Tighter restrictions on THC products have cost Tennessee more than $54 million dollars in tax revenue. The state has only collected 3% of what it had anticipated from a new hemp tax.
Last year, state lawmakers approved both the new tax and a ban on THCA, a type of THC that was legalized nationwide in 2018 through a loophole in the Farm Bill. That meant an end to the hemp industry’s most profitable products, like smokable flower and full-spectrum CBD. Many businesses had to close or move across state lines to continue growing.
The ban, initially intended to take effect at the start of the year, was delayed until this summer to give growers and sellers more time to shift their business models.
The hemp tax took effect as scheduled at the start of the year. Every month since, the tax has generated a tiny fraction of what the state had projected. In February, the state had anticipated collecting nearly $8.8 million from the new hemp tax, but it only brought in $61,000.
Before its July 1 deadline, the ban had a chilling effect on the state’s hemp industry. Farmers like Lee Crabtree in Readyville pivoted from growing and selling full-spectrum CBD to more seasonal staples.
“I’m not making the money that I would have been making back when CBD was huge there for a minute,” Crabtree said.
The state has also collected less money from sales tax on hemp products compared to previous years.
However, the $54-million hole in the state budget has been largely patched by surpluses from other taxes. Franchise and excise taxes, along with sales tax broadly, have been well over what the state has projected — enough to keep Tennessee’s overall budget on track for the new fiscal year.
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