After Just 6 Months, Illinois Collects $52 Million in Cannabis Tax Revenue
Illinois has hauled in $52 million in tax revenue from the sale of $239 million worth of adult-use cannabis this year, Governor JB Pritzker announced Tuesday.
According to a news release, the Illinois Department of Revenue collected $34.7 million worth of excise taxes and approximately $18 million in sales taxes through the first six months of 2020.
Tax revenue collected on the sale of legal recreational marijuana was 85% higher than anticipated, driven by growing consumer demand and increasing acceptance of the still federally illegal drug.
Tuesday’s announcement comes one week after the state reported record high adult-use cannabis sales of more than $47.6 million in June.
Under Illinois’ Cannabis Regulation and Tax Act (CRTA), two types of taxes are levied on marijuana. The state imposes a 7% cultivation privilege tax on the gross receipts from the sale of adult-use cannabis by a cultivator to a dispensary. It also charges a variable, potency-based cannabis purchaser excise tax at the dispensary level.
Cannabis-infused offerings are taxed at 20%, while marijuana containing 35% THC or less is taxed at 10%. More concentrated cannabis containing over 35% THC is taxed at 25%.
Municipalities are also allowed to collect up to 3% in cannabis taxes.
Gov. Pritzker’s budget initially estimated that just $22 million in purchaser excise taxes would be collected during the final six months of fiscal 2020.
So how will the funds be used? The IDFPR said $25.9 million will be deposited into the state’s general fund, 72% more than expected. Pritzker’s fiscal 2020 budget had previously forecast that $15 million would be transferred into the fund.
The state will also use a quarter of the tax revenue collected to support communities “hit hardest” by the War on Drugs, it said.
"Illinois has done more to put justice and equity at the forefront of this industry than any other state in the nation, and we're ensuring that communities that have been hurt by the war on drugs have the opportunity to participate," Pritzker said via the release.
Under the CRTA, 25% of taxes are put into the Restore, Reinvest and Renew (R3) Program, which supports communities that have been disproportionately impacted by the justice system. Those funds can also be directed to address substance abuse and prevention and mental health concerns or used to support local governments and their individual crime prevention programs.
"A portion of every dollar spent will be reinvested in communities that have suffered from decades of disinvestment,” Pritzker added.
The state will also disperse a portion of the $18 million in sales taxes to local governments, the release noted.
According to Pritzker’s fiscal 2021 budget, $100 million in excise taxes and $27 million in cultivation taxes are expected to be collected over the next 12 months.
By comparison, a recent study of the Massachusetts adult-use cannabis market by accounting firm KPMG shows that recreational sales have the potential to reach $1 billion over the next 12 months. Under Massachusetts’ price-based tax scheme, the state would generate approximately $200 million in tax revenue.
According to cannabis market research firm BDSA, sales of marijuana in Illinois are expected to reach $1.5 billion by 2025.
A press release with additional details is included below.
Gov. Pritzker Announces $52 Million in Adult-Use Cannabis Tax Revenue in First Six Months of Industry
25% of Revenue Collected from Cannabis Sales to be Reinvested in Communities Hit Hardest by Failed War on Drugs
CHICAGO — Gov. Pritzker announced today that the state has earned $52 million in revenue during the first six months of Illinois' new adult-use cannabis industry. Last year, the Governor signed the bipartisan Illinois Cannabis Regulation and Tax Act (CRTA) into law, the most equity-centric recreational cannabis legalization in the nation. Since the program's launch on January 1, $52 million has been collected in adult-use cannabis tax revenue, with $34.7 million coming from excise taxes.
"Illinois has done more to put justice and equity at the forefront of this industry than any other state in the nation, and we're ensuring that communities that have been hurt by the war on drugs have the opportunity to participate," said Governor JB Pritzker. "Since January, over $239 million has been spent on recreational cannabis in Illinois translating to $52 million in tax revenue, and a portion of every dollar spent will be reinvested in communities that have suffered from decades of disinvestment."
The Pritzker administration collected $34.7 million in cannabis excise taxes in the second half of fiscal year 2020. In addition to the cannabis excise taxes, the Illinois Department of Revenue collected $18 million in sales taxes that will be shared with local governments. In total, the department estimates $25.9 million will be directed to the state's General Fund from excise and sales taxes.
"I'm proud to work with Gov. Pritzker in creating equity in the cannabis industry in a way that no other state has done," said Toi Hutchinson, Senior Advisor to the Governor for Cannabis Control. "By expunging hundreds of thousands of cannabis-related records, reinvesting the money spent on adult-use cannabis in Illinois into communities that are suffering, and making equity a central focus of the cannabis licensure process, the administration is ensuring that no community is left out or left behind."
The Pritzker Administration is committed to ensuring the new cannabis industry is equitable and offers economic opportunity for all Illinois residents, regardless of background. Under the CRTA, 25% of revenues collected from recreational cannabis sales will be either reinvested through the Restore, Reinvest and Renew (R3) Program in communities that have been disproportionately impacted by the justice system, directed to address substance abuse and prevention and mental health concerns, or allocated to local governments to support their own crime prevention programs. The innovative R3 program recently announced $31.5 million in grant opportunities to organizations working in historically underserved communities across Illinois.
In addition to providing financial support to organizations offering services in disproportionately impacted communities, the administration offered lower application fees, low-interest loans, and informational workshops on cannabis-related licenses to social equity applicants. Gov. Pritzker is also working with State's Attorney Kim Foxx, the Prisoner Review Board, and state's attorneys across Illinois to expunge the records of non-violent offenders with a cannabis related conviction.