Updated: July 1, 2025

3D-rendered topographical map of Texas in green and tan tones, highlighting elevation changes across the state, with bold white text in the foreground reading “Texas Cannabis Tax Guide” on a neutral gray background.

Key Points (as of July 2025)

  • Texas has expanded its medical cannabis program (called TCUP) under House Bill 46, adding more health conditions, products, and dispensaries.

  • Hemp-derived products (like CBD, Delta-8, and others) are still legal — but SB 3, which would have banned them, was vetoed. The situation may change soon.

  • Both cannabis and hemp retail sales are subject to sales tax. There is no separate cannabis excise tax in Texas.

  • Texas follows the federal 280E tax rule — cannabis businesses can’t deduct normal business expenses on their state taxes. Hemp businesses can.

  • Texas does not have a state corporate income tax, but it does have a state franchise tax on business gross receipts.

  • Adult-use (recreational) cannabis is still illegal in Texas.

1. Tax Structure: Cannabis vs. Hemp

280E: Business Deductions

  • Cannabis businesses: Cannot deduct rent, payroll, or other expenses — just cost of goods sold.

  • Hemp businesses: Can deduct normal business expenses.

Excise Tax

  • None for either medical cannabis or hemp-derived products.

Sales Tax

  • Base rate: 6.25%

  • Local add-ons: Up to 2% more

  • Max total rate: 8.25% (typical in major cities like Austin, Dallas, and Houston)

  • Applies to all retail cannabis and hemp product sales

2. Medical Cannabis (HB 46 Changes)

  • New Conditions Covered: Chronic pain, Crohn’s disease, TBI, glaucoma, terminal illness, degenerative disc disease, and more.

  • Allowed Products: Patches, edibles, vapes, lotions, nebulizers, and inhalers. No smokable flower.

  • THC Limits: 10 mg per serving, max 1 gram per package

  • Dispensaries: Up to 12 total licenses by 2026, with coverage in each health region

  • Regulation: Background checks for major owners, Board of Pharmacy oversight, and confidential patient registry

  • Tax: Sales tax applies; no excise tax

3. Hemp-Derived Products (Delta-8, CBD, etc.)

  • Legal Status: Still legal under federal law; SB 3 was vetoed, but new restrictions may be coming

  • Tax: Subject to regular state and local sales tax

  • Compliance: Businesses must register with the state, follow labeling, lab testing, and safety rules

  • No Excise Tax

4. Texas Franchise Tax (No Corporate Income Tax)

  • Texas does not have a corporate income tax.

  • Instead, Texas imposes a franchise tax on most business entities, including cannabis and hemp companies.

  • Applies to LLCs, corporations, S-corps, and partnerships doing business in Texas.

Franchise Tax Details for 2025:

  • Rate for retailers/wholesalers: 0.375%

  • Rate for other businesses: 0.75%

  • EZ computation rate: 0.331% (if total revenue is ≤ $20 million and you waive deductions)

  • No tax due if total revenue is less than $2.47 million (adjusted annually for inflation)

Cannabis & Hemp Application:

  • Hemp businesses are fully subject to franchise tax.

  • Medical cannabis licensees (under TCUP) are also subject to the tax, assuming they’re organized as taxable entities.

  • Does not replace federal 280E. Franchise tax is based on gross revenue, not net profit.

Filing: Businesses must file annually with the Texas Comptroller, even if no tax is due.

5. Filing and Compliance Rules

  • Filing Schedule:

    • Monthly if you owe over $1,000 per year

    • Quarterly if you owe under $1,000 (must apply)

  • How to File: All businesses must file online using the Texas Comptroller’s Webfile portal.

  • Records to Keep: Sales records, patient data (if cannabis), and inventory must be kept for at least 4 years.

  • Even if You Make No Sales: You still have to file a return.

  • Penalties: Late filings get a 5% penalty (10% if more than 30 days late), plus interest. Audits are common.

6. How to Calculate Your Taxes

  • Find Your Local Tax Rate (State + Local; max is 8.25%)

  • Apply It to Your Sales
    Example: $100 sale × 8.25% = $8.25 tax due

  • Excise Tax: Doesn’t apply

  • File and Pay: Use the state’s Webfile portal and meet the deadline

7. 2025 Tax Filing Calendar

Tax Type Rate Applies To Filing Frequency Due Date
Sales Tax 6.25–8.25% Cannabis and hemp product retailers Monthly or Quarterly 20th of each period
Excise Tax Not applicable N/A N/A N/A
Franchise Tax 0.375% / 0.75% All cannabis and hemp businesses Annually May 15
Income Tax Not applicable Texas has no corporate income tax N/A N/A
Medical Tax Exemption Not available All cannabis taxed as retail N/A N/A

8. Industry Organizations to Know

 

9. Government Contacts

Texas Department of Public Safety – Compassionate Use Program
Licensing, registry, and program info

Texas Comptroller of Public Accounts
Handles sales tax and franchise tax

Texas Department Health and Human Services
Hemp product oversight and licensing

  • Phone: 512-776-7111

This guide is for informational purposes only. Always talk to a qualified CPA, attorney, or compliance expert before making any business, tax, or licensing decisions.
Laws can change — double check with state agencies or professionals after legislative sessions or natural disasters.