Kansas Cannabis & Hemp Industries
After Missouri voters legalized medical marijuana on November 6, 2018, Kansas is now surrounded on three sides by states that have legalized either medical marijuana or marijuana for adults’ use. Newly elected Gov. Laura Kelly supports medical marijuana for Kansans.
Kansas passes law allowing CBD products with zero THC
In 2018, Kansas finally passed a law acknowledging the medical efficacy of cannabis for the first time ever, leaving Idaho standing alone as the only state in the union yet to do so. The new law, SB 282, was signed by former Gov. Jeff Colyer in May and changed the definition of “marijuana” to exclude cannabidiol (CBD). The bill took effect May 24, 2018.
However, because state law separately bans tetrahydrocannabinols (THC), it may be difficult for medical cannabis patients to take advantage of this provision, because most CBD products contain at least trace amounts of THC (“hemp” is sometimes defined as 0.3% THC or less). The bill does not provide for in-state access to CBD oils in Kansas.
IRC § 280E Analysis / R&D Tax Credit Eligibility
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Does Section 280E Apply to state individual income tax?
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N/A
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Does Section 280E apply to state corporate income tax?
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N/A
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Are State R&D Tax Credits Potentially Eligible for "Plant Touching" (e.g. producers, cultivators, manufacturers, retailers) Cannabis Companies?
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No, subject to 280E restrictions.
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Are State R&D Tax Credits Potentially Eligible for Industrial Hemp Companies & "Non-Plant Touching" Separate Trade or Businesses (e.g. testing laboratories)?
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Yes, subject to further 280E analysis regarding company activities, structure, and applicable state laws.
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State Law Background
(1) Hemp State Law Authority & Background
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K.S.A Ch. 62 § 1 - 62 § 2
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SB 263 (2018)
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Creates the Alternative Crop Research Act (and licensing fee fund) to promote the research and development of industrial hemp.
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Allows the Kansas Department of Agriculture (KDA), either alone or in coordination with a state institute of higher education, to cultivate and promote research and development of industrial hemp.
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Directs KDA to oversee annual licensing, establish fees, and promulgate rules and regulations.
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Allows for a pilot program in Russell County, and other counties as determined by KDA
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(2) Medical Marijuana State Law Authority & Background - Limited Access Marijuana Product Laws (low THC/high CBD- cannabidiol)
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Uniform Controlled Substances Act; Definition of Marijuana; SB 282
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SB 282 amends the Uniform Controlled Substances Act (Act) and certain statutes pertaining to crimes involving controlled substances.
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The bill amends the definition of “marijuana” to exempt cannabidiol.
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Drugs and Drug Classes: The bill amends the Act to add several drugs and modify drug classes in the schedules of controlled substances. Specifically, the bill provides the following
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adds several synthetic opioid fentanyl compounds and an opioid analgesic drug to Schedule I;
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updates several cannabinoid classes in Schedule I to include new synthetics and substitutes;
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adds oral solutions of dronabinol and 4-anilino-Nphenethyl-4-piperidine (immediate precursor to fentanyl) to Schedule II; and
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updates the list of anabolic steroids in Schedule III. Definitions
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The bill amends the definition of “marijuana” in the Act and in statutes pertaining to crimes involving controlled substances. The bill exempts cannabidiol from the definition of “marijuana.”
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Are sales of medical marijuana subject to sales tax?
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Uncertain. While SB 282 amends the Uniform Controlled Substances Act (Act) amends the definition of “marijuana” to exempt cannabidiol, it is unclear how, or if, Kansas will tax sales of such cannabidiol.
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Is medical marijuana subject to an excise tax?
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Uncertain.
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(3) Recreational Marijuana State Law Authority & Background - N/A
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Are sales of recreational marijuana subject to sales tax?
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N/A.
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Is recreational marijuana subject to an excise tax?
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N/A.
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(4) Does the State impose a Stamp Tax or Controlled Substances Tax?
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Yes. The Kansas Tax on Marijuana and Controlled Substances imposes a tax upon marijuana and domestic marijuana plants. The tax rate is $3.50 on each gram of marijuana, or each portion of a gram; $0.40 on each gram of a wet domestic marijuana plant; and $0.90 on each gram of a dry domestic marijuana plant. See K.S.A. § 79-5202. The tax must be paid immediately upon a person acquiring or possessing the marijuana or domestic marijuana plant within the State of Kansas. The payment of the tax must be evidenced by attaching the proper denominations of drug tax stamps to the marijuana, domestic marijuana plants, or controlled substance. See K.S.A. § 79-5204.
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For reference: Kansas Department of Revenue Guidance