Mississippi Marijuana Business

What is the Demand for Marijuana in Mississippi?

Although Mississippi allows CBD oil for medical purposes, medical cannabis is yet to be legalized fully. In May 2021, the Mississippi Supreme Court struck out Initiative 65, which was going to legalize medical marijuana by August 2021. The Harper Grace Law currently requires the National Center for Natural Products Research (NCNPR) to provide CBD oil to qualified users. However, the NCNPR restricts the dispensing of CBD oil to the University of Mississippi Medical Center (UMMC) only under appropriate federal and state regulatory approval. This program only serves a few qualified patients in Mississippi because of the current restrictions and the difficulty in getting the consent of relevant federal agencies by the NCNPR. It is not providing readily accessible CBD medication to many persons with severe epilepsy as intended.

Following the Mississippi 2020 elections, where voters overwhelmingly approved Initiative 65 that would have legalized medical cannabis, there were projections regarding the estimated demand for medical marijuana. In one of such forecasts by New Frontier Data, Mississippi was reported to have a population of 3 million and an estimated 263,000 marijuana consumers. The report projected that Mississippi would make an estimated $6 million annual sales from medical cannabis in the first year of legalization. It further forecasted $21.1 million, $41.1 million, and $66 million, for the second, third, and fourth year of an operational market, respectively, in annual sales of medical marijuana.

While the Supreme Court of Mississippi overturned Initiative 65, the state finally legalized medical marijuana in 2022 through a legislative act. The first legal sale of medical cannabis occurred in Mississippi on January 25, 2023. However, Mississippi already opened the approval process for medical marijuana cards in 2022 and out of the 2,311 applications submitted, 1,321 were approved that year in addition to 242 licenses for cannabis businesses. By the end of 2022, Mississippi had issued over 120 medical cannabis dispensary licenses and already made $4.5 million of revenue from the licensing fees of these dispensaries.

How is Marijuana Taxed in Mississippi?

Had Initiative 65, a bill to legalize medical marijuana, approved by Mississippian voters, not been invalidated by the state's Supreme Court in May 2021, it would go into effect by August 2021. Typically, the Initiative did not earmark a tax for medical patients. Generally, Mississippi sales tax law provides a complete tax exemption for the sale of prescription drugs, and medical marijuana is one of such. However, Initiative 65 stipulated a 7% user fee on the final sale of medical cannabis paid by purchasers. This amount would not exceed state sales tax.

The proposed medical marijuana program by the Mississippi State Department of Health (MSDH) was designed to be a self-funding program. While this program is not intended to fund other state needs, it will generate revenue for Mississippi through licensing fees for businesses and medical cards. Its primary aim is to serve patients with debilitating medical conditions who do not have alternative ways of managing their ailments. Hence, the 7% user fee would be deposited in a special fund for exclusive use by the MSDH. Initiative 65 stated that the fund balances would not revert to the General Fund. Although it would appear like the state sales tax to patients at the point of sale, technically, it is not.

What is the Agency Taxing Marijuana Business in Mississippi?

The Mississippi Department of Revenue (DOR) does not tax marijuana currently because of the legality state of the drug. However, it does so for several other businesses in Mississippi. The DOR is the primary agency that collects tax revenues used in supporting state and local governments in the state.

Generally, the Mississippi DOR imposes a 7% sales tax on various services and the sales of tangible personal property. Notwithstanding, certain sales enjoy a reduced tax rate while there are exemptions provided by state law. Depending on the type of service provided or sale made, the DOR applies the tax rate against either the gross income of a business or the gross proceeds of sales. Sales or services subject to sales tax in Mississippi include:

• Contracting

• Rental of accommodations in motels, hotels, and campgrounds

• Repairs of tangible personal property

• Taxable services such as plumbing, pest control services, electrical work, dry cleaning, heating, and air conditioning business, computer software services, and parking lots

• Lease or rental of personal property such as equipment or motor vehicles

• Charges collected for admission to an amusement, sport, or recreation

Business owners who are not clear whether their businesses are required to collect sales tax can contact the DOR at (601) 923-770 or visit:

500 Clinton Center Drive

Clinton, MS 39056

The DOR also provides other contact addresses for various districts on its website.

Businesses liable for taxes in Mississippi should register online using Mississippi's Taxpayer Access Point (TAP). The length of time to process an application for a sales tax number depends on the completeness of the information provided on the application. Once the DOR receives all information required on an application, it reviews and approves it. Typically, applicants will receive their permit in the mail within two weeks of application. Besides registering for taxes, TAP allows business owners to:

• Securely file their tax returns - TAP does all the calculations, and as such, reduces errors. It also ensures that all required information is provided on tax returns before submission.

• View their accounts - Business owners who have multiple tax accounts with the DOR can access all of them in one place.

• Make payments - TAP allows the payment of tax returns. It also gives users access to their tax information, including a summary review of the return filed.

• Apply for new permits

• Request changes to their accounts

• File for renewals

• Check the status of refunds

In Mississippi, sales tax returns are due the 20th day of the month following the reporting period. A due date that falls on a holiday or weekend is moved to the next business day. Typically, the DOR does not grant an extension for any business that does not file its sales tax return by the due date. However, the Commissioner of Revenue can provide an extension of time to file a sales tax return for a good cause. For instance, the DOR will grant an extension if the inability to file the return by the due date is associated with a natural disaster. Regardless of the cause, the tax remains payable, and interest may apply for late payment (if applicable). Businesses must file sales tax returns for each reporting period even though no tax is due (for periods without sales). In such a period, they will enter a zero on the total tax due field. Failure by a business to file returns on time can lead to penalties, outrageous interest, and in the long run, liens against properties. The DOR penalizes taxpayers with deficient or delinquent tax due to failure to comply with the law or negligence. Typically, there may be a penalty of 10% of the total amount of delinquency or deficiency in the tax due or interest at the rate of 0.5% per month, or both, from tax due date until it is paid.