Should Illinois's cannabis purchaser excise tax and local cannabis taxes be added on top of the retail price, and do they get taxed again themselves?

Plain-English summary

A cannabis retailer asked a basic point-of-sale question: when a customer buys recreational cannabis, does the local cannabis tax get added on top of the retail price, and how should the final receipt total be calculated? The Department's answer walks through several DIFFERENT, STACKED taxes that can apply to a single cannabis sale -- and confirms that none of these add-on taxes become part of the seller's own taxable receipts (no "tax on tax").

Recreational (non-medical) cannabis sales can carry several layers: (1) the regular State Retailers' Occupation Tax/Use Tax framework, including the 6.25% Use Tax collection rule stated in this GIL; (2) the State Cannabis Purchaser Excise Tax, which varies by potency -- 10% of the purchase price for cannabis at or below 35% THC, 25% for cannabis above 35% THC, and 20% for cannabis-infused products; and (3) applicable local taxes, including a Municipal or County Cannabis Retailers' Occupation Tax and a home-rule municipality's general Home Rule Municipal Retailers' Occupation Tax. The response does not limit the home-rule tax to non-cannabis items; it excludes titled items and medical cannabis taxed at the 1% rate.

The key mechanical point: the excise tax and any local cannabis or home-rule tax must be stated on the invoice as a SEPARATE, additional charge, not folded into the base "purchase price"/"selling price" used to calculate any of the OTHER taxes. Illinois's regulations explicitly exclude amounts collected under the cannabis excise tax, the municipal/county cannabis taxes, and other locally imposed taxes from the "purchase price"/"gross receipts" base of each other -- so a retailer doesn't end up paying tax on the tax it already collected.

What this means for you

Cannabis retailers and dispensaries

Build your point-of-sale system to calculate each layer independently, off the BASE product price, and then add each tax as its own separately-stated line item -- don't compound the taxes on top of each other. The potency-tiered excise rate (10%/25%/20%) depends on the specific product's THC level or whether it's infused, so your system needs accurate product-level potency data, not just a flat storewide rate.

Business owners in home-rule municipalities

If your municipality has adopted both taxes, the GIL does not say the general home-rule tax stops applying to recreational cannabis. It says the home-rule tax generally reaches tangible personal property other than titled items and 1%-rate medical cannabis. It also explains that separately stated amounts collected as one tax are excluded from another tax's selling-price base, so the tax amounts themselves are not compounded.

Accountants and tax professionals

When computing a client's taxable gross receipts/selling price under any of these cannabis-related tax laws, remember to EXCLUDE amounts the client separately collected under the OTHER cannabis taxes (excise, municipal, county) and other locally imposed occupation/use taxes -- each tax's own "selling price" definition carves the others out, so double-counting is a common and avoidable error.

Common questions

Q: Is the cannabis purchaser excise tax added on top of the sale price, or built into it? A: It must be stated on the invoice as a distinct, separate charge from the purchase price of the cannabis -- not built into an all-in price.

Q: What are the excise tax rates?
A: 10% of the purchase price for cannabis with THC at or below 35%, 25% for cannabis above 35% THC, and 20% for cannabis-infused products.

Q: Does the cannabis excise tax apply to medical cannabis? A: No. The Cannabis Purchaser Excise Tax Law specifically excludes cannabis taxed under the Compassionate Use of Medical Cannabis Program.

Q: Do local cannabis taxes get included when calculating the state excise tax (or vice versa)? A: No. Each cannabis tax law's definition of "purchase price"/"selling price"/"gross receipts" specifically excludes amounts added to the bill because of the OTHER cannabis taxes and other locally imposed occupation or use taxes -- they aren't taxed on top of each other.

Q: Can I rely on this letter for my own dispensary's tax setup? A: No. This is a General Information Letter -- it's not binding on the Department and doesn't reflect your specific municipality's local tax adoptions. Confirm your locality's actual cannabis tax ordinances with a tax professional.

Citations and references

Statutes:

• 410 ILCS 705/65-10 (Cannabis Purchaser Excise Tax Law)
• 65 ILCS 5/8-11-23 (Municipal Cannabis Retailers' Occupation Tax Law)
• 55 ILCS 5/5-1006.8 (County Cannabis Retailers' Occupation Tax Law)
• 65 ILCS 5/8-11-1 (Home Rule Municipal Retailers' Occupation Tax reimbursement authority)

Regulations:

• 86 Ill. Adm. Code 423.100, 423.105 (excise tax invoicing; rate tiers; exclusions from purchase price)
• 86 Ill. Adm. Code 424.105, 425.105, 425.106 (municipal/county cannabis tax "gross receipts"/"selling price")
• 86 Ill. Adm. Code 270.101 (Home Rule Municipal Retailers' Occupation Tax)

Source

• Landing page: Illinois 2026 Sales Tax Letter Rulings
• Original PDF: ST26-0013-GIL.pdf

Original ruling text

ST 26-0013-GIL 04/28/2026 CANNABIS PURCHASER EXCISE TAX
Cannabis purchaser excise tax is not part of the seller’s gross receipts subject to tax. (This is a GIL). April 28, 2026 NAME COMPANY COMPANY1 ADDRESS EMAIL Dear NAME: This letter is in response to your letter dated March 11, 2026, in which you requested information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning the application of a tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the topic about which they have inquired. A GIL is not a statement of Department policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at https://tax.illinois.gov/ to review regulations, letter rulings and other types of information relevant to your inquiry. The nature of your inquiry and the information you have provided require that we respond with a GIL. INQUIRY: I just received the updated certificate and tax information for COMPANY from NAME1. Both are attached. I wanted to get clarification on how these taxes should be applied at the point of sale. Specifically, for cannabis sales in CITY, should the local XX.XX% recreational cannabis tax be added on top of the retail sale amount to arrive at the customer’s total, or is that tax treated differently?

NAME/COMPANY1
Page 2
April 28, 2026
For example, if a customer purchases only cannabis products totaling
$10.00, what would the total tax amount be in CITY, and what would the customer’s final out-the-door total be? start.

I just want to make sure we are pricing and collecting correctly from the Thank you for your help.

DEPARTMENT’S RESPONSE:
The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State in the business of selling tangible personal property to purchasers for use or consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege of using, in this State, any kind of tangible personal property that is purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm. Code 150.101. These taxes comprise what is commonly known as “sales” tax in Illinois. Local Tax The corporate authorities of a home rule municipality may impose a tax upon all persons engaged in the business of selling tangible personal property, other than items of tangible personal property titled or registered with an agency of this State’s government, at retail in the municipality on the gross receipts from these sales made in the course of such business. 86 Ill. Adm Code 270.101(a). This additional tax may not be imposed on tangible personal property taxed at the 1% rate under the Retailers’ Occupation Tax Act, i.e. medical cannabis. 86 Ill. Adm. Code 270.101(b). The various locally imposed retailers’ occupation tax acts (e.g. the Home Rule Municipal Retailers’ Occupation Tax (HRMROT)) authorize retailers subject to these taxes to reimburse themselves for their liability by separately stating these taxes to their customers. See, for example, 86 Ill. Adm. Code 270.101. The statutory language authorizing the HRMROT states, in part, as follows: Persons subject to any tax imposed under the authority granted in this Section may reimburse themselves for their seller’s tax liability hereunder by separately stating such tax as an additional charge, which charge may be stated in combination, in a single amount, with State tax which sellers are required to collect under the Use Tax Act...

NAME/COMPANY1
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April 28, 2026
65 ILCS 5/8-11-1. Sellers responsible for State and local retailers’ occupation taxes must collect from purchasers the 6.25% Use Tax liability and may collect reimbursement for all local tax liabilities. Any amount added to the selling price of tangible personal property by the seller because of a Home Rule Municipal Retailers’ Occupation Tax, the Retailers’ Occupation Tax, the Use Tax, or any other local occupation tax administered by the Department, and collected from the purchaser, are excluded as part of the seller’s gross receipts that are subject to such Home Rule Municipal Retailers’ Occupation Tax. 86 Ill. Adm. Code 270.101(c). If tax is not collected by the retailer, purchasers should self-assess and remit Use Tax to the Department at the rate of 6.25%. In this situation, the purchaser would not be obligated to pay State and local retailers’ occupation taxes as the incidence of those taxes is on the retailer, not the user. 65 ILCS 5/8-11-1. Cannabis Purchaser Excise Tax The Cannabis Purchaser Excise Tax Law (Law) imposes a tax on the privilege of using cannabis, excluding cannabis subject to tax under the Compassionate Use of Medical Cannabis Program. 410 ILCS 705/65-10. The tax imposed by the Law is collected from the purchaser by the cannabis retailer. The tax imposed by the Law shall be stated on the invoice as a distinct item separate and apart from the purchase price of the cannabis. 86 Ill. Adm. Code 423.100. The cannabis purchaser excise tax varies based on the type and potency of the cannabis. Cannabis with an adjusted delta-9-tetrahydrocannabinol (THC) level at or below 35% is taxed at 10% of the purchase price, and cannabis with an adjusted THC above 35% is taxed at 25% of the purchase price. Tax on all cannabis infused products is imposed at 20% of the purchase price. “Purchase price” means the consideration paid for a purchase of cannabis, valued in money, whether received in money or otherwise, including cash, gift cards, credits, and property and shall be determined without any deduction on account of the cost of materials used, labor or service costs, or any other expense whatsoever. However, “purchase price” does not include consideration paid for: . . . any amounts added to a purchaser’s bill because of charges made under the tax imposed by the Cannabis Purchase Excise Tax Law, the Municipal Cannabis Retailers’ Occupation Tax Law, the County Cannabis Retailers’ Occupation Tax Law, the Retailers’ Occupation Tax Act . .
. or any locally imposed occupation or use tax.
86 Ill. Adm. Code 423.105 (internal citations omitted).

NAME/COMPANY1
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April 28, 2026

Local Cannabis Tax
The Municipal Cannabis Retailers’ Occupation Tax Law permits a municipality to impose a tax upon all persons engaged in the business of selling cannabis, other than cannabis purchased under the Compassionate Use of Medical Cannabis Program Act, at retail in the municipality on the gross receipts from these sales made in the course of that business. 65 ILS 5/8-11-23. Similarly, the County Cannabis Retailers’ Occupation Tax Law authorizes a county to impose an additional tax on persons engaged in the business of selling cannabis other than medical cannabis on the gross receipts. 55 ILCS 5/5-1006.8. For the purpose of the Municipal and County Cannabis Retailers’ Occupation Tax Laws, “gross receipts” from the sales of cannabis by a cannabis retailer means the total selling price or the amount of such sales. 86 Ill. Adm. Code 424.105 and 425.105. For purposes of these Laws, “selling price” means: the consideration for a sale valued in money, whether received in money or otherwise, including cash, credits, property, and services, and shall be determined without any deduction on account of the cost of the property sold, the cost of materials used, labor or service cost, or any other expense whatsoever, but does not include separately stated charges identified on the invoice by cannabis retailers to reimburse themselves for their Tax liability under the Law. However, “selling price” does not include consideration paid for: . . . any amounts added to a purchaser’s bill because of charges made under the County Cannabis Retailers’ Occupation Tax Law, the Cannabis Purchaser Excise Tax Law [410 ILCS 705/Art. 65], the Municipal Cannabis Retailers’ Occupation Tax Law [65 ILCS 5/8-11-23], the Use Tax Act [35 ILCS 105], the Service Use Tax Act [35 ILCS 110], or any locally imposed occupation tax. 86 Ill. Adm. Code 424.105 and 425.106 As with the HRMROT, any amount added to the selling price of tangible personal property by the seller because of the Retailers’ Occupation Tax or any other local occupation tax administered by the Department, and collected from the purchaser, are excluded as part of the seller’s gross receipts for purposes of the Municipal and County Cannabis Retailers’ Occupation Taxes.

NAME/COMPANY1
Page 5
April 28, 2026
I hope this information is helpful. If you require additional information, please visit our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information Division at 800-732-8866. Very truly yours, Kimberly Rossini Associate Counsel KAR:slc

Printed by the authority of the State of Illinois
Electronic Only - One Copy
Issued 04/28/2026, Redacted 5/14/2026