NASHVILLE, Tenn. — Tennessee’s tougher hemp law is shrinking the retail stores and suppliers it regulates, and state tax collections from hemp products are coming in at a small fraction of what budget writers expected.
The numbers from the Department of Finance and Administration are stark. July, the first month of the new fiscal year, brought in $427,000 from hemp against a budgeted $9.4 million. August produced $688,000, roughly $4.8 million below its $5.5 million target. Overall state collections are still running ahead of plan, with general fund revenue $1.1 billion above the year-to-date estimate in July, so the hemp gap is not creating a budget hole.
The state also missed its original $55.8 million hemp estimate for the fiscal year that ended June 30, and the forecast for the current year has already been cut by $46.2 million, to $9.6 million. The state funding board is expected to revisit revenue estimates in November.
The law behind the slide, passed by the General Assembly in April 2025 as House Bill 1376 and Senate Bill 1413, took effect in January. It caps products at 0.3% total THC on a dry weight basis and bars hemp with more than 0.1% THCA, the compound that turns into THC when heated. That effectively removed smokable flower from legal shelves and pushed makers to lower the strength of gummies and drinks.
Oversight moved from the Department of Agriculture to the Tennessee Alcoholic Beverage Commission, though growing hemp stays with Agriculture. Under the commission’s rules, total THC is calculated as THCA multiplied by 0.877 plus delta-9 THC, and any product containing THCp is banned outright. Each package must carry a QR code that links to its lab certificate of analysis from a commission-approved testing lab.
The supply chain is tighter too. Licensed retailers may buy only from a commission-licensed wholesaler, and that wholesaler must buy from a licensed supplier. Gas stations can no longer qualify for retail licenses. A retail license now carries a $500 application fee and a $1,000 annual fee, up from the $250 yearly fee under the old system. Businesses holding older Agriculture licenses were allowed to keep operating under the prior rules until those licenses ran out on June 30, 2026, which is why the full impact arrived this summer.
Hemp has become a campaign issue. Republican nominee for governor Marsha Blackburn has issued a statement backing the ban and the tighter rules, while Democratic nominee Jerri Green opposes the law. A 2024 Vanderbilt University poll found 63% of Tennessee voters supported legalizing recreational marijuana. A new federal hemp definition that counts THCA toward the 0.3% limit is set to take effect before year end.
Section: More Chattanooga TN business news
