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Tennessee’s new law regulating Cannabidiol - aka CBD – takes effect July 1, 2023. The law is part of a comprehensive regulatory regime that will be phased in over the next year.

What does the law say?

Beginning July 1, 2023, stores selling CBD must:

  1. Card for 21. It is a Class A misdemeanor to knowingly sell or distribute cannabinoid products to any person under 21 years of age. This is the same penalty as sale of beer or alcoholic beverages to a minor. 
  2. Take CBD off the shelves. CBD must be stored behind the retail counter and inaccessible to a customer, if the business allows patrons that are under 21. A violation is a Class A misdemeanor.
  3. Tax CBD. There is a new 6% tax. This is in addition to sales tax. Retailers should begin collecting the 6% tax on sales of CBD beginning July 1, 2023. The first CBD sales taxes are due August 20, 2023.
  4. No public samples. It is illegal to knowingly distribute samples of hemp-derived cannabinoid product in or on a public street, sidewalk, or park.

By July 1, 2024, all retailers selling CBD must have licenses issued from the Department of Agriculture. There are labeling and testing requirements, as well as a distance requirement. The entire law can be found here.

How do I pay the new CBD tax?

The tax will be reported in the same manner as sales tax and is due monthly. Taxpayers are required to file a return with the state Department of Revenue and pay by the 20th day of each month. The tax will be paid on a new schedule attached to Sales and Use Tax Returns.

The new 6% tax does not apply to hemp-derived fiber, grain, or topical products.

Cue the Beatles:

If you drive a car, I'll tax the street

If you try to sit, I'll tax your seat

If you get too cold, I'll tax the heat

If you take a walk, I'll tax your feet

How does the new Tennessee law define CBD?

Hemp-derived cannabinoid means (1) a cannabinoid other than delta-9 THC or an isomer derived from such cannabinoid, that is derived from hemp in a concentration of more than 0.1% or (2) a hemp-derived product containing delta-9 THC in a concentration of 0.3% or less on a dry weight basis. This includes, but is not limited to, delta-8 THC and delta-10 THC.

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