104 
due date shall be the immediately preceding day 
that is not a Saturday, Sunday, or such a holi-
day. 
‘‘(E) SPECIAL
RULE
FOR
UNLAWFULLY 
PRODUCED CANNABIS PRODUCTS.—In the case 
of any cannabis products produced in the 
United States at any place other than the 
premises of a producer that has obtained the 
permit required under this chapter, tax shall be 
due and payable immediately upon production. 
‘‘(3) PAYMENT BY ELECTRONIC FUND TRANS-
FER.—Any person who in any 12-month period, end-
ing December 31, was liable for a gross amount 
equal to or exceeding $1,000,000 in taxes imposed 
on cannabis products by section 5901 (or section 
7652) shall pay such taxes during the succeeding 
calendar year by electronic fund transfer (as defined 
in section 5061(e)(2)) to a Federal Reserve Bank. 
Rules similar to the rules of section 5061(e)(3) shall 
apply to the $1,000,000 amount specified in the pre-
ceding sentence. 
‘‘(c) DEFINITION OF PRICE.— 
‘‘(1) CONSTRUCTIVE SALE PRICE.— 
‘‘(A) IN GENERAL.—If an article is sold di-
rectly to consumers, sold on consignment, or 
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105 
sold (otherwise than through an arm’s length 
transaction) at less than the fair market price, 
or if the price for which the article sold cannot 
be determined, the tax under section 5901(a) 
shall be computed on the price for which such 
articles are sold, in the ordinary course of 
trade, by producers thereof, as determined by 
the Secretary. 
‘‘(B) ARM’S LENGTH.— 
‘‘(i) IN
GENERAL.—For purposes of 
this section, a sale is considered to be 
made under circumstances otherwise than 
at arm’s length if— 
‘‘(I) the parties are members of 
the same controlled group, whether or 
not such control is actually exercised 
to influence the sale price, 
‘‘(II) the parties are members of 
a family, as defined in section 
267(c)(4), or 
‘‘(III) the sale is made pursuant 
to special arrangements between a 
producer and a purchaser. 
‘‘(ii) CONTROLLED GROUPS.— 
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106 
‘‘(I) IN
GENERAL.—The term 
‘controlled group’ has the meaning 
given to such term by subsection (a) 
of section 1563, except that ‘more 
than 50 percent’ shall be substituted 
for ‘at least 80 percent’ each place it 
appears in such subsection. 
‘‘(II) 
CONTROLLED
GROUPS 
THAT
INCLUDE
NONINCORPORATED 
PERSONS.—Under 
regulations 
pre-
scribed by the Secretary, principles 
similar to the principles of subclause 
(I) shall apply to a group of persons 
under common control where one or 
more of such persons is not a corpora-
tion. 
‘‘(2) CONTAINERS, PACKING
AND
TRANSPOR-
TATION CHARGES.—In determining, for the purposes 
of this chapter, the price for which an article is sold, 
there shall not be included any charge for coverings 
and containers of whatever nature, and any charge 
incident to placing the article in condition packed 
ready for shipment. Further, there shall be excluded 
the amount of tax imposed by this chapter, whether 
or not stated as a separate charge. A transportation, 
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107 
delivery, insurance, installation, or other charge (not 
required by the preceding sentence to be included) 
shall likewise be excluded from the price. 
‘‘(d) PARTIAL PAYMENTS AND INSTALLMENT AC-
COUNTS.— 
‘‘(1) PARTIAL PAYMENTS.—There shall be paid 
upon each payment with respect to the article a per-
centage of such payment equal to the rate of tax in 
effect on the date such payment is due in the case 
of— 
‘‘(A) a contract for the sale of an article 
wherein it is provided that the price shall be 
paid by installments and title to the article sold 
does not pass until a future date notwith-
standing partial payment by installments, 
‘‘(B) a conditional sale, or 
‘‘(C) a chattel mortgage arrangement 
wherein it is provided that the sales price shall 
be paid in installments. 
‘‘(2) SALES OF INSTALLMENT ACCOUNTS.—If 
installment accounts, with respect to payments on 
which tax is being computed as provided in para-
graph (1), are sold or otherwise disposed of, then 
paragraph (1) shall not apply with respect to any 
subsequent payments on such accounts (other than 
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subsequent payments on returned accounts with re-
spect to which credit or refund is allowable by rea-
son of section 6416(b)(5)), but instead— 
‘‘(A) there shall be paid an amount equal 
to the difference between— 
‘‘(i) the tax previously paid on the 
payments on such installment accounts, 
and 
‘‘(ii) the total tax that would be pay-
able if such installment accounts had not 
been sold or otherwise disposed of (com-
puted as provided in paragraph (1)), ex-
cept that 
‘‘(B) if any such sale is pursuant to the 
order of, or subject to the approval of, a court 
of competent jurisdiction in a bankruptcy or in-
solvency proceeding, the amount computed 
under subparagraph (A) shall not exceed the 
sum of the amounts computed by multiplying— 
‘‘(i) the proportionate share of the 
amount for which such accounts are sold 
that is allocable to each unpaid installment 
payment, by 
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109 
‘‘(ii) the rate of tax under this chap-
ter in effect on the date such unpaid in-
stallment payment is or was due. 
‘‘(3) LIMITATION.—The sum of the amounts 
payable under this subsection in respect of the sale 
of any article shall not exceed the total tax. 
‘‘SEC. 5904. EXEMPTION FROM TAX. 
‘‘(a) EXEMPTION FROM TAX.—Cannabis products on 
which the internal revenue tax has not been paid or deter-
mined may, subject to such regulations as the Secretary 
shall prescribe, be withdrawn from the premises of any 
producer in approved containers free of tax and not for 
resale for use— 
‘‘(1) exclusively in scientific research by a lab-
oratory, 
‘‘(2) by a proprietor of a cannabis production 
facility in research, development, or testing (other 
than consumer testing or other market analysis) of 
processes, systems, materials, or equipment, relating 
to cannabis or cannabis operations, under such limi-
tations and conditions as to quantities, use, and ac-
countability as the Secretary may by regulations re-
quire for the protection of the revenue, 
‘‘(3) by the United States or any governmental 
agency thereof, any State, any political subdivision 
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110 
of a State, or the District of Columbia, for non-
consumption purposes, or 
‘‘(4) by a qualified State medical cannabis pa-
tient or patients, when the cannabis product is 
100% donated to the patient or patients, and such 
a donated article otherwise qualifies for use as a 
‘designated State medical cannabis product’ within 
the meaning of the Federal Food, Drug, and Cos-
metic Act, section 360ggg, part J of subchapter V 
of chapter 9 of title 21 of the United States Code. 
‘‘(b) CANNABIS PRODUCTS TRANSFERRED OR RE-
MOVED FROM DOMESTIC FACTORIES AND EXPORT WARE-
HOUSES.— 
‘‘(1) IN GENERAL.—Subject to such regulations 
as the Secretary shall prescribe, a producer or ex-
port warehouse proprietor may transfer cannabis 
products, without payment of tax, to the premises of 
another producer or export warehouse proprietor, or 
remove such articles, without payment of tax, for 
shipment to a foreign country, Puerto Rico, the Vir-
gin Islands, or a possession of the United States, or 
for consumption beyond the jurisdiction of the inter-
nal revenue laws of the United States. 
‘‘(2) LABELING.—Cannabis products may not 
be transferred or removed under this subsection un-
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111 
less such products bear such marks, labels, or no-
tices as the Secretary shall by regulations prescribe. 
‘‘(c) CANNABIS PRODUCTS RELEASED FROM CUS-
TOMS CUSTODY.—Cannabis products imported or brought 
into the United States may be released from customs cus-
tody, without payment of tax, for delivery to a producer 
or export warehouse proprietor if such articles are not put 
up in packages, in accordance with such regulations as 
the Secretary shall prescribe. 
‘‘(d) CANNABIS PRODUCTS EXPORTED
AND RE-
TURNED.—Cannabis products classifiable under item 
9801.00.10 of the Harmonized Tariff Schedule of the 
United States (relating to duty on certain articles pre-
viously exported and returned), as in effect on the date 
of the enactment of the States Reform Act, may be re-
leased from customs custody, without payment of that 
part of the duty attributable to the internal revenue tax 
for delivery to the original producer of such cannabis prod-
ucts or to the export warehouse proprietor authorized by 
such producer to receive such products, in accordance with 
such regulations as the Secretary shall prescribe. Upon 
such release such products shall be subject to this chapter 
as if they had not been exported or otherwise removed. 
‘‘SEC. 5905. CREDIT, REFUND, OR DRAWBACK OF TAX. 
‘‘(a) CREDIT OR REFUND.— 
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‘‘(1) IN GENERAL.—Credit or refund of any tax 
imposed by this chapter or section 7652 shall be al-
lowed or made (without interest) to the producer, 
importer, or export warehouse proprietor on proof 
satisfactory to the Secretary that the claimant pro-
ducer, importer, or export warehouse proprietor has 
paid the tax on— 
‘‘(A) cannabis products withdrawn from 
the market by the claimant, or 
‘‘(B) such products lost (otherwise than by 
theft) or destroyed, by fire, casualty, or act of 
God, while in the possession or ownership of the 
claimant. 
‘‘(2) CANNABIS
PRODUCTS
LOST
OR
DE-
STROYED.— 
‘‘(A) EXTENT OF LOSS ALLOWANCE.—No 
tax shall be collected in respect of cannabis 
products lost or destroyed, except that such tax 
shall be collected— 
‘‘(i) in the case of loss by theft, unless 
the Secretary finds that the theft occurred 
without connivance, collusion, fraud, or 
negligence on the part of the proprietor of 
cannabis production facility, or owner, con-
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113 
signor, consignee, bailee, or carrier, or 
their employees or agents, 
‘‘(ii) in the case of voluntary destruc-
tion, unless such destruction is carried out 
as provided in paragraph (3), and 
‘‘(iii) in the case of an unexplained 
shortage of cannabis products. 
‘‘(B) PROOF
OF
LOSS.—In any case in 
which cannabis products are lost or destroyed, 
whether by theft or otherwise, the Secretary 
may require the proprietor of a cannabis pro-
duction facility or other person liable for the 
tax to file a claim for relief from the tax and 
submit proof as to the cause of such loss. In 
every case where it appears that the loss was by 
theft, the burden shall be upon the proprietor 
of the cannabis production facility or other per-
son responsible for the tax under section 5901 
to establish to the satisfaction of the Secretary 
that such loss did not occur as the result of 
connivance, collusion, fraud, or negligence on 
the part of the proprietor of the cannabis pro-
duction facility, or owner, consignor, consignee, 
bailee, or carrier, or their employees or agents. 
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‘‘(C) REFUND OF TAX.—In any case where 
the tax would not be collectible by virtue of sub-
paragraph (A), but such tax has been paid, the 
Secretary shall refund such tax. 
‘‘(D) LIMITATIONS.—Except as provided in 
subparagraph (E), no tax shall be abated, re-
mitted, credited, or refunded under this para-
graph where the loss occurred after the tax was 
determined. The abatement, remission, credit, 
or refund of taxes provided for by subpara-
graphs (A) and (C) in the case of loss of can-
nabis products by theft shall only be allowed to 
the extent that the claimant is not indemnified 
against or recompensed in respect of the tax for 
such loss. 
‘‘(E) APPLICABILITY.—The provisions of 
this paragraph shall extend to and apply in re-
spect of cannabis products lost after the tax 
was determined and before completion of the 
physical removal of the cannabis products from 
the premises. 
‘‘(3) VOLUNTARY DESTRUCTION.—The propri-
etor of a cannabis production facility or other per-
sons liable for the tax imposed by this chapter or by 
section 7652 with respect to any cannabis product 
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