Retail outlets should be charging sales tax on products made from the hemp-extract cannabidiol, the Vermont Department of Taxes said in a recent ruling.
Ceres Natural Remedies, a CBD retailer with locations in Burlington and Brattleboro, queried the tax department about the issue after some initial confusion.
“We wanted to make sure we were doing everything in accordance with the law,” David Mickenberg, a lawyer representing Ceres, told Seven Days.
As a result, Mickenberg said the Ceres store will charge 7 percent state and local sales tax on its over-the-counter CBD products, which include pills, salves and patches designed to offer pain and anxiety relief.
Ceres was initially charging sales tax but paused after numerous complaints from customers who said that other retailers were not charging sales tax, according to Mickenberg. The company then sought the guidance of the Tax Department, he said.
Green State Gardener, another Burlington outlet that sells CBD products, has been charging sales tax on such items and will continue to do so, according to general manager Kelsy Raap.
While drugs, including some nonprescription products such as aspirin, are
CBD supplements that are subject to sales tax.
exempt from sales tax, the Tax Department noted in its ruling that CBD products do not qualify as medical treatment under federal law.
“Because … cannabidiol products do not qualify as ‘drugs’ as defined in the statute and regulations, these products are not exempt from Vermont sales tax,” Tax Department lawyer Emily Bergquist and Commissioner Kaj Samsom said in the September ruling.
The increasingly popular CBD products are made from non-psychoactive hemp plants and contain less than 0.3 percent tetrahydrocannabinol (or THC) levels. Hemp is considered a controlled substance under federal law.
Samsom said it was unclear if sales tax would apply to CBD-infused foods, which are otherwise tax-exempt. Iced tea on its own, for example, is exempt from sales tax as a food product. But should CBD-infused iced tea be taxed? The state would have to determine whether a specific product is mainly a food or a CBD product, Samsom said.
“This would be case specific and I do not believe we have encountered this question with all the necessary relevant facts,” he said.
Samsom said he doesn’t yet know if the state will reach out to retailers about the sales tax decision. Typically, Samsom said, the state does such outreach when it determines there is widespread confusion. The department has not posted the ruling on its website.