Effective January 1, 2026, Public Chapter 526 (2025) amends the regulation and taxation of hemp-derived cannabinoid products.
In Tennessee, growers of agricultural products are exempt from the business tax and the sales tax on the sales of agricultural products that they grow. Hemp producers who sell the hemp they grow are therefore exempt from the business tax and are not required to collect sales tax. They do not need to get a business license from the city or county.
However, retail sales of hemp-derived cannabinoid products (HDCPs) are subject to sales and use tax and through December 31, 2025, an additional 6% sales tax. Public Chapter 526 (2025) repeals the additional 6% sales tax on HDCPs sold effective January 1, 2026.
Public Chapter 526 (2025) creates a wholesale tax on HDCPs at the following rates:
- $0.02 per milligram of hemp-derived cannabinoid in each HDCP;
- $50.00 per ounce of weight for HDCPs sold in the form of hemp plant parts or hemp flower; and
- $4.40 per gallon of liquid HDCP or at a proportional rate if the liquid HDCP is sold or distributed in a container that is not measured by gallonage.
Hemp producers, distributors, and retailers that operate in Tennessee under a corporate form including, but not limited to, corporations, S corporations, LLCs (including single-member LLCs owned by individuals), and LPs are also subject to Tennessee's franchise and excise taxes.
Note: This article was updated on June 5, 2025. The previous version of SUT-112 is available here.
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