At the conclusion of the 114th General Assembly, Tennessee legislators passed SB1413/HB1376, a lengthy bill overhauling the regulation of Hemp-Derived Cannabinoid Products (HDCPs). The bill was controversial and while some changes were strongly opposed by industry stakeholders, other changes had almost industry wide support. The most widely opposed industry change is the comprehensive ban on the manufacture, cultivation, production or sale of products containing THCa, which is a precursor to delta-9, in a concentration in excess of .3% on a dry weight basis. Also prohibited are products that contain a synthetic cannabinoid, or a derivative of hemp or an HDCP that contains THCp. While these changes aren't an outright ban of delta-9, which remains legal for sale in concentrations less than .3% on a dry weight basis, it will likely prohibit the sale of many products that are currently available. Notably, delta-8, delta-10, hexahydrocannabinol and THCv are included in the definition of HDCPs and will continue to be regulated subject to this legislation.
One major change that was largely supported by the industry was the transfer of licensing, regulation and enforcement to the Tennessee Alcoholic Beverage Commission (TABC). Currently, HDCPs are regulated by the Tennessee Department of Agriculture (TDA) but when the bill goes into effect on January 1, 2026, the TABC will assume all responsibilities previously held by TDA. Supporters of this change believe that given the similarities between alcohol regulation and HDCPs, the TABC is more equipped to address some of the more important goals of the bill, including ensuring that HDCPs are not sold or distributed to anyone under 21 years of age. TABC will have the authority to promulgate rules on HDCPs, which will likely differ from the current rules promulgated by TDA.
Other changes include the following:
- Permitted retailers: HDCPs will only be sold in establishments that are restricted to those 21 years of age and up. This includes liquor stores, vape/hemp shops, and on-premises liquor-by-the-drink locations. HDCPs will no longer be available for sale in convenience stores and grocery stores.
- Direct shipment and delivery are prohibited. All HDCPs must be sold in a face-to-face transaction.
- Serving sizes:
- Hemp beverages are limited to 15 milligrams with no more than two servings per container for a total of 30 milligrams. There are exceptions for 750 milliliter resealable containers and kegs.
- Cartridges, also known as vapes, are limited to 40 servings, not to exceed 500 milligrams per vape.
- Smokeless hemp pouches are limited to 15 servings per container with each pouch containing no more than six milligrams.
- Edibles are limited to 20 per package with each one containing no more than 15 milligrams per serving for a total of 300 milligrams.
- Brand registration: Hemp brands must be registered with the Tennessee Department of Revenue (TDOR). This is a similar framework that is already required for alcoholic beverage brands.
- Taxes: HDCPs will be taxed at the wholesale level at two cents per milligram of THC in the product. Hemp-based beverages will be taxed at $4.40 per gallon. Again, this is a similar framework for alcoholic beverages. Distilled spirits are taxed at the same rate. All taxes will be remitted to TDOR.
While these are significant changes, some parts of the original bill passed in 2023 remain in place. The distance requirement that all HDCP retailers are 1,000 feet from schools remains, as well as the grandfather provision that allows retailers that began selling HDCPs prior to December 31, 2023, to continue sales despite their proximity to a school. Also remaining in the bill is the requirement that HDCPs are displayed behind a barrier, requiring a physical separation between the customer and the products. This will only apply to flower, edibles and vapes. HDCP beverages are permitted to remain on shelves.
As evidenced by this bill, numerous changes are forthcoming in the industry. There are many unanswered questions regarding the regulations, especially with the upcoming rule promulgation by the TABC. Whether the TABC scraps all previous rules promulgated by TDA remains to be seen, but industry questions and uncertainties are warranted during this transition.
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