Tennessee Republican lawmakers banned popular cannabinoid-derived hemp products starting in July, and after one month of sales tax collections, projections are on pace for a $110 million loss.
The state’s new hemp laws ban smokable products and, in particular THCA, which several industry groups estimated made up 75% of Tennessee’s cannabinoid market.
When lit on fire, THCA essentially turns into THC, the psychoactive ingredient in marijuana that is illegal in Tennessee. THCA, because it comes from hemp, technically has a THC content below the state’s previous legal threshold.
State Rep. Aftyn Behn, a Nashville Democrat, said the revenue shortfall was not surprising and that the ban “torched a $250 million industry.”
“Leadership can tout the revenue surplus all they want, but their decisions left Tennesseans who rely on hemp for chronic pain out on the side of our busted roads and stuck the rest of us with the tax burden,” Behn said.
Behn and state Sen. Heidi Campbell, a Nashville Democrat, renewed their push to legalize marijuana through their “pot for potholes” measure earlier this year. The legislation would allow people 21 and older to use marijuana legally and create a regulatory framework for growing, testing and selling products.
Under the Behn-Campbell bill, cannabis businesses would be required to obtain state licenses, and a 15% tax would be charged on sales, with the revenue going toward the nearly $60 billion backlog of highway and bridge projects.
The current hemp taxes go into the state’s general fund and aren’t dedicated to any specific purpose.
For the state’s 2025-26 budget, officials already reduced hemp tax collection projections by $55 million. That budget ended in June, with tax collections $55.8 million below projections.
For the 2026-27 budget, Tennessee’s Department of Finance and Administration and the governor’s office estimated hemp sales tax collections at around $130 million. In July, the first month of the new ban, the revenue projections were $9.4 million and actual collections were around $425,000. Over the course of a year, that over 90% drop would create at least a $110 million deficit.
Budget officials will have some room to maneuver after the state announced a $1.2 billion surplus after closing the 2025-26 budget.
Originally published on tennesseelookout.com, part of the BLOX Digital Content Exchange.
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