Is CBD Subject to Florida Sales Tax?

We have recently received an influx of calls regarding the taxability of CBD products derived from hemp. In Florida, sales of tangible personal property are subject to sales and use tax unless they are specifically exempted by law or rule. Here, CBD derived from hemp falls within the definition of tangible personal property. However, there is an argument to be made that CBD products fall within items listed on the exempt list.

First, it is important to elaborate on the distinction between marijuana and hemp. Both marijuana and hemp are cannabis, the difference is in the potency levels of THC, as hemp must have below 0.3% THC on a dry weight basis. At the federal level, marijuana is a controlled substance and hemp has recently been removed from the controlled substances list if produced in compliance with the 2018 Farm Bill.

Sales of “medical products and supplies or medicine dispensed according to an individual prescription or prescriptions written by a prescriber authorized by law to prescribe medicinal drugs; hypodermic needles; hypodermic syringes; chemical compounds and test kits used for the diagnosis or treatment of human disease, illness, or injury; and common household remedies recommended and generally sold for internal or external use in the cure, mitigation, treatment, or prevention of illness or disease in human beings, but not including cosmetics or toilet articles, notwithstanding the presence of medicinal ingredients therein, according to a list prescribed and approved by the Department of Business and Professional Regulation, are exempt from sales and use tax.” Section 212.08, Fla. Stat.

It is important to note that medical marijuana is recommended by physicians as opposed to prescribed-because it is federally illegal it cannot be prescribed. Further, medical marijuana is exempt from sales and use tax in Florida. As a result, if medical marijuana, including low-THC marijuana that falls within the definition of hemp is sold by a Medical Marijuana Treatment Center (MMTC) to a Qualified Patient then the sale is exempt from sales and use tax. CBD products sold by MMTC’s are exempt, but those sold by non-MMTC’s are not specifically exempted by this law.

However, there is a strong argument that CBD products fall within the listed items on the general groceries exempt list, specifically as “herbal supplements.” Further, the majority of CBD products are marketed and labeled as dietary supplements, which is a debate in itself whether this is legal or not, based on prior FDA statements.

However, because cannabis products sold by MMTC’s are specifically exempted under Florida law, the Department may take the position that because CBD sold by businesses that are not MMTC’s are not specifically exempted, then the products are taxable.

This seems to be a grey enough area it would be good to get an opinion from the Department so the industry can have more clarity moving forward. You can request an informal opinion from the Department, in the form of a Letter of Technical Advice, to have more clarity moving forward.

There are many grey areas in the cannabis industry, as there are inconsistencies between federal and state laws and the laws are volatile. The Law Offices of Moffa, Sutton and Donnini can help with licensing and regulatory compliance burdens on a multi-state level.