Taxes on hemp-derived cannabinoid products and related requirements

(a) In general Subtitle E of the Internal Revenue Code of 1986 is amended by adding at the end the following new chapter: 56 Hemp-derived Cannabinoid Products Subchapter A—Definitions; Taxes Subchapter B—Qualification Requirements for Manufacturers of Hemp-derived Cannabinoid Products and Wholesalers of Hemp-derived Beverages Subchapter C—Operations by Manufacturers of Hemp-derived Cannabinoid Products and Wholesalers of Hemp-derived Beverages Subchapter D—Distribution System for Hemp-derived Beverages Subchapter E—General Provisions Relating to Hemp-derived Cannabinoid Products Subchapter F—Miscellaneous General Provisions Subchapter G—Penalties A Definitions; Taxes Sec. 5900. Definitions. Sec. 5901. Tax on hemp-derived beverages. Sec. 5901A. Tax on hemp-derived cannabinoid products. Sec. 5901B. Tax on sales revenue of manufacturers of hemp-derived cannabinoid products. Sec. 5901C. Method of collecting tax. 5900. Definitions When used in this chapter— (1) Hemp-derived cannabinoid product The term hemp-derived cannabinoid product has the meaning given such term in section 201 of the Federal Food, Drug, and Cosmetic Act. Except as otherwise provided in this chapter, such term includes hemp-derived beverages. (2) Hemp-derived beverage The term hemp-derived beverage means a hemp-derived cannabinoid product which is a non-alcoholic beverage intended for human consumption. (3) Removed for consumption or sale The term removed for consumption or sale means any removal of a hemp-derived cannabinoid product from the premises of the manufacturer of such product. (4) Manufacturer (A) In general The term manufacturer, when used with respect to hemp-derived cannabinoid products, means any person who— (i) is engaged in the business of preparing, processing, modifying, or manipulating hemp, including any unfinished hemp-cannabinoid ingredient, to produce such products for purposes of wholesale or retail distribution, and (ii) has a permit to engage in such business under subchapter B. (B) Hemp; unfinished hemp-cannabinoid ingredient For purposes of subparagraph (A), the terms hemp and unfinished hemp-cannabinoid ingredient have the meanings given such terms in section 297A of the Agricultural Marketing Act of 1946. (5) Wholesaler The term wholesaler, when used with respect to hemp-derived beverages, means any person who is engaged in the business of purchasing such beverages for resale at wholesale and has a permit to engage in such business under subchapter B. (6) Retailer The term retailer, when used with respect to hemp-derived beverages, means any person who is engaged in the business of purchasing such beverages for resale to consumers. 5901. Tax on hemp-derived beverages (a) Imposition and rate of tax (1) In general A tax is hereby imposed on all hemp-derived beverages produced, and removed for consumption or sale, within the United States. The rate of such tax with respect to each hemp-derived beverage shall be 5 cents on each milligram of tetrahydrocannabinol in such beverage. (2) Illegally produced hemp-derived beverages Any hemp-derived beverage which is produced at any place in the United States, on the premises of any person who does not have a permit under subchapter B, shall be subject to tax at the rate prescribed in paragraph (1). (b) Determination and collection of tax (1) In general The tax imposed by subsection (a)(1) on a hemp-derived beverage shall be— (A) determined at the time such beverage is removed for consumption or sale, and (B) paid by the manufacturer of such beverage in accordance with section 5901C. (2) Illegally produced hemp-derived beverages The tax imposed by subsection (a)(2) on a hemp-derived beverage shall be due and payable immediately upon production. (c) Applicability of other provisions of law All administrative and penal provisions of this title, insofar as applicable, shall apply to any tax imposed by subsection (a). 5901A. Tax on hemp-derived cannabinoid products (a) Imposition and rate of tax (1) In general A tax is hereby imposed on all hemp-derived cannabinoid products (other than hemp-derived beverages) produced, and removed for consumption or sale, within the United States. The rate of such tax with respect to each hemp-derived cannabinoid product shall be the amount equal to 5 percent of the price for which such product is sold. (2) Illegally produced hemp-derived cannabinoid products Any hemp-derived cannabinoid product (other than a hemp-derived beverage) which is produced at any place in the United States, on the premises of any person who does not have a permit under subchapter B, shall be subject to tax at the rate prescribed in paragraph (1). (b) Determination and collection of tax (1) In general The tax imposed by subsection (a)(1) on a hemp-derived cannabinoid product shall be— (A) determined at the time such product is removed for consumption or sale, and (B) paid by the manufacturer of such product in accordance with section 5901C. (2) Illegally produced hemp-derived cannabinoid products The tax imposed by subsection (a)(2) on a hemp-derived cannabinoid product shall be due and payable immediately upon production. (c) Applicability of other provisions of law All administrative and penal provisions of this title, insofar as applicable, shall apply to any tax imposed by subsection (a). 5901B. Tax on sales revenue of manufacturers of hemp-derived cannabinoid products (a) Imposition and rate of tax A tax is hereby imposed on all manufacturers of hemp-derived cannabinoid products. The rate of such tax with respect to each manufacturer shall be the amount equal to 5 percent of the sales revenue of such manufacturer for the taxable year. (b) Sales revenue defined For purposes of this section, the term sales revenue means the gross receipts from the sale of hemp-derived cannabinoid products. (c) Determination and collection of tax The tax imposed by subsection (a) on a manufacturer of hemp-derived cannabinoid products shall be— (1) determined at the close of the taxable year, and (2) paid by such manufacturer in accordance with section 5901C. (d) Applicability of other provisions of law All administrative and penal provisions of this title, insofar as applicable, shall apply to any tax imposed by subsection (a). 5901C. Method of collecting tax (a) Collection by return The taxes imposed by this subchapter shall be collected on the basis of a return. The Secretary shall by regulation prescribe the period or event for which such return shall be filed, the time for filing such return, the information to be furnished on such return, and the time for payment of such taxes. (b) Exceptions Notwithstanding subsection (a), any tax imposed by section 5901(a)(2) or section 5901A(a)(2) shall be immediately due and payable at the time provided by such provisions. Such tax shall be assessed and collected by the Secretary on the basis of the information available to the Secretary in the same manner as taxes payable by return but with respect to which no return has been filed. (c) Assessment If any tax imposed by this subchapter is not paid in full at the time required for such payment, it shall be the duty of the Secretary, subject to the limitations prescribed in section 6501, on proof satisfactory to the Secretary, to determine the amount of tax which has been omitted to be paid, and to make an assessment therefor against the person liable for the tax. The tax so assessed shall be in addition to the penalties imposed by law for failure to pay such tax when required. B Qualification Requirements for Manufacturers of Hemp-derived Cannabinoid Products and Wholesalers of Hemp-derived Beverages Sec. 5902. Application for permit. Sec. 5902A. Permit. Sec. 5902B. Judicial review. 5902. Application for permit Every person, before commencing business as a manufacturer of hemp-derived cannabinoid products, or wholesaler of hemp-derived beverages, and at such other time as the Secretary shall by regulation prescribe, shall make application for the permit provided for in section 5902A. The application shall be in such form as the Secretary shall prescribe and shall set forth, truthfully and accurately, the information called for on such form. Such application may be rejected and the permit denied if the Secretary, after notice and opportunity for hearing, finds that— (1) the premises on which it is proposed to conduct the business are not adequate to protect the revenue, or (2) such person (or any person required by regulation to be listed in the application)— (A) is not likely to maintain operations in compliance with this chapter, (B) has been convicted of a felony violation of any provision of Federal or State criminal law relating to hemp-derived cannabinoid products, or (C) has failed to disclose any material information required or made any material false statement in the application. 5902A. Permit (a) Issuance A person shall not engage in business as a manufacturer of hemp-derived cannabinoid products, or wholesaler of hemp-derived beverages, without a permit to engage in such business. Such permit, conditioned upon compliance with this chapter and regulations prescribed thereunder, shall be issued, in such form and in such manner as the Secretary shall by regulation prescribe, to every person properly qualified under section 5902. A new permit may be required at such other time as the Secretary shall by regulation prescribe. (b) Suspension or revocation (1) Show cause hearing If the Secretary has reason to believe that any person holding a permit— (A) has not in good faith complied with this chapter, or with any other provision of this title involving intent to defraud, (B) has violated the conditions of such permit, (C) has failed to disclose any material information required or made any material false statement in the application for such permit, (D) has failed to maintain the premises in such manner as to protect the revenue, (E) is, by reason of previous or current legal proceedings involving a felony violation of any other provision of Federal criminal law relating to hemp-derived cannabinoid products, not likely to maintain operations in compliance with this chapter, or (F) has been convicted of a felony violation of any provision of Federal or State criminal law relating to hemp-derived cannabinoid products, the Secretary shall issue an order, stating the facts charged, citing such person to show cause why the permit should not be suspended or revoked. (2) Action following hearing If, after a hearing, the Secretary finds that such person has not shown cause why the permit should not be suspended or revoked, such permit shall be suspended for such period as the Secretary deems proper or shall be revoked. 5902B. Judicial review If the Secretary denies a person a permit under section 5902, or suspends or revokes the permit of a person under section 5902A, such person may obtain judicial review by filing in the United States Court of Appeals for the circuit wherein the person resides or has the person’s principal place of business, or in the United States Court of Appeals for the District of Columbia, within 60 days after such denial, suspension, or revocation, as the case may be. Any findings of fact by the Secretary, if supported by substantial evidence, shall be conclusive. C Operations by Manufacturers of Hemp-derived Cannabinoid Products and Wholesalers of Hemp-derived Beverages Sec. 5903. Inventories. Sec. 5903A. Reports. Sec. 5903B. Packages, marks, labels, and notices. 5903. Inventories Every manufacturer of hemp-derived cannabinoid products, and every wholesaler of hemp-derived beverages, shall make a true and accurate inventory at the time of commencing business, at the time of concluding business, and at such other times, in such manner and form, and to include such items, as the Secretary shall by regulation prescribe. Such inventories shall be subject to verification by any internal revenue officer. 5903A. Reports Every manufacturer of hemp-derived cannabinoid products, and every wholesaler of hemp-derived beverages, shall make reports containing such information, in such form, at such times, and for such periods as the Secretary shall by regulation prescribe. 5903B. Packages, marks, labels, and notices Every hemp-derived cannabinoid product shall, before such product is removed for consumption or sale, be put up in such package and bear the marks, labels, and notices, if any, that the Secretary by regulation prescribes. D Distribution System for Hemp-derived Beverages Sec. 5904. Distribution system. 5904. Distribution system The Secretary shall prescribe regulations to establish and implement a three-tiered distribution system for hemp-derived beverages. Such regulations shall, at a minimum, require the following: (1) Tier 1—Manufacturers A manufacturer of hemp-derived beverages may only sell or transfer such beverages to a wholesaler of hemp-derived beverages. (2) Tier 2—Wholesalers A wholesaler of hemp-derived beverages may only— (A) purchase such beverages from a manufacturer of hemp-derived beverages, and (B) sell or transfer such beverages to a retailer of hemp-derived beverages. (3) Tier 3—Retailers A retailer of hemp-derived beverages may only purchase such beverages from a wholesaler of hemp-derived beverages. No person may hold permits under subchapter B as both a manufacturer of hemp-derived beverages and a wholesaler of hemp-derived beverages, and no person may hold any interest, directly or indirectly, in more than one tier. The separation among the three tiers shall be strictly maintained. E General Provisions Relating to Hemp-derived Cannabinoid Products Sec. 5905. Records to be maintained. Sec. 5905A. Right of entry and examination. Sec. 5905B. Purchase, receipt, possession, or sale of hemp-derived beverages after removal. Sec. 5905C. Restrictions relating to marks, labels, notices, and packages. 5905. Records to be maintained Every manufacturer of hemp-derived cannabinoid products, and every wholesaler of hemp-derived beverages, shall keep such records in such manner as the Secretary shall by regulation prescribe. 5905A. Right of entry and examination The Secretary may, during business hours, enter the premises of any manufacturer of hemp-derived cannabinoid products, or wholesaler of hemp-derived beverages, for the purpose of examining— (1) any records required under section 5905, or (2) any hemp-derived cannabinoid products stored on such premises. 5905B. Purchase, receipt, possession, or sale of hemp-derived cannabinoid products after removal (a) Restriction No person shall— (1) with intent to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, any hemp-derived cannabinoid product (after such product has been removed for consumption or sale) upon which the tax has not been paid or determined in the manner and at the time prescribed by this chapter or regulations thereunder, (2) with intent to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, any hemp-derived cannabinoid product (after such product has been removed for consumption or sale) which is not put up in a package as required under section 5903B or which is put up in a package not bearing the marks, labels, and notices required under such section, or (3) otherwise than with intent to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, any hemp-derived cannabinoid product (after such product has been removed for consumption or sale) which is not put up in a package as required under section 5903B or which is put up in a package not bearing the marks, labels, and notices required under such section. Paragraph (3) shall not prevent the sale or delivery of hemp-derived cannabinoid products directly to consumers from proper packages, nor apply to such products when so sold or delivered. (b) Liability to tax Any person who possesses hemp-derived cannabinoid products in violation of subsection (a)(1) or (a)(2) shall be liable for a tax equal to the tax on such products, as applicable under subchapter A. 5905C. Restrictions relating to marks, labels, notices, and packages No person shall, with intent to defraud the United States, destroy, obliterate, or detach any mark, label, or notice prescribed or authorized, by this chapter or regulations thereunder, to appear on, or be affixed to, any package of hemp-derived cannabinoid products before such package is emptied. F Miscellaneous General Provisions Sec. 5906. Regulations. Sec. 5906A. Application of State laws. 5906. Regulations The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this chapter. 5906A. Application of State laws Compliance with this chapter with respect to carrying on any trade or business shall not be held to exempt any person from any penalty or punishment provided by the laws of any State for carrying on such trade or business within such State, or in any manner to authorize the commencement or continuance of such trade or business contrary to the laws of such State; nor shall the payment of any tax imposed by this chapter be held to prohibit any State from placing a tax on the same trade or business for State or other purposes. G Penalties Sec. 5907. Civil penalties. Sec. 5907A. Criminal penalties. 5907. Civil penalties (a) Omitting things required or doing things forbidden Whoever willfully omits, neglects, or refuses to comply with any tax imposed by this chapter, or to do, or cause to be done, any of the things required by this chapter, or does anything prohibited by this chapter, shall, in addition to any other penalty provided in this title, be liable to a penalty of $1,000 for each such omission or commission. (b) Failure To pay tax Whoever fails to pay any tax imposed by this chapter at the time prescribed by law or regulations, shall, in addition to any other penalty provided in this title, be liable to a penalty of 5 percent of the tax due but unpaid. (c) Applicability of section 6665 The penalties imposed by this section shall be assessed, collected, and paid in the same manner as taxes, as provided in section 6665(a). 5907A. Criminal penalties (a) Fraudulent offenses Whoever, with intent to defraud the United States— (1) Engaging in business unlawfully Engages in business as a manufacturer of hemp-derived cannabinoid products, or wholesaler of hemp-derived beverages, without obtaining the permit required by this chapter or regulations thereunder, or (2) Failing to furnish information or furnishing false information Fails to keep or make any record, return, report, or inventory, or keeps or makes any false or fraudulent record, return, report, or inventory, required by this chapter or regulations thereunder, or (3) Refusing to pay or evading tax Refuses to pay any tax imposed by this chapter, or attempts in any manner to evade or defeat the tax or the payment thereof, or (4) Removing hemp-derived cannabinoid products unlawfully Removes for consumption or sale, contrary to this chapter or regulations thereunder, any hemp-derived cannabinoid product subject to tax under this chapter, or (5) Purchasing, receiving, possessing, or selling hemp-derived cannabinoid products unlawfully Violates any provision of section 5905B(a)(1) or (a)(2), or (6) Destroying, obliterating, or detaching marks, labels, or notices before packages are emptied Violates any provision of 5905C, shall, for each such offense, be fined not more than $10,000, or imprisoned not more than 5 years, or both. (b) Other offenses Whoever, otherwise than as provided in subsection (a), violates any provision of this chapter, or of regulations prescribed thereunder, shall, for each such offense, be fined not more than $1,000, or imprisoned not more than 1 year, or both.. (b) Trust Fund for Oversight of Hemp-Derived Cannabinoid Products Subchapter A of chapter 98 of such Code is amended by adding at the end the following new section: 9512. Trust Fund for Oversight of Hemp-derived Cannabinoid Products (a) Creation of trust fund There is hereby established in the Treasury of the United States a trust fund to be known as the Trust Fund for Oversight of Hemp-derived Cannabinoid Products, consisting of such amounts as may be appropriated to such Trust Fund as provided in this section. (b) Transfer to trust fund of amounts equivalent to certain taxes There are hereby appropriated to the Trust Fund for Oversight of Hemp-derived Cannabinoid Products amounts equivalent to the taxes received in the Treasury under sections 5901A and 5901B. (c) Expenditures from trust fund Amounts in the Trust Fund for Oversight of Hemp-derived Cannabinoid Products shall be available, without further appropriation, to the Secretary for making expenditures— (1) to carry out the requirements of chapter 56, (2) to administer or conduct oversight of any hemp commerce regulatory program, as authorized by law, (3) to carry out any consumer protection activities related to hemp-derived cannabinoid products, as authorized by law, and (4) to support States that cooperate with the Secretary in carrying out the requirements of chapter 56. (d) Annual report to Congress The Secretary shall submit an annual report to Congress and include in such report with respect to the preceding year— (1) the amounts appropriated to the Trust Fund for Oversight of Hemp-derived Cannabinoid Products under subsection (b), and (2) any expenditures made from such Trust Fund under subsection (c).. (c) Highway Trust Fund Section 9503 of such Code is amended by adding at the end the following new subsection: (g) Zero-Tolerance for impaired driving There are hereby appropriated into the Highway Trust Fund amounts equivalent to 1 percent of the total taxes received in the Treasury each year under section 5901 (relating to taxes on hemp-derived beverages). Such amounts shall be available for making expenditures to support State-level enforcement, training, and testing technologies related to the zero-tolerance for impaired driving standards described in section 180 of title 23, United States Code.. (d) Disclosure of returns and return information Section 6103(l) of such Code is amended by adding at the end the following new paragraph: (23) Disclosure of returns and return information to Federal, State, tribal, and local agencies administering or enforcing hemp laws (A) In general Returns and return information with respect to taxes imposed by chapter 56 may be open to inspection by, or disclosure to, any Federal, State, tribal, or local agency charged under any Federal, State, tribal, or local hemp law with responsibility for the administration or enforcement of such law for the purpose of, and only to the extent necessary in, the administration or enforcement of such law. However, such returns and return information shall not be so disclosed if the Secretary determines that such disclosure would seriously impair Federal tax administration. (B) Public information The Secretary shall make publicly available the name and business address of each manufacturer of hemp-derived cannabinoid products and each wholesaler of hemp-derived beverages. (C) Definitions Any term used in this paragraph which is also used in chapter 56 shall have the same meaning for purposes of this paragraph as when used in such chapter.. (e) Conforming amendments (1) Section 6091(b)(6) of such Code is amended— (A) by striking and firearms and inserting firearms, and hemp-derived cannabinoid products, and (B) in the heading thereof, by striking and firearms and inserting firearms, and hemp-derived cannabinoid products. (2) Section 7613(a)(2) of such Code is amended by striking and firearms and inserting firearms, and hemp-derived cannabinoid products. (3) The table of chapters for subtitle E of such Code is amended by adding at the end the following new item: Chapter 56—Hemp-derived Cannabinoid Products. (4) The table of sections for subchapter A of chapter 98 of such Code is amended by adding at the end the following new item: Sec. 9512. Trust Fund for Oversight of Hemp-derived Cannabinoid Products.. (f) Deadline for regulations The Secretary of the Treasury (or the Secretary’s delegate) shall prescribe regulations to implement chapter 56 of the Internal Revenue Code of 1986 (as added by this section) not later than 1 year after the date of the enactment of this Act. (g) Effective date (1) In general Except as otherwise provided in this subsection, the amendments made by this section shall apply to hemp-derived cannabinoid products sold on or after the date on which the Secretary publishes the regulations prescribed under subsection (f). (2) Transition rule (A) In general No person may engage in business as a manufacturer of hemp-derived cannabinoid products, or wholesaler of hemp-derived beverages, after the date of the enactment of this Act until such person has a permit in accordance with chapter 56 of the Internal Revenue Code of 1986 (as added by this section) and regulations prescribed thereunder. Notwithstanding the preceding sentence, any person who is engaged in business as a manufacturer of hemp-derived cannabinoid products, or wholesaler of hemp-derived beverages, on the date of the enactment of this Act may continue to engage in such business on the condition that— (i) the person applies for a permit within 30 days after the date described in paragraph (1), and (ii) beginning on the date described in paragraph (1), complies with such chapter 56 and such regulations. (B) Penalties A violation of subparagraph (A) by any person shall be treated for all purposes in the same manner as a violation of chapter 56 of the Internal Revenue Code of 1986 (as added by this section), and such person shall be subject to the same penalties, and to the same extent, as for a violation of such chapter. (3) Trust funds The amendments made by subsections (b) and (c) shall apply to taxes received after the date described in paragraph (1). (4) Disclosure of returns and return information The amendment made by subsection (d) shall apply to disclosures after the date described in paragraph (1).