Tennessee Department of Revenue Issues Notice on Taxability of Hemp-derived Cannabinoids
The Tennessee Department of Revenue has recently issued Important Notice #23-12 regarding the taxability of hemp-derived cannabinoids.
Effective July 1, 2023, Public Chapter 423 (2023) creates a new 6% sales tax for the privilege of engaging in the business of selling products containing a hemp-derived cannabinoid. This tax applies in addition to the standard 7% state sales tax rate and the applicable local option sales tax rate. This tax does not apply to hemp-derived fiber, grain or topical products.
Definition of Hemp-derived Cannabinoid
The notices states that hemp-derived cannabinoid means (i) a cannabinoid other than delta-9 tetrahydrocannabinol (“THC”), or an isomer derived from such cannabinoid, that is derived from hemp in a concentration of more than one-tenth of one percent (0.1%); or (ii) a hemp-derived product containing delta-9 THC in a concentration of three-tenths of one percent (0.3%) or less on a dry weight basis. This includes, but is not limited to, delta-8 THC and delta-10 THC.
Reporting the Tax
The additional 6% sales tax applies to the sales price of products containing hemp-derived cannabinoids when sold at retail in Tennessee. The tax is reported in the same manner as sales tax. Therefore, the tax is due monthly. Taxpayers must file a return with the Department and remit payment on or before the 20th day of each month.
The Department will revise its Sales and Use Tax Return to add a new schedule that retailers will use to comply with this additional tax.