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McHenry County reviewing marijuana tax; Franks opposes setting tax at cap

Franks voices concerns about setting it at state-established 3% cap

An ordinance establishing a tax on the gross sales receipts of potential recreational marijuana retailers in McHenry County is under board review.

However, McHenry County Board Chairman Jack Franks is at odds with the county’s Finance and Audit Committee recommendation on setting such a tax at its 3% cap under state law.

Under House Bill 1438 – which Gov. JB Pritzker signed in June and takes effect
Jan. 1 – Illinois residents will be allowed to buy and possess 30 grams of marijuana, 250 milligrams of THC in a cannabis-infused product and 2.5 grams of a concentrated cannabis product. Nonresidents are allowed to buy half of those amounts.

The law also gives municipalities the right to charge their own taxes of up to 3%, as well as 3% in county taxes.

Some municipalities in McHenry County, including Woodstock and Harvard, already have approved separate ordinances establishing a 3% marijuana retailer tax.

During a Finance and Audit Committee meeting this month, McHenry County Administrator Peter Austin suggested setting the county tax at its 3% cap. He said absent any further direction, he’d figured the county would want to get the most revenue it could.

Austin said that from a market perspective, McHenry County may be in a better position than downstate counties to set a slightly higher tax since it borders Wisconsin, where recreational and medicinal marijuana is illegal.

“I think our costs associated with a lot of services are going to go up, so I don’t have any issue taxing to the max,” Finance and Audit Committee Chairman Mike Skala said during the meeting.

The committee recommended a 3% retailer tax for board approval without opposition.

However, Franks said he doesn’t think setting the tax at its cap is prudent. Therefore, he made a public recommendation to lower the rate.

“You don’t want to make [marijuana sales taxes] so high that people are going to go and buy it in other counties,” Franks said. “Also, if it’s really high, it’s going to keep the illicit market going and encourage the illegal behavior that we’re trying to stamp out, so I think it’s bad business, and it’s also bad for our law enforcement.”

Although Woodstock City Council members said any revenue from the retailer tax would go toward increased police training to properly enforce marijuana legalization, Franks said it is too early to determine whether revenue from the county tax should be set aside for police.

“It’s imprudent to earmark it since I don’t know if we have an issue yet,” Franks said. “If we have an issue, we’ll deal with it.”

Developers who wish to create new dispensaries will have to apply for a conditional adult-use license. Applications for those will be available in October, according to the law.

Currently, 55 dispensaries are allowed to operate under state law.

Austin said that by July 1, there will be an opportunity for 75 marijuana retail outlets statewide, 47 of which have been targeted for the Chicago metropolitan area. However, Austin said, it is unclear whether any of those 47 possible licenses may fall within McHenry County’s borders.

By December 2021, the state will issue up to 110 conditional licenses, according to the law. At no point will more than 500 adult-use dispensary organization licenses be issued in the state.

The county’s ordinance will be under a 30-day review period after Tuesday’s McHenry County Board meeting and may be up for consideration during the board’s October meeting.

In addition to municipal and county retailer taxes, marijuana products also are taxed based on their potency and product type.

According to the bill, cannabis-infused products will be hit with a 20% sales tax.

Any cannabis other than a cannabis-infused product with a level of THC – the psychoactive chemical in marijuana – at or below 35% will receive a 10% sales tax.

Any cannabis other than a cannabis-infused product with a THC level greater than 35% will receive a 25% sales tax.

The County Board is set to meet at 7 p.m. Tuesday at the McHenry County Administration Building, 667 Ware Road, Woodstock.

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