Fiscal Summary
Increase State Revenue – $5,000,000/FY23-24/Hemp Fund
$10,000,000/FY24-25 and Subsequent Years/Hemp Fund
$1,100,000/FY23-24 and Subsequent Years/
Tennessee Agriculture Regulatory Fund
Increase State Expenditures – $157,000/FY23-24/General Fund
$154,600/FY24-25 and Subsequent Years/General Fund
$1,189,800/FY23-24/Hemp Fund and
Tennessee Agriculture Regulatory Fund
$1,170,600/FY24-25 and Subsequent Years/Hemp Fund
and Tennessee Agriculture Regulatory Fund
Other Fiscal Impact – The Department of Agriculture will need additional resources including, but not limited to, employing additional staff. The extent and timing of the needed resources will be dependent on the promulgation of rules and the growth of the program and cannot be reasonably quantified at this time. Any additional expenditures incurred will be covered through the revenue collected in the Hemp Fund.
Bill Summary
PRESENT LAW
Present law requires that a person obtain a license from the department of agriculture in order to produce hemp in this state. Present law defines "hemp" to mean the plant cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis. Articles that contain hemp may be subject to further regulation, such as food safety requirements and compliance with the Prevention of Youth Access to Tobacco, Smoking Hemp, and Vapor Products Act.
NEW OFFENSES UNDER THIS BILL
This bill makes it a Class A misdemeanor for a person to knowingly do the following:
(1) Sell or distribute a product containing a hemp-derived cannabinoid to a person who is under 21 or purchase a product containing a hemp-derived cannabinoid on behalf of a person who is under 21;
(2) Persuade, entice, send, or assist a person who is under 21 to purchase, acquire, receive, or attempt to purchase a product containing a hemp-derived cannabinoid. However, this provision does not apply to law enforcement operations that utilize persons under 21 as long as a parent or legal guardian's consent is received if the person is a minor;
(3) Distribute samples of products containing a hemp-derived cannabinoid in or on a public street, sidewalk, or park;
(4) Sell or distribute a product containing a hemp-derived cannabinoid without having first obtained proof of age from the purchaser or recipient; or
(5) In the case of a person under 21, purchase, possess, or accept receipt of a product containing a hemp-derived cannabinoid or to knowingly present purported proof of age that is false, fraudulent, or not actually that person's for the purpose of purchasing or receiving a product containing a hemp-derived cannabinoid.
This bill also makes it a Class A misdemeanor for a retailer to fail to maintain products containing a hemp-derived cannabinoid behind the counter in an area inaccessible to a customer. However, this provision does not apply to a business for which entry is limited to persons who are 21 or older.
ENFORCEMENT
This bill requires the department of agriculture to enforce this bill's provisions in a manner that may reasonably be expected to reduce the extent to which products containing a hemp-derived cannabinoid are sold or distributed to persons under 21, and to conduct random, unannounced inspections at locations where such products are sold or distributed to ensure compliance with this bill. This bill also requires the department to make an annual report to the general assembly regarding the department's enforcement efforts under this bill.
PRIVILEGE TAX
This bill levies a privilege tax of 5 percent of the sales price of products containing a hemp-derived cannabinoid when sold at retail in this state. All revenue generated from the 5 percent tax must be deposited into a special account in the state general fund and allocated to the department to be used exclusively for the regulation of products containing a hemp-derived cannabinoid in this state.
LICENSURE
This bill requires a person in the business of manufacturing or selling products containing a hemp-derived cannabinoid in this state to obtain a license from the department of agriculture authorizing the person to engage in that business prior to the commencement of business or by January 1, 2024, whichever is later. The full text of this bill describes qualifications for licensure. The license fee will be $500 for producers or $250 per retailer per location. A license issued pursuant to this bill is valid for one year and may be renewed annually. This bill requires the department to charge an annual renewal fee equal to the initial licensing fee.
This bill authorizes the department of agriculture to:
(1) Determine additional requirements for and issue licenses for the production of hemp in Tennessee and for the manufacture or sale of products containing a hemp-derived cannabinoid in this state; and
(2) Deny or revoke licenses and issue civil penalties up to $1,000 for a violation of this bill or rules promulgated pursuant to this bill, in addition to the criminal prosecution authorized by this bill.
This bill makes it a Class A misdemeanor for a person to engage in the business of manufacturing, producing, or selling products containing a hemp-derived cannabinoid in this state without a valid license.
TESTING
This bill requires producers and retailers to contract with an accredited third-party laboratory to test products containing a hemp-derived cannabinoid after being manufactured to determine the presence and amounts of cannabinoids, heavy metals, microbials, mycotoxins, pesticides, and residual solvents. This bill requires each batch manufactured to undergo testing and obtain a certificate of analysis.
This bill requires the department of agriculture to:
(1) Promulgate rules specifying pass/fail action levels for safety and toxicity with respect to the testing;
(2) Maintain and post on its website a registry of testing laboratories that are qualified to test intermediate manufactured material and finished products containing a hemp-derived cannabinoid; and
(3) Develop an application and process by which qualifying laboratories are listed on its website.
LABELING AND SAFETY REQUIREMENTS
This bill requires that an expiration date on the label of a product containing a hemp-derived cannabinoid must be no more than one year from the date of publication of the product's laboratory testing report.
This bill requires that products containing a hemp-derived cannabinoid that are sold at retail must:
(1) Satisfy the child-resistant effectiveness standards under federal regulations; and
(2) Be labeled with various warnings and disclaimers that are specified in the full text of this bill, an expiration date, a list of ingredients and possible allergens, a nutritional fact panel, the total amount of hemp-derived cannabinoid in the entire package, and a code that can be scanned to access a website providing certain information, including the method of analysis for the testing report required under this bill.
This bill prohibits retailers and producers from advertising, marketing, or offering for sale a product containing a hemp-derived cannabinoid by using, in the labeling or design of the product or product packaging or in advertising or marketing materials for the product trade dress, trademarks, branding, or other related imagery or scenery that depicts or signifies characters or symbols known to appeal primarily to persons under 21.
This bill also prohibits the sale of an ingestible product containing a hemp-derived cannabinoid in a serving that contains more than 25 milligrams, in the aggregate, of one or more hemp-derived cannabinoids; or the forming of an ingestible product containing a hemp-derived cannabinoid into the shape of an animal or cartoon character.
APPLICABILITY
This bill does not permit a person to undertake a task under the influence of a hemp-derived cannabinoid when doing so would constitute negligence or professional malpractice; or operate, navigate, or be in actual physical control of a motor vehicle, aircraft, motorized watercraft, or another vehicle while under the influence of a hemp-derived cannabinoid.
This bill does not require the following:
(1) An employer to accommodate the use of a hemp-derived cannabinoid in a workplace or an employee working while under the influence of a hemp-derived cannabinoid;
(2) An individual or establishment in lawful possession of property to allow a guest, client, customer, or other visitor to use a hemp-derived cannabinoid on or in that property; or
(3) An individual or establishment in lawful possession of property to admit a guest, client, customer, or other visitor who is impaired as a result of the person's use of a hemp-derived cannabinoid.
This bill also does not do the following:
(1) Exempt a person from prosecution for a criminal offense related to impairment or intoxication resulting from use of a hemp-derived cannabinoid or relieve a person from any requirement under law to submit to a breath, blood, urine, or other test to detect the presence of a controlled substance;
(2) Limit the ability of an employer to establish, continue, or enforce a drug-free workplace program or policy;
(3) Create a cause of action against an employer for wrongful discharge or discrimination; or
(4) Allow the possession, sale, manufacture, or distribution of any substance that is otherwise prohibited by law.
RULEMAKING
This bill authorizes the department of agriculture to promulgate rules to effectuate this bill.
ON APRIL 18, 2023, THE SENATE ADOPTED AMENDMENT #3 AND PASSED SENATE BILL 378, AS AMENDED.
AMENDMENT #3 rewrites this bill to make the following changes:
DEFINITIONS
(1) Clarify that hemp does not include a substance that is categorized as a Schedule I controlled substance on or after July 1, 2023;
(2) Make the provisions applicable to a producer applicable to a supplier instead. This amendment defines "supplier" as a person or entity that manufacturers hemp-derived cannabinoids or sells products containing hemp-derived cannabinoids to retailers;
OFFENSES
(3) Establish that it is an offense for a person or entity to engage in the business of manufacturing, producing, or selling products containing a hemp-derived cannabinoid in this state without a valid license;
(4) Establish that it is an offense for a person to knowingly sell or distribute a product containing a hemp-derived cannabinoid without having first obtained proof of age from the purchaser or recipient;
(5) Establish that it is a Class C misdemeanor, for a person who obtains a product containing a hemp-derived cannabinoid that is sold at retail, if the person does not store any unconsumed portion of the product in its original packaging;
(6) Clarify that it is an offense only to knowingly assist a person who is under 21 to purchase, acquire, receive, or attempt to purchase a product containing a hemp-derived cannabinoid;
(7) Establish that state and local law enforcement officers have concurrent jurisdiction to enforce violations;
ENFORCEMENT
(8) Revise the provisions pertaining to the department of agriculture to provide that the department is responsible for:
(A) Issuing licenses to suppliers and retailers;
(B) Overseeing the manufacture and distribution of hemp-derived cannabinoid products by licensed suppliers, including ensuring compliance with labeling, product testing, and transportation requirements and conducting necessary inspections, prior to a product's delivery or sale to a retailer; and
(C) Conducting random, unannounced inspections at locations where hemp-derived cannabinoids and products containing hemp-derived cannabinoids are manufactured, distributed, or sold to ensure compliance;
(9) Provide that the department of revenue:
(A) Is responsible for ensuring retailers are in compliance with this amendment and applicable tax provisions;
(B) Must enforce these requirements in a manner that may reasonably be expected to reduce the extent to which non-compliant hemp-derived cannabinoid products are sold and must conduct random, unannounced inspections at retail locations where such products are sold to ensure compliance. The department of revenue must also determine the frequency of random, unannounced inspections; and
(C) Is authorized to confiscate non-compliant hemp-derived cannabinoid products as contraband;
PRIVILEGE TAX
(10) Change the privilege tax to be levied on the sales price of products containing a hemp-derived cannabinoid when sold at retail in this state to 6 percent and gives 50 percent of the funds to the department of revenue and the other 50 percent to the department of agriculture;
LICENSURE
(11) Require the following:
(A) A person or entity that is in the business of manufacturing or selling products containing a hemp-derived cannabinoid in this state, to obtain a license from the department of agriculture authorizing the person or entity to engage in that business prior to the commencement of business or by July 1, 2024, whichever is later; and
(B) In order to obtain or maintain a supplier or retailer license, a person to additionally submit a criminal history background check that includes fingerprint checks against state and federal criminal records maintained by the Tennessee bureau of investigation and the federal bureau of investigation;
(12) Prohibit a retail location that is within 1,000 feet of a private school, public school, or charter school that serves any grades from K-12 from selling products containing a hemp-derived cannabinoid, unless the applicant provides the department with documentation that establishes that products containing a hemp-derived cannabinoid were being offered for sale at retail at such location on December 31, 2023. Measurements must be made in a straight line in all directions, without regard to intervening structures or objects, from the nearest point on the property line of a parcel containing a retail establishment to the nearest point on the property line of a parcel containing a private school, public school, or charter school that serves any grades from K-12;
(13) Limit the department of agriculture's authorization to only determine requirements for and issue licenses for the manufacture or sale of products containing a hemp-derived cannabinoid in this state;
(14) Revise the revocation of licenses and civil penalties that can be issued by the department of agriculture to be as follows:
(A) $1,000 for a first violation;
(B) $2,500 for a second violation that occurs within two years of the first violation;
(C) $5,000 for a third violation that occurs within two years of the first violation;
(D) Revocation of the license for a fourth violation that occurs within two years of the first violation; and
(E) Require retraining of all employees of the licensee under the supervision of the department in addition to the civil penalty imposed;
TESTING
(15) Revise the requirements to require that testing of products and substances must be conducted as follows:
(A) Full-panel testing on all active cannabinoid molecules must be conducted prior to final production of products containing a hemp-derived cannabinoid; and
(B) A potency test must be conducted on finished goods to confirm potency is consistent with stated potency on the packaging;
(16) Authorize the department of agriculture to promulgate rules specifying which types of tests may be used and the qualifications for laboratories from which the department will accept test results;
(17) Require the department of agriculture to sample and analyze products containing a hemp-derived cannabinoid produced, distributed, or offered for sale in this state for cannabinoid concentrations, tested according to protocols prescribed by rule under this part. Departmental testing methods must employ liquid chromatography tandem mass spectrometry, in a manner similarly reliable to post-decarboxylation, to determine a cannabinoid profile of samples tested, including their THC concentrations;
PRODUCT TRANSPORTATION
(18) Add that a person transporting products containing a hemp-derived cannabinoid into, within, or through this state must carry the following:
(A) Documentation sufficient to prove that the products being shipped or transported were produced from hemp that was lawfully produced under a state or tribal hemp plan approved by the United States department of agriculture, under a hemp license issued by the United States department of agriculture, or otherwise in accordance with federal regulations through the state or territory of the Indian tribe, as applicable, and do not exceed the cannabinoid limits for hemp-derived cannabinoids; and
(B) A bill of lading with certain information described in this amendment;
(19) Provide that the requirements of (18) do not apply to a person in possession of products that were purchased from a licensed retailer;
LABELING AND SAFETY REQUIREMENTS
(20) Delete the requirement that an expiration date on the label of a product containing a hemp-derived cannabinoid must be no more than one year from the date of publication of the product's laboratory testing report;
(21) Delete the requirements that the products be labeled with the various warning and disclaimers;
(22) Clarify that the package must contain a quick response (QR) code and that the website must include information regarding results of the product's full-panel and potency tests conducted pursuant to law;
RULEMAKING
(23) Authorize the departments of agriculture and revenue to promulgate rules to effectuate this bill;
GOODS SUBJECT TO FORFEITURE
(24) Add to present law pertaining to goods subject to forfeiture for criminal penalties and enforcement that all products containing a hemp-derived cannabinoid that are manufactured, transported, packaged, labeled, displayed, distributed as samples, offered for sale, or sold in violation of the above provisions are subject to forfeiture; and
(25) Add that property subject to forfeiture may be seized by the director of the Tennessee bureau of investigation or the director's authorized representative, agent, or employee; the commissioner of safety or the commissioner's authorized representative, agent, or employee; the commissioner of agriculture or the commissioner's authorized representative, agent, or employee; the commissioner of revenue or the commissioner's authorized representative, agent, or employee; or a sheriff, deputy sheriff, municipal law enforcement officer, campus police officer, internal affairs director or internal affairs special agent of the department of correction, or constable upon process issued by any circuit or criminal court having jurisdiction over the property.
EFFECTIVE DATES
This amendment has the following effective dates:
(1) For purposes of promulgating rules or forms, this bill takes effect upon becoming a law;
(2) The definition provisions; the offenses described in (4)-(7) above; the provision requiring a product containing a hemp-derived cannabinoid to be maintained behind the counter of a retail establishment in an area inaccessible to a customer; and the provisions relative to the privilege tax imposed on the business of selling products containing a hemp-derived cannabinoid in this state take effect July 1, 2023;
(3) For purposes of requiring the department of revenue to ensure that retailers are in compliance with applicable tax provisions, this bill takes effect July 1, 2023; and
(4) For all other purposes, this bill takes effect July 1, 2024.
