Nebraska Bill To Levy 30% Tax On Consumable Hemp Products Advances Out Of Committee

A legislative committee in Nebraska has advanced a sweeping tax bill that would, among other changes, impose a 30 percent sales tax on “consumable hemp” and CBD products. The proposal, broadly aimed at providing property tax relief, will now be considered by the full legislature.

On Monday, lawmakers on the Revenue Committee passed the bill, LB 34, on a 6–1 vote. The tax package combines various proposals that have been introduced during the state’s special legislative session, called by Gov. Jim Pillen (R) last month to deal with the property tax issue.

As approved by the committee, the bill would set a 30 percent sales tax on “consumable hemp products,” defined as finished products that contain hemp and that contain no more than 0.3 percent THC. Hemp products made from stalks or seed—that is, for fiber or food use—would not be included in the definition, nor would pharmaceuticals approved by the federal Food and Drug Administration (FDA).

Revenue Committee chair Sen. Lou Ann Linehan (R), who has played a central role in the tax discussion, first introduced the 30 percent hemp tax two weeks ago, in an earlier bill she sponsored. A separate proposal she introduced during the regular legislative session would have taxed consumable hemp and CBD at 100 percent, a rate that was later reduced to 25 percent before the underlying bill fizzled out.

“The 100% tax was unworkable for CBD companies in our state. They were concerned it would drive them out of business,” Sen. Anna Wishart (D), who’s backed past efforts to end marijuana prohibition in the state, told Marijuana Moment in an email at the time. “In talking with representatives from a group of CBD companies in the state, I worked with them and other senators to negotiate the tax down to 25%.”

The rate is now at 30 percent in the bill moving to the floor.

Other lawmakers, meanwhile, have used the property tax issue as a springboard to discuss broader cannabis legalization, which they say would bring in considerable state revenue.

“Honestly speaking, what we really need to have a conversation about in our state, in the state of Nebraska, is our refusal to open ourselves up to other revenue streams,” Sen. Terrell McKinney (D) said during floor debate earlier this year. “One revenue stream that we should open ourselves up to is the legalization of marijuana.”

“We have a brain-drain issue,” added Sen. Jen Day (D) at the time, “and we refused to recognize that and address it from the other policy perspectives that caused the issues with brain drain—one of those being the fact that we have chosen year after year after year not to legalize even medical cannabis in the state.”

“Through the end of 2022, states have reported a combined total of more than $15 billion in tax revenue from legal adult-use cannabis sales,” she noted.

Though Linehan is not the sponsor of the latest tax revenue bill, she told local media ahead of Tuesday’s floor debate that she’s feeling optimistic.

“I’m confident we’ve written the bill in a way that nobody’s going to see less, and almost everybody’s going to see more,” Linehan told reporters, according to Nebraska Examiner. “I think we have a chance now to debate a bill.”

Tuesday marked the first of three expected rounds of debate on LB 34.

The tax proposal comes as Nebraska, like other states across the country, witnesses an explosion of hemp-derived products, including intoxicating cannabinoids such as delta-8 THC. Late last year, the states’s attorney general, Mike Hilgers (R), filed suit against retailers over the sale of delta-8 products.

Neither medical nor adult-use cannabis are legal in Nebraska, though activists are hoping to change that, working to qualify two prospective medical cannabis initiatives for November’s ballot.

As part of the special legislative session, lawmakers also held hearings this month on a pair of newly introduced adult-use marijuana legalization bills—LB 52 from Sen. Justin Wayne (D) and LB 71 from McKinney.

“One of the standout features of LB 71 is the potential to generate substantial tax revenue by legalizing marijuana and putting forth a well regulated tax framework,” McKinney told colleagues. “We can provide tax relief in our state. This revenue can also be allocated in our educational systems, helping children receive the education they deserve, and into businesses and community development initiatives.”

“If we are back for a special session because property taxes are so bad that we need to come back for two, three weeks of the summer to figure this out, and everything’s supposed to be put on the table,” he continued, “I don’t see how we can sit here and say no and ignore the potential revenue of $100-plus million.”

A fiscal note on McKinney’s bill estimates the measure would bring in $18.9 million in fiscal year 2025, which would increase over time to an estimated $98.0 million in fiscal 2028. Annual state expenses for operations, meanwhile, are expected to start at $1 million annually and rise to $2.5 million by fiscal year 2028.

Opponents who spoke against the legalization proposals included representatives of law enforcement, the state’s Department of Health and Human Services (DHHS), and anti-cannabis advocates.

As for the voter initiatives, activists last month turned in what they hope will be more than enough signatures to qualify the measures—the third time the campaign has sought to let voters decide on the reform in recent years.

A recent poll by the campaign found 70 percent support in the state for legalizing medical marijuana.

Organizers at Nebraskans for Medical Marijuana (NMM) have been petitioning for the change since July of last year, about two months after turning in a pair of complementary ballot proposals to the secretary of state’s office.

The governor has already voiced opposition to the reform effort, saying last September that legalization “poses demonstrated harms to our children,” and that medical cannabis should only be accessible if its approved by FDA.

Late last year, NMM told Marijuana Moment that the governor’s argument was a “cop out,” and she says the campaign will let voters decide for themselves.

One of NMM’s earlier campaigns gathered enough signatures for ballot placement in 2020, but the measure was invalidated by the state Supreme Court following a single-subject challenge. Supporters then came up short on signatures for revised petitions in 2022 due in large part to the loss of funding after one of their key donors died in a plane crash.

Nebraska lawmakers, including campaign co-chair Wishart, have also attempted to enact the reform legislatively, but cannabis bills have consistently stalled out in the conservative legislature.

Wishart’s medical cannabis bill received a hearing in the unicameral Judiciary Committee in February, but it did not advance. She attributed the inaction to changes in committee membership. An earlier version of the measure ultimately stalled out in the GOP-controlled legislature amid a filibuster that supporters could not overcome.

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Photo courtesy of Kimzy Nanney.