Cannabis Dispensing Organizations in Illinois to Be Licensed and Bonded
Illinois recently passed the Cannabis Regulation and Tax Act, which legalizes cannabis for recreational use. It was enacted on June 25th, 2019 and is effective from the same date.
As a part of the new law, cannabis dispensing organizations have to undergo a strict licensing procedure that ensures their legal compliance. It includes providing a security instrument in the form of an Illinois marijuana surety bond or an escrow account. The Illinois surety bond or escrow account guarantees you will follow all applicable regulations in your operations as a dispensing organization.
In the sections below, you can learn the essentials about the new Act, as well as gather key information on how to meet the bonding requirement.
The licensing rules in the Cannabis Regulation and Tax Act
In order to operate as a cannabis dispensing organization in Illinois, you have to obtain an Adult Use Dispensing Organization License from the state Department of Agriculture. It is a biennial license that expires on March 31st of every even-numbered year.
The requirements that you have to meet under the Cannabis Regulation and Tax Act include:
- Provide relevant personal and business entity information
- All owners, managers, employees, and agents have to successfully complete the Responsible Vendor Program
- Pay a registration fee of $60,000
- Obtain evidence of financial responsibility in the form of a $50,000 surety bond or maintain an escrow account with that sum
The financial security should be made payable to the Department in certain circumstances set in the Act. They are the following:
- Timely and successful completion of the dispensary’s construction
- Operating in a manner that provides an uninterrupted supply of cannabis
- Payment of registration renewal fees to continue the licensing
- Keeping accurate books and records
- Providing the regularly required reports
- Complying with state tax requirements
- Running the dispensing organization in compliance with the applicable law and regulations
The escrow account or surety bond can be cancelled with a written notice sent to the Department at least 30 days in advance of the cancellation date. If the licensee fails to provide a new security instrument, the license can be revoked.
Meeting the surety bond requirement
Typically, in order to maintain an escrow account, you have to keep the whole sum in it at all times during your licensing. That’s why many licensees would opt for the surety bond option to satisfy the evidence of financial responsibility requirements.
In case you fail to follow the law and satisfy the conditions mentioned in the previous section, you may end up with a claim against your bond. If it is proven, you have to pay compensation for the damages caused by your non-compliance.
In order to get bonded, you have to pay a small percentage of the required bond amount, which is $50,000 in this case. This is called the bond premium. It is determined after a careful examination of your personal and business finances, such as credit score and company paperwork. If your profile is solid, the bond rates that you can expect are between 0.75% and 5%. Thus, you may have to pay only $375 to $2,500 to obtain your Illinois marijuana surety bond.
Have further questions about the new Illinois marijuana surety bond requirement? You can reach us at 877.514.5146 to speak with our bonding specialists.