Sales Tax on Drugs in Illinois
In Illinois, the sales tax on drugs varies significantly depending on the type of product being purchased. While prescription medications are subject to different tax rates than over-the-counter drugs or recreational substances like cannabis, the overall tax landscape is shaped by Illinois’ nuanced approach to taxation. Let’s break down the sales tax rates on drugs in Illinois and what they mean for consumers and businesses.
Sales Tax on Prescription Medications
Illinois has a relatively favorable tax policy when it comes to prescription medications. Under the state’s Sales Tax Act, prescription drugs are exempt from the state sales tax. This exemption is part of a broader effort to reduce the financial burden on individuals who rely on prescription medications for their health needs.
However, it’s important to note that while prescription drugs are exempt from Illinois’ standard sales tax rate, over-the-counter (OTC) medications are not. OTC drugs, such as pain relievers, allergy medicines, and cold treatments, are subject to Illinois’ regular sales tax rate of 6.25%, unless they are considered a necessity and are specifically exempt.
Sales Tax on Cannabis in Illinois
While not typically classified as a “drug” in the traditional sense, cannabis in Illinois falls under a specialized tax structure. Since the legalization of adult-use cannabis on January 1, 2020, cannabis products are subject to a Retailers’ Occupation Tax (ROT) and excise taxes rather than the standard sales tax.
- Excise tax: Cannabis is taxed based on its THC content. Products with 35% THC or less are taxed at 10%, while products with more than 35% THC are taxed at 25%. Cannabis-infused products, such as edibles and beverages, are taxed at 20%.
- State ROT: The state imposes a 6.25% sales tax on cannabis purchases, which applies in addition to the excise tax. Local municipalities and counties can also impose additional taxes on cannabis, further raising the total tax burden.
Other Drugs and Tax Considerations
For other types of drugs, such as those related to medical treatments or substances like alcohol and tobacco, Illinois follows federal guidelines for taxation, and these taxes are typically higher than for other consumer goods. Alcohol, for instance, is heavily taxed both at the wholesale and retail levels, while tobacco products are subject to both state and federal taxes.
Conclusion
In Illinois, the sales tax treatment of drugs depends on the category of the product. Prescription medications are exempt from sales tax, while over-the-counter drugs and cannabis products face specific tax rates that vary based on their classification. Understanding these tax rules is crucial for consumers and businesses alike, as they help navigate the costs associated with purchasing medical or recreational products. Contact Dimov Tax today for clarity in surrounding cannabis rules. Our team is ready to present professional aid.