabis and cannabis concentrate. The infuser sells all the cannabis-infused
				products created from the cannabis and cannabis concentrate to the cultivator
				for $1,500. The cultivator owes $70 tax on the transfer of the cannabis and
				cannabis concentrate to the infuser. The infuser owes no tax on the sale of the
				cannabis-infused products to the cultivator.
EXAMPLE 4: A cultivator contracts with an infuser to provide
				the infuser with cannabis and cannabis concentrate and for the infuser to
				create cannabis-infused products on behalf of the cultivator for an agreed-upon
				fee or rate. The cultivator transfers to the infuser cannabis and cannabis
				concentrate with a fair market value of $750, and the cultivator retains title
				to the cannabis and cannabis concentrate. The infuser makes the
				cannabis-infused products, transfers to the cultivator all cannabis-infused
				products created from the cannabis and cannabis concentrate, returns any
				remaining cannabis and cannabis concentrate, and charges the cultivator the
				agreed-upon fee or rate for its services. The cultivator does not owe tax on
				the fair market value of the cannabis and cannabis concentrate transferred to
				the infuser. The cultivator subsequently sells the cannabis-infused products to
				a dispensary and owes tax on the gross receipts received from the sale to the
				dispensary.
b)
The
			 sale of any product by a cultivator that contains any amount of cannabis or any
			 derivative thereof is subject to the Tax on the full selling price of the
			 product.
[410 ILCS
			 705/60-10(a)]
EXAMPLE 1: A cultivator grows cannabis and sells the cannabis
				for $200 to an infuser. The cultivator has $14 in Tax liability on the sale of
				the cannabis to the infuser. The infuser creates cannabis-infused products and
				sells the products to a dispensary. The infuser has no Tax liability.
EXAMPLE 2: A cultivator grows cannabis, processes a pound of
				cannabis into cannabis-infused products, and sells the cannabis-infused
				products to a dispensary for $500. It normally sells the cannabis at wholesale
				for $200 an ounce. The cultivator has $35 ($500 x .07) in Tax liability on the
				sale of the cannabis-infused products to the dispensary.
c) It shall be presumed that all sales of
			 cannabis are subject to Tax until the contrary is established, and the burden
			 of proving that a transaction is not taxable shall be upon the
			 cultivator.
d) In computing Tax
			 liability, no deductions shall be made by a taxpayer from gross receipts or
			 selling prices on account of the cost of property sold, the cost of materials
			 used, labor or service costs, incoming freight or transportation costs,
			 overhead costs, processing charges, salesmen's commissions, interest paid by
			 the taxpayer, or any other expenses whatsoever. Costs of doing business are an
			 element of the cultivator's gross receipts and are subject to the Tax even if
			 separately stated on the bill to the customer. (See 86 Ill. Adm. Code
			 130.415 for rules regarding the
			 treatment of transportation and the delivery charges.)
EXAMPLE: A cultivation center sells 500 ounces of cannabis to a
				dispensing organization for $100,000, plus a delivery charge of $250 and a fuel
				surcharge of $50. The fuel surcharge is a cost of doing business and is part of
				the selling price. The cultivation center delivers the cannabis to the
				dispensing organization. The cultivation center does not provide the dispensing
				organization with the option to pick up the cannabis. As a result, the cost of
				the delivery service is part of the selling price of the cannabis. The selling
				price for purposes of determining the Tax is $100,300.
e) The Tax is computed on the selling price
			 of the cannabis after the application of any applicable discounts.
EXAMPLE: A cultivation center sells 500 ounces of cannabis to a
				dispensing organization for $200 an ounce. The cultivation center provides a
				nondiscriminatory 10% discount for sales over 300 ounces. The total price with
				the discount is $90,000. The Tax is computed on the gross receipts of
				$90,000.
f)
The
			 Department may determine the selling price of the cannabis when the seller and
			 purchaser are affiliated persons, when the sale and purchase of cannabis is not
			 an arm's length transaction, or when cannabis is transferred by a cultivator to
			 the cultivator's dispensing organization or infuser and a value is not
			 established for the cannabis. The value determined by the Department shall be
			 commensurate with the actual price received for products of like quality,
			 character, and use in the area. If there are no sales of cannabis of like
			 quality, character, and use in the same area, then the Department shall
			 establish a reasonable value based on sales of products of like quality,
			 character, and use in other areas of the State, taking into consideration any
			 other relevant factors.
[410 ILCS
			 705/60-10(a)]
g)
The Tax is solely the
			 responsibility of the cultivator who makes the first sale and is not the
			 responsibility of a subsequent purchaser, a dispensing organization, or an
			 infuser. Cultivators subject to the Tax may, however, reimburse themselves for
			 their Tax liability under this Part by separately stating reimbursement for
			 their Tax liability as an additional charge.
[410 ILCS
			 705/60-10(b)] The charge for
			 reimbursement may not be identified on the invoice as a tax.
h)
A cultivator may not either
			 directly or indirectly discriminate in price between different cannabis
			 business establishments that are purchasing a like grade, strain, brand, and
			 quality of cannabis or cannabis-infused product. Nothing in this subsection (h)
			 prevents a cultivator from pricing cannabis differently based on differences in
			 the cost of manufacturing or processing, the quantities sold, such as volume
			 discounts, or the way the products are delivered.
[410 ILCS
			 705/20-30(e) and 30 -30(f)]
i)
The Tax shall be in addition to
			 all other occupation, privilege, or excise taxes imposed by the State of
			 Illinois or by any unit of local government.
[410 ILCS
			 705/60-10(c)]