Kentucky Cannabis Tax Guide: 2025 Edition

Updated on July 1, 2025

Key Points, Updated as of July 1, 2025

• Legal Status: Kentucky’s medical cannabis program launched in 2025. Registered patients may purchase medical‑grade cannabis from licensed dispensaries.

• Excise Tax: Kentucky has not enacted a cannabis‑specific excise tax.

• Sales Tax: All medical cannabis sales are subject to Kentucky’s general sales tax (6% state), plus any local option taxes.

• 280E Conformity: Kentucky conforms fully to federal IRC § 280E — disallowing the same business deductions beyond cost of goods sold.

Understanding Kentucky’s Cannabis Tax Structure

1. No Excise Tax

   • There is no separate excise tax on medical cannabis sales.

2. Sales/Gross Receipts Tax Applies

   • Medical cannabis is treated as a tangible good and is therefore subject to the 6% state sales tax, plus any applicable local taxes.

3. 280E Conformity

   • State taxable income rules mirror federal IRC § 280E, disallowing deductions (other than cost of goods sold) for cannabis businesses.

Cannabis Excise Tax: What Retailers Need to Know

• 2025 Rate: N/A (no excise tax)

• Uniformity: N/A

• Who Pays: N/A

• Medical Sales: N/A

Sales/Gross Receipts Tax: Local Impact on Medical Cannabis

Calculation: Sales tax applies to the total retail price of medical cannabis products.

Medical Cannabis: Tax Exemptions and Requirements

• Excise Tax: N/A

• Sales/GRT: No special exemptions; dispensaries collect the standard sales tax.

• Documentation: Dispensaries must register for a sales tax permit with the Kentucky Department of Revenue and retain transaction records.

Filing and Payment Deadlines

*Quarterly filing available if average monthly liability falls below the DOR threshold — confirm with Kentucky DOR.

How to Calculate Your Total Cannabis Tax Obligation

1. Determine Your Rate: Sum state (6%) + local.

2. Compute Sales Tax: Retail price × total rate.

3. File & Remit: Via Kentucky Tax Online by the due date.

Key State Cannabis Trade Associations

• Kentucky Cannabis Industry Alliance: Advocacy and practice standards for medical cannabis.

• Kentucky Hemp Association (KYHA): Supports hemp growers and processors — useful for CBD crossover.

• Kentucky NORML: policy reform, advocacy, education.
• Minority Cannabis Business Association (MCBA): social equity, advocacy, and education.

• National Cannabis Industry Association (NCIA): Networking, policy updates, and compliance resources.

Government Contact List

Kentucky Department of Revenue

• Phone: (502) 564-4581
• Mail: 501 High Street​
  Frankfort, KY 40601

• Phone Directory

• Sales & Use Tax Division: Administers state and local sales tax

• My Taxes Portal Setup and Login

• ​​​​​​​​​​​Recent Changes to Sales Tax​ and Excise Taxes

Kentucky Office of Medical Cannabis

• Main Phone: 833-727-2828

• Contact Us Form

Kentucky Cannabis Taxes Financial Calendar

Note: This guide is for informational purposes only. Consult a qualified CPA, attorney, or compliance specialist before making business, taxation, or compliance decisions. Rules may change; always verify with the IRS and state agencies.