Cannabis Now Reports

Stick around the cannabis industry long enough and you’ll hear someone say “states are the laboratories of democracy.” It’s an idea that was first published by U.S. Supreme Court Justice Louis Brandeis in 1932, when Brandeis wrote that states have the ability to “try novel social and economic experiments without risk to the rest of the country,” and it’s a political idea that the cannabis industry has certainly embodied.

Since California broke with the federal government in 1996 to legalize medical marijuana, every state in the union except Idaho has experimented with a different way to regulate cannabis, with varying levels of success. But today, one particularly interesting economic experiment is playing out in Illinois. The state is going to tax cannabis products based upon their THC percentage, not upon their weight, as most states with adult-use cannabis do today.

On June 25, Illinois became the first state to legalize an adult-use cannabis marketplace through the legislature. The law that Gov. J.B. Pritzker signed, which will go into effect on Jan. 1, 2020, puts forth a baseline tax structure for recreational cannabis in the state with three tiers.

Cannabis products with less than 35% THC will face a 10% excise tax. Cannabis products with more than 35% THC will face a 25% excise tax. Meanwhile, cannabis-infused products, such as edibles, will be taxed at 20%, regardless of their THC percentage. The vast majority of cannabis flower on the market today falls below that 35% THC line, while cannabis concentrates usually test at above 50% THC.

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Taxing Based on THC: What It Means for Concentrates