Effective January 1, 2026, Public Chapter 526 (2025) amends the regulation and taxation of hemp-derived cannabinoid products.
If a retailer purchases hemp from a hemp grower or producer for resale to the retailer's customers, the retailer must collect sales tax from its customers on the hemp sales. The sale of hemp or any products associated with hemp by retailers are treated similar to sales of other types of tangible personal property. Sales and use taxes will apply to sales of hemp that is not grown by the seller. And effective July 1, 2023, Pub. Ch. 423 (2023) creates a new 6% sales tax for the privilege of engaging in the business of selling products containing a hemp-derived cannabinoid at retail in Tennessee. This tax applies in addition to the standard 7% state sales tax rate and the applicable local option sales tax rate.
Effective January 1, 2026, Public Chapter 526 (2025) repeals the additional 6% sales tax on hemp-derived cannabinoid products (HDCPs) sold at retail. The additional sales tax on HDCPs sold at retail remains effective through December 31, 2025, and taxpayers should continue filing returns and remitting tax until then. The standard 7% state sales tax and the applicable local option sales tax are not impacted and remain in effect.
Note: This article was updated on June 5, 2025. The previous version of SUT-111 is available here.
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