The New Jersey Division of Taxation has recently updated its guidance on cannabis product taxes, providing important clarifications for both consumers and businesses in the state. The updated guidance specifically defines which cannabis items are subject to state taxes, with a focus on “Intoxicating Hemp” products.
What is Intoxicating THC?
Under the new guidelines, “Intoxicating Hemp” is now officially considered a cannabis item for tax purposes. But what does this mean for consumers and businesses?
An “Intoxicating Hemp Product” refers to any product cultivated, derived, or manufactured in the State of New Jersey from hemp regulated under the “Agricultural Improvement Act of 2018” or the “New Jersey Hemp Farming Act.” Such products must be sold within New Jersey and contain more than 0.5 milligrams of Total THC per serving or 2.5 milligrams of Total THC per package to fall under this classification. The law specifically excludes cannabinoid products that are not derived from naturally occurring chemical constituents, as well as hemp products defined under section 3 of P.L.2019, c.238 (C.4:28-8).
This definition plays a crucial role in regulating cannabinoids such as Delta-8 and Delta-10, which have been prevalent in unregulated markets. These substances are now subject to stricter oversight. “Total THC” encompasses the total concentration of all tetrahydrocannabinols (“THC”) in hemp or its products, including Delta-8, Delta-9, Delta-10, tetrahydrocannabinolic acid (“THCA”), and any other chemically similar compounds, derivatives, or isomers of THC that cause intoxication, as identified by the New Jersey Cannabis Regulatory Commission in consultation with the Department of Agriculture and the Attorney General. Regulated products under this definition may include food, cosmetics, personal care items, and other commercial goods.
What is Excluded from This Definition?
Not all hemp products fall under the Intoxicating Hemp definition. The guidance clarifies that an intoxicating hemp product does not include cannabinoid products that are not derived from naturally occurring biologically active chemical constituents. This exclusion means that certain hemp-based products may not face the same tax treatment as “Intoxicating Hemp” products.
Additionally, the definition specifies that “Intoxicating Hemp” includes any product cultivated, derived, or manufactured within New Jersey, creating ambiguity as to whether this classification extends to products manufactured outside the State but sold within its borders.
Why This Matters for Cannabis Consumers and Retailers
This updated guidance helps both consumers and retailers understand which products are subject to taxes and regulations. For consumers, it means clearer pricing and understanding of what’s included in their cannabis purchases. For businesses, it helps ensure compliance with the state’s cannabis tax laws, preventing potential issues down the road.
The New Jersey Division of Taxation’s clarification serves to create a more transparent and consistent framework for the cannabis industry, contributing to the state’s ongoing efforts to regulate and tax cannabis products responsibly.
As the cannabis industry continues to evolve, it’s important for all parties involved to stay informed about regulatory updates like these. By understanding what constitutes “Intoxicating Hemp” and how it is taxed, consumers can make more informed decisions, and businesses can navigate New Jersey’s cannabis regulations with greater confidence.
For more information, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com
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