The Vermont Department of Taxes has ruled that retail outlets are to charge a 7% sales tax on products made from Cannabidiol (CBD), an extract of hemp containing widely recognized medical properties and less than 0.3% of psychotropic tetrahydrocannabinol (THC). The decision comes during a rapid increase in both production as well as demand in the Vermont CBD market.

Nonprescription pills and drugs are exempt from sales tax under federal law, however, CBD is not recognized as medicine by the FDA. Speaking with Seven Days magazine, Tax Department lawyer Emily Bergquist and Commissioner Kaj Samsom explained that “Because … cannabidiol products do not qualify as ‘drugs’ as defined in the statute and regulations, these products are not exempt from Vermont sales tax.”

Commissioner Samsom said the Department of Taxes had not yet decided on whether or not the new sales tax law would affect food and drink products infused with CBD. For example, Creek Valley CBD produces a CBD-infused Kombucha. It is unclear whether this product will be taxed in accordance with the new 7% CBD state tax.