Taxing hemp consumables — NC HB563 

CNR: Taxing hemp consumables — NC HB563 

“Hemp-derived consumables” in HB563, https://www.ncleg.gov/Sessions/2023/Bills/House/PDF/H563v5.pdf

– contain THC, the intoxicant in marijuana, which creates externalities.

– will cost money to regulate.

– are federally legal only because of loopholes in the Farm Bill.  

We can and should tax these hemp products.

– Louisiana, Tennessee, West Virginia, and other jurisdictions tax hemp now. 

–  SB3 would tax medical cannabis (used by certified patients only).

Taxing by percentage of price is weak.

– Prices will go down over time as industry matures; taxes shouldn’t.

– Prices may reflect frills, premium marketing, quantity discounts, and employee discounts rather than externalities.

Taxing by weight of THC is better than taxing by price.

– A THC tax aims straight at the intoxicant — the right target.        

–  Connecticut and Illinois already tax legalized cannabis by the THC it contains. 

But you can tax too much – as other states have learned the hard way.  If you tax too heavily, 

– Illicit sellers will bypass not just taxes, but also all regulations.

–  Revenue will evaporate. 

Suggested language is below.

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Statutory Draft

Senator _______

 moves to amend the bill as reported by the Senate Judiciary Committee

 on page 7, lines 31, by rewriting the line to read: “§ 18D-302. Fees and Taxes.”

On page 8, by adding the following after line 22:

(d) Taxes

(1)   An excise tax of [$0.0xx] per milligram of the amount of total THC, as reflected on the product label, is levied on the sale of all hemp-derived consumable products sold at retail.  

(2)   “Total THC” means the sum of weight of tetrahydrocannabinolic acid, multiplied by eight hundred seventy-seven-thousandths, plus the percentage of weight of tetrahydrocannabinol.

(3)   The excise taxes on total THC are payable to the Secretary of Revenue by the retailer or by the importer who ships the products to consumers in this State.

(4)   The tax on total THC is due on or before the 15th day of the month following the month in which the product is sold by the retailer or the importer to consumers.

(5)   The tax on total THC is effective for sales and importation to consumers occurring on or after July 1, 2025.  For transactions occurring before July 1, 2027, the tax rate shall be one-half the rate described in subsection (1) of this section.  This amount shall be indexed on January 1 of 2028 and each year thereafter by the cost-of-living adjustment described in G.S. 105-277.1.  

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Notes

Rate:  How high should the tax be?  A 1-cent per milligram tax would be about 8% of retail price for these products:https://www.southernease.com/collections/new-delta-9-thc-gummies.  Connecticut taxes marijuana edibles at 2.75 cents per milligram.  West Virginia’s ad valorem rate is 11%; Tennesee’s is 6%; Minnesota’s, 10%, Louisiana’s, 3% — all plus applicable sales taxes.

Target:  Total THC reaches all “delta” forms of THC (tetrahydrocannabinol); it reaches THCA, as well, with a fractional reduction reflecting the weaker intoxicating power of THC.  It excludes, for instance, CBD.  This definition comes from the Connecticut statute: https://www.cga.ct.gov/current/pub/chap_420b.htm#sec_21a-240 section 60.

Phase-in:  The tax rate could be set deliberately low for the first few years as industry matures, and indexed thereafter.


#CBD #Hemp

Taxing hemp consumables — NC HB563 


June 16, 2024 3:33 pm