Tennessee Department of Revenue Issues Notice on Taxability of Hemp-derived Cannabinoids

May 18, 2023

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.

For more information, visit the Department of Revenue website. Additional information is also available in the Department’s Sales and Use Tax Manual.