Nashville, Tennessee — Tennessee’s decision to ban popular smokable hemp products, including THCA, is producing a steep drop in tax collections that could leave the state about $110 million below its projected annual revenue.
The new restrictions took effect in July and target products containing THCA, a hemp-derived cannabinoid that converts into psychoactive THC when heated. Industry groups estimated THCA products previously accounted for roughly 75% of Tennessee’s cannabinoid market.
State budget officials projected about $9.4 million in hemp-related sales tax revenue for July. Actual collections totaled only about $425,000, according to Tennessee Lookout. If that decline continues throughout the fiscal year, collections could fall at least $110 million below the approximately $130 million included in the state budget.
Democratic state Rep. Aftyn Behn criticized Republican lawmakers for banning the products, saying the decision “torched a $250 million industry.” Behn and state Sen. Heidi Campbell have proposed legalizing recreational marijuana and imposing a 15% sales tax, with proceeds directed toward Tennessee’s backlog of road and bridge projects.
The state had already reduced its previous hemp revenue forecast by $55 million before the ban took effect.
Tennessee has some financial cushion. Officials recently announced the state finished its 2025-26 fiscal year with a roughly $1.2 billion budget surplus.
Sources
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