For some reason, there are some features of the IL Cannabis Act that you may have missed…
Until October, only medical dispensaries can sell legally, and to do so requires a non-refundable deposit of 3% of their annual sales, or $100,000, whichever is less. This is termed the ‘Cannabis Business Development Fee’.
The state is also working to create virtual monopolies. For those not in the medical side seeking a license, the following is the total number available:
- Bloomington: 1
- Cape Girardeau: 1
- Carbondale-Marion: 1
- Champaign-Urbana: 1
- Chicago-Naperville-Elgin: 47
- Danville: 1
- Davenport-Moline-Rock Island: 1
- Decatur: 1
- Kankakee: 1
- Peoria: 3
- Rockford: 2
- St. Louis: 4
- Springfield: 1
- Northwest Illinois nonmetropolitan: 3
- West Central Illinois nonmetropolitan: 3
- East Central Illinois nonmetropolitan: 2
- South Illinois nonmetropolitan: 2
That’s it. Want to compete with the single recreational dispensary in the Davenport area? Tough. If they are overcharging, it’s back to the street dealers. 20+ pages later, we find that after 2022, the number of licenses may be raised. With an absolute cap of 500. At least until that is amended. The increase is to ‘reduce or eliminate’ various barriers. This is the part people likely mean when they envision pot shops replacing liquor stores in lower income neighborhoods.
Applications are $5000, and are, of course, non-refundable. By the way, this information is on pages 84 & 85 of a 610 page bill. There are 16 pages of definitions at the beginning.
The requirements for application are long too, so they are under the accordion below, check them out if you wish.
Just To Apply To Run A Store...
- An applicant must meet the following requirements:
- Payment of a nonrefundable application fee of $5,000 for each license for which the applicant is applying, which shall be deposited into the Cannabis Regulation Fund;
- Certification that the applicant will comply with the requirements contained in this Act;
- The legal name of the proposed dispensing organization;
- A statement that the dispensing organization agrees to respond to the Department’s supplemental requests for information;
- From each principal officer, a statement indicating whether that person:
- has previously held or currently holds an ownership interest in a cannabis business establishment in Illinois; or
- has held an ownership interest in a dispensing organization or its equivalent in another state or territory of the United States that had the dispensing organization registration or license suspended, revoked, placed on probationary status, or subjected to other disciplinary action;
- Disclosure of whether any principal officer has ever filed for bankruptcy or defaulted on spousal support or child support obligation;
- A resume for each principal officer, including whether that person has an academic degree, certification, or relevant experience with a cannabis business establishment or in a related industry;
- A description of the training and education that will be provided to dispensing organization agents;
- A copy of the proposed operating bylaws;
- A copy of the proposed business plan that complies with the requirements in this Act, including, at a minimum, the following:
- A description of services to be offered; and
- A description of the process of dispensing cannabis;
- A copy of the proposed security plan that complies with the requirements in this Article, including:
- The process or controls that will be implemented to monitor the dispensary, secure the premises, agents, and currency, and prevent the diversion, theft, or loss of cannabis; and
- The process to ensure that access to the restricted access areas is restricted to, registered agents, service professionals, transporting organization agents, Department inspectors, and security personnel;
- A proposed inventory control plan that complies with this Section;
- A proposed floor plan, a square footage estimate, and a description of proposed security devices, including, without limitation, cameras, motion detectors, servers, video storage capabilities, and alarm service providers;
- The name, address, social security number, and date of birth of each principal officer and board member of the dispensing organization; each of those individuals shall be at least 21 years of age;
- Evidence of the applicant’s status as a Social Equity Applicant, if applicable, and whether a Social Equity Applicant plans to apply for a loan or grant issued by the Department of Commerce and Economic Opportunity;
- The address, telephone number, and email address of the applicant’s principal place of business, if applicable. A post office box is not permitted;
- Written summaries of any information regarding instances in which a business or not-for-profit that a prospective board member previously managed or served on were fined or censured, or any instances in which a business or not-for-profit that a prospective board member previously managed or served on had its registration suspended or revoked in any administrative or judicial proceeding;
- A plan for community engagement;
- Procedures to ensure accurate recordkeeping and security measures that are in accordance with this Article and Department rules;
- The estimated volume of cannabis it plans to store at the dispensary;
- A description of the features that will provide accessibility to purchasers as required by the Americans with Disabilities Act;
- A detailed description of air treatment systems that will be installed to reduce odors;
- A reasonable assurance that the issuance of a license will not have a detrimental impact on the community in which the applicant wishes to locate;
- The dated signature of each principal officer;
- A description of the enclosed, locked facility where cannabis will be stored by the dispensing organization;
- Signed statements from each dispensing organization agent stating that he or she will not divert cannabis;
- The number of licenses it is applying for in each BLS Region;
- A diversity plan that includes a narrative of at least 2,500 words that establishes a goal of diversity in ownership, management, employment, and contracting to ensure that diverse participants and groups are afforded equality of opportunity;
- A contract with a private security contractor that is licensed under Section 10-5 of the Private Detective, Private Alarm, Private Security, Fingerprint Vendor, and Locksmith Act of 2004 in order for the dispensary to have adequate security at its facility; and
- Other information deemed necessary by the Illinois Cannabis Regulation Oversight Officer to conduct the disparity and availability study referenced in subsection (e) of Section 5-45.
Working there will cost the employee $100 for their ID card. Not too far off from what security is required to pay, but also not easy if you’ve been out of work for a while.
And Then The Taxes Begin…
7% on the grower’s sale, paid by the grower
Buyers face the following excise taxes:
- Any cannabis, other than a cannabis-infused product, with an adjusted delta-9-tetrahydrocannabinol level at or below 35% shall be taxed at a rate of 10% of the purchase price;
- Any cannabis, other than a cannabis-infused product, with an adjusted delta-9-tetrahydrocannabinol2 level above 35% shall be taxed at a rate of 25% of the purchase price; and
- A cannabis-infused product shall be taxed at a rate of 20% of the purchase price.
- The tax imposed under this Article shall be in additionThe tax imposed under this Article shall be in addition to all other occupation, privilege, or excise taxes imposed by the State of Illinois or by any municipal corporation or political subdivision thereof.
So, for an eighth of an ounce, street prices in Chicago are about $40 according to https://budzu.com/prices/usa/illinois/chicago. Let’s pretend that will stay consistent. So, your dispensary price in Chicago will be $48.51 – $55.13. Since the law makes all pot possession no longer an issue, why pay the state $8 – $15 more? This has been seen in other states. The Chicago Sun Times estimated pot prices of about $60 for an eighth of an ounce, which is in line with my basic finding.
And remember, there is a hard limit on the number of stores, and those beyond existing medical dispensaries won’t be live until 2022. So yeah, no instant tax boon here.
Illinois is pretty good at screwing up taxes.
So what we have is a law that allows use, but at a very high cost, and despite claims to the contrary, isn’t likely to see any development in economically depressed communities. After all, with the costs associated with the mere starting of the business, why risk it in a bad neighborhood or town? It’s just too expensive a thing to mess up.