‘‘CHAPTER 56—MARIJUANA 
‘‘SUBCHAPTER A. PRODUCER TAX. 
‘‘SUBCHAPTER B. SPECIAL PROVISIONS RELATING TO MARIJUANA 
ENTERPRISES. 
‘‘SUBCHAPTER C. PENALTIES. 
‘‘Subchapter A—Producer Tax 
‘‘Sec. 5901. Imposition of tax. 
‘‘Sec. 5902. Exemption from tax. 
‘‘Sec. 5903. Special rules. 
‘‘Sec. 5904. Definitions. 
‘‘SEC. 5901. IMPOSITION OF TAX. 
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 
a tax on the sale of marijuana by the producer or importer 
thereof. 
‘‘(b) AMOUNT OF TAX.— 
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) shall be the applicable per-
centage of the price for which so sold. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage is— 
‘‘(A) for the first two calendar years in 
which this chapter becomes effective, 10 per-
cent, 
‘‘(B) for the calendar year following the 
calendar years described in subparagraph (A), 
15 percent, 
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‘‘(C) for the calendar year following the 
calendar year described in subparagraph (B), 
20 percent, and 
‘‘(D) for any calendar year following the 
calendar year described in subparagraph (C), 
25 percent. 
‘‘SEC. 5902. EXEMPTION FROM TAX. 
‘‘(a) GENERAL RULE.—No tax shall be imposed 
under this subchapter— 
‘‘(1) on the distribution or sale of marijuana for 
medical use in accordance with State law, or 
‘‘(2) under regulations prescribed by the Sec-
retary, on the sale by the producer or importer of 
an article— 
‘‘(A) for use by the purchaser for further 
production, or for resale by the purchaser to a 
second purchaser for use by such second pur-
chaser in further production, or 
‘‘(B) for export, or for resale by the pur-
chaser to a second purchaser for export. 
‘‘(b) PROOF OF RESALE FOR FURTHER PRODUC-
TION; PROOF OF EXPORT.—Where an article has been 
sold free of tax under subsection (a)— 
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‘‘(1) for resale by the purchaser to a second 
purchaser for use by such second purchaser in fur-
ther production, or 
‘‘(2) for export, or for resale by the purchaser 
to a second purchaser for export, 
subsection (a) shall cease to apply in respect of such sale 
of such article unless, within the 6-month period which 
begins on the date of the sale by the producer or importer 
(or, if earlier, on the date of shipment by the producer 
or importer), the producer or importer receives proof that 
the article has been exported or resold for use in further 
production. 
‘‘(c) PRODUCER OR IMPORTER RELIEVED FROM LI-
ABILITY IN CERTAIN CASES.—In the case of any article 
sold free of tax under this section (other than a sale to 
which subsection (b) applies), if the producer or importer 
in good faith accepts a certification by the purchaser that 
the article will be used in accordance with the applicable 
provisions of law, no tax shall thereafter be imposed under 
this chapter in respect of such sale by such producer or 
importer. 
‘‘(d) EXPORT.—For purposes of this section, the 
term ‘export’ includes shipment to a possession of the 
United States; and the term ‘exported’ includes shipped 
to a possession of the United States. 
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‘‘(e) USE
IN FURTHER PRODUCTION.—An article 
shall be treated as sold for use in further production if 
such article is sold for use by the purchaser for further 
planting, cultivating, or harvesting. 
‘‘(f) FURTHER PRODUCER LIABLE FOR TAX.—For 
purposes of this chapter, a producer to whom an article 
is sold or resold free of tax under subsection (a)(1) for 
use by him in further production shall be treated as the 
producer of such article. 
‘‘SEC. 5903. SPECIAL RULES. 
‘‘(a) DEFINITION OF PRICE.—For purposes of this 
chapter— 
‘‘(1) CONTAINERS, PACKING
AND
TRANSPOR-
TATION CHARGES.—In determining, for the purposes 
of this chapter, the price for which an article is sold, 
there shall be included any charge for coverings and 
containers of whatever nature, and any charge inci-
dent to placing the article in condition packed ready 
for shipment, but there shall be excluded the amount 
of tax imposed by this chapter, whether or not stat-
ed as a separate charge. A transportation, delivery, 
insurance, installation, or other charge (not required 
by the foregoing sentence to be included) shall be ex-
cluded from the price only if the amount thereof is 
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established to the satisfaction of the Secretary in ac-
cordance with regulations. 
‘‘(2) CONSTRUCTIVE SALE PRICE.— 
‘‘(A) IN GENERAL.—If an article is sold at 
retail, sold on consignment, or sold (otherwise 
than through an arm’s length transaction) at 
less than the fair market price, the tax under 
section 5901 shall be computed on the price for 
which such articles are sold, in the ordinary 
course of trade, by producers thereof, as deter-
mined by the Secretary. In the case of an arti-
cle sold at retail, the computation under the 
preceding sentence shall be on whichever of the 
following prices is the lower: 
‘‘(i) the price for which such article is 
sold, or 
‘‘(ii) the highest price for which such 
articles are sold to manufacturers, in the 
ordinary course of trade, by producers 
thereof, as determined by the Secretary. 
This paragraph shall not apply if subpara-
graph (B) applies. 
‘‘(B) SPECIAL RULE.—If an article is sold 
at retail or to a retailer, and if— 
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‘‘(i) the producer or importer of such 
article regularly sells such articles at retail 
or to retailers, as the case may be, 
‘‘(ii) the producer or importer of such 
article regularly sells such articles to one 
or more manufacturers in arm’s length 
transactions and he establishes that his 
prices in such cases are determined with-
out regard to any tax benefit under this 
paragraph, and 
‘‘(iii) the transaction is an arm’s 
length transaction, 
the tax under this chapter shall (if based on the 
price for which the article is sold) be computed 
under subparagraph (C). 
‘‘(C) PRICE
FOR
PURPOSES
OF
SPECIAL 
RULE.—The price computed under this sub-
paragraph is whichever of the following prices is 
the lower— 
‘‘(i) the price for which such article is 
sold, or 
‘‘(ii) the highest price for which such 
articles are sold by such producer, or im-
porter to manufacturers. 
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‘‘(D) DEFINITION
OF
LOWEST
PRICE.— 
For purposes of subparagraphs (A) and (C), 
the lowest price shall be determined— 
‘‘(i) without requiring that any given 
percentage of sales be made at that price, 
and 
‘‘(ii) without including any fixed 
amount to which the purchaser has a right 
as a result of contractual arrangements ex-
isting at the time of the sale. 
‘‘(E) 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, or 
‘‘(II) the sale is made pursuant 
to special arrangements between a 
manufacturer and a purchaser. 
‘‘(ii) CONTROLLED GROUPS.— 
‘‘(I) IN
GENERAL.—The term 
‘controlled group’ has the meaning 
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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 
WHICH
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 1 or 
more of such persons is not a corpora-
tion. 
‘‘(3) PARTIAL PAYMENTS.—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, 
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there shall be paid upon each payment with respect 
to the article a percentage of such payment equal to 
the rate of tax in effect on the date such payment 
is due. 
‘‘(4) SALES OF INSTALLMENT ACCOUNTS.—If 
installment accounts, with respect to payments on 
which tax is being computed as provided in para-
graph (3), are sold or otherwise disposed of, then 
paragraph (3) shall not apply with respect to any 
subsequent payments on such accounts (other than 
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 which would be pay-
able if such installment accounts had not 
been sold or otherwise disposed of (com-
puted as provided in paragraph (3)); ex-
cept that 
‘‘(B) if any such sale is pursuant to the 
order of, or subject to the approval of, a court 
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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 
which is allocable to each unpaid install-
ment payment by 
‘‘(ii) the rate of tax under this chap-
ter in effect on the date such unpaid in-
stallment payment is or was due. 
The sum of the amounts payable under this 
subsection and subsection (c) in respect of the 
sale of any article shall not exceed the total tax. 
‘‘(b) CERTAIN USES TREATED AS SALES.—Any pro-
ducer of marijuana which uses such marijuana before it 
is sold shall be liable for the tax imposed by section 5901 
in the same manner as if such marijuana were sold by 
such producer. 
‘‘(c) APPLICATION OF TAX IN CASE OF SALES BY 
OTHER THAN PRODUCER.—In case any person acquires 
from the producer of marijuana, by operation of law or 
as a result of any transaction not taxable under section 
5901, the right to sell such marijuana, the sale of such 
marijuana by such person shall be taxable under this 
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chapter as if made by the producer, and such person shall 
be liable for the tax. 
‘‘SEC. 5904. DEFINITIONS. 
‘‘For purposes of this chapter— 
‘‘(1) MARIJUANA.—The term ‘marijuana’ has 
the meaning given such term by section 102(16) of 
the Controlled Substances Act (21 U.S.C. 802). 
‘‘(2) MARIJUANA PRODUCT.—The term ‘mari-
juana product’ means any article which contains 
marijuana, including an article which is a con-
centrate, an edible, a tincture, a marijuana-infused 
product, or a topical. 
‘‘(3) PRODUCER.—The term ‘producer’ means 
any person who plants, cultivates, harvests, or in 
any way facilitates the natural growth of, marijuana. 
‘‘(4) MANUFACTURER.—The term ‘manufac-
turer’ means a person who manufactures, com-
pounds, converts, processes, prepares, or packages 
marijuana or marijuana products. 
‘‘(5) IMPORTER.—The term ‘importer’ means— 
‘‘(A) any person in the United States to 
whom nontaxpaid marijuana products, or any 
processed marijuana, manufactured in a foreign 
country, Puerto Rico, the Virgin Islands, or a 
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possession of the United States are shipped or 
consigned; and 
‘‘(B) any person who smuggles or other-
wise unlawfully brings marijuana or marijuana 
products into the United States. 
‘‘(6) DISTRIBUTOR.—The term ‘distributor’ 
means a person who distributes marijuana or mari-
juana products. 
‘‘(7) RETAILER.—The term ‘retailer’ means a 
person who sells marijuana or marijuana products to 
consumers. 
‘‘(8) 
MARIJUANA
ENTERPRISE.—The 
term 
‘marijuana enterprise’ means a producer, importer, 
manufacturer, distributor, retailer or any person 
who transports, stores, displays, or otherwise partici-
pates in any business activity that handles mari-
juana or marijuana products. 
‘‘Subchapter B—Special Provisions Relating 
to Marijuana Enterprises 
‘‘Sec. 5911. Occupational tax. 
‘‘Sec. 5912. Application for permit. 
‘‘Sec. 5913. Permit. 
‘‘Sec. 5914. Inspection of books. 
‘‘SEC. 5911. OCCUPATIONAL TAX. 
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 
a special tax to be paid by each person who is engaged 
in a marijuana enterprise. 
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‘‘(b) AMOUNT OF TAX.—The amount of the tax im-
posed under subsection (a) shall be— 
‘‘(1) $1,000 per year in the case of a producer, 
importer, or manufacturer, and 
‘‘(2) $500 per year in the case of any person 
engaged in a marijuana enterprise who is not de-
scribed in paragraph (1). 
‘‘SEC. 5912. APPLICATION FOR PERMIT. 
‘‘Every person, before commencing business as a 
marijuana enterprise, and at such other time as the Sec-
retary shall by regulation prescribe, shall make application 
for the permit provided for in section 5913. The applica-
tion shall be in such form as the Secretary shall prescribe 
and shall set forth, truthfully and accurately, the informa-
tion called for on the form. Such application may be re-
jected and the permit denied if the Secretary, after notice 
and opportunity for hearing, finds that— 
‘‘(1) the premises on which it is proposed to 
conduct the business are not adequate to protect the 
revenue, 
‘‘(2) the activity proposed to be carried out at 
such premises does not meet such minimum capacity 
or activity requirements as the Secretary may pre-
scribe, or 
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‘‘(3) such person (including, in the case of a 
corporation, any officer, director, or principal stock-
holder and, in the case of a partnership, a part-
ner)— 
‘‘(A) is, by reason of his business experi-
ence, financial standing, or trade connections or 
by reason of previous or current legal pro-
ceedings involving a felony violation of any 
other provision of Federal criminal law relating 
to marijuana or marijuana products, not likely 
to maintain operations in compliance with this 
chapter, 
‘‘(B) has been convicted of a felony viola-
tion of any provision of Federal or State crimi-
nal law relating to marijuana or marijuana 
products, or 
‘‘(C) has failed to disclose any material in-
formation required or made any material false 
statement in the application therefor. 
‘‘SEC. 5913. PERMIT. 
‘‘(a) ISSUANCE.—A person shall not engage in busi-
ness as a marijuana enterprise without a permit to engage 
in such business. Such permit, conditioned upon compli-
ance with this chapter and regulations issued thereunder, 
shall be issued in such form and in such manner as the 
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Secretary shall by regulation prescribe. A new permit may 
be required at such other time as the Secretary shall by 
regulation prescribe. 
‘‘(b) SUSPENSION OR REVOCATION.— 
‘‘(1) SHOW CAUSE HEARING.—If the Secretary 
has reason to believe that any person holding a per-
mit— 
‘‘(A) has not in good faith complied with 
this chapter, or with any other provision of this 
title involving intent to defraud, 
‘‘(B) has violated the conditions of such 
permit, 
‘‘(C) has failed to disclose any material in-
formation required or made any material false 
statement in the application for such permit, 
‘‘(D) has failed to maintain his premises in 
such manner as to protect the revenue, 
‘‘(E) is, by reason of previous or current 
legal proceedings involving a felony violation of 
any other provision of Federal criminal law re-
lating to marijuana, not likely to maintain oper-
ations in compliance with this chapter, or 
‘‘(F) has been convicted of a felony viola-
tion of any provision of Federal or State crimi-
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nal law relating to marijuana or marijuana 
products, 
the Secretary shall issue an order, stating the facts 
charged, citing such person to show cause why his 
permit should not be suspended or revoked. 
‘‘(2) ACTION FOLLOWING HEARING.—If, after 
hearing, the Secretary finds that such person has 
not shown cause why his permit should not be sus-
pended or revoked, such permit shall be suspended 
for such period as the Secretary deems proper or 
shall be revoked. 
‘‘(c) INFORMATION REPORTING.—The Secretary may 
require— 
‘‘(1) information reporting by any person issued 
a permit under this section, and 
‘‘(2) information reporting by such other per-
sons as the Secretary deems necessary to carry out 
this chapter. 
‘‘(d) INSPECTION
OR DISCLOSURE
OF INFORMA-
TION.—For rules relating to inspection and disclosure of 
returns and return information, see section 6103(o). 
‘‘SEC. 5914. REGULATIONS. 
‘‘The Secretary may issue such regulations or other 
guidance as the Secretary determines necessary or appro-
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priate to carry out this chapter, including the filing of re-
turns under this chapter in electronic format. 
‘‘Subchapter C—Penalties 
‘‘Sec. 5921. Civil penalties. 
‘‘Sec. 5922. Criminal penalties. 
‘‘SEC. 5921. CIVIL PENALTIES. 
‘‘(a) OMITTING
THINGS
REQUIRED
OR
DOING 
THINGS FORBIDDEN.—Whoever omits, neglects, or re-
fuses to comply with any duty imposed upon him by this 
chapter, or to do, or cause to be done, any of the things 
required by this chapter, or does anything prohibited by 
this chapter, shall in addition to any other penalty pro-
vided in this title, be liable to a penalty of the greater 
of— 
‘‘(1) $1,000, or 
‘‘(2) in the case of an omission, neglect, or re-
fusal with respect to a sale, $100 per ounce of mari-
juana sold, 
to be recovered, with costs of suit, in a civil action, except 
where a penalty under subsection (b) or (c) or under sec-
tion 6651 or 6653 or part II of subchapter A of chapter 
68 may be collected from such person by assessment. 
‘‘(b) EXCEPTION.—No penalty shall be imposed 
under subsection (a) if it is shown that there was a reason-
able cause and that the taxpayer acted in good faith. 
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‘‘(c) FAILURE TO PAY TAX.—Whoever fails to pay 
any tax imposed by this chapter at the time prescribed 
by law or regulations, shall, in addition to any other pen-
alty provided in this title, be liable to a penalty of 5 per-
cent of the tax due but unpaid. 
‘‘(d) SALE OF MARIJUANA OR MARIJUANA PROD-
UCTS FOR EXPORT.— 
‘‘(1) Every person who sells, relands, or receives 
within the jurisdiction of the United States any 
marijuana or marijuana products which have been 
labeled or shipped for exportation under this chap-
ter, 
‘‘(2) every person who sells or receives such re-
landed marijuana or marijuana products, and 
‘‘(3) every person who aids or abets in such 
selling, relanding, or receiving, 
shall, in addition to the tax and any other penalty provided 
in this title, be liable for a penalty equal to the greater 
of $1,000 or 5 times the amount of the tax imposed by 
this chapter. All marijuana and marijuana products re-
landed within the jurisdiction of the United States shall 
be forfeited to the United States and destroyed. All ves-
sels, vehicles, and aircraft used in such relanding or in 
removing such marijuana or marijuana products from the 
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place where relanded, shall be forfeited to the United 
States. 
‘‘(e) APPLICABILITY OF SECTION 6665.—The pen-
alties imposed by subsections (b) and (c) shall be assessed, 
collected, and paid in the same manner as taxes, as pro-
vided in section 6665(a). 
‘‘(f) CROSS REFERENCES.—For penalty for failure to 
make deposits or for overstatement of deposits, see section 
6656. 
‘‘SEC. 5922. CRIMINAL PENALTIES. 
‘‘(a) FRAUDULENT OFFENSES.—Whoever, with in-
tent to defraud the United States— 
‘‘(1) ENGAGING IN BUSINESS UNLAWFULLY.— 
Engages in business as a marijuana enterprise with-
out filing the application and obtaining the permit 
where required by this chapter or regulations there-
under, 
‘‘(2) FAILING
TO
FURNISH
INFORMATION
OR 
FURNISHING FALSE INFORMATION.—Fails to keep or 
make any record, return, report, or inventory, or 
keeps or makes any false or fraudulent record, re-
turn, report, or inventory, required by this chapter 
or regulations thereunder, 
‘‘(3) REFUSING TO PAY OR EVADING TAX.—Re-
fuses to pay any tax imposed by this chapter, or at-
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tempts in any manner to evade or defeat the tax or 
the payment thereof, 
‘‘(4) SALES AND TRANSFERS OF MARIJUANA OR 
MARIJUANA PRODUCTS UNLAWFULLY.—Sells or oth-
erwise transfers, contrary to this chapter or regula-
tions thereunder, any marijuana or marijuana prod-
ucts subject to tax under this chapter, or 
‘‘(5) TAXABLE
EVENT
AFTER
TAX
EXEMP-
TION.—With intent to defraud the United States, 
purchases, receives, possesses, offers for sale, or sells 
or otherwise disposes of, any marijuana or mari-
juana product— 
‘‘(A) upon which the tax has not been paid 
or determined in the manner and at the time 
prescribed by this chapter or regulations there-
under, or 
‘‘(B) which, without payment of tax pursu-
ant to section 5902, have been diverted from 
the applicable purpose or use specified in that 
section, 
shall, for each such offense, be fined not more than 
$10,000, or imprisoned not more than 5 years, or both. 
‘‘(b) OTHER OFFENSES.—Whoever, otherwise than 
as provided in subsection (a), violates any provision of this 
chapter, or of regulations prescribed thereunder, shall, for 
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each such offense, be fined not more than $1,000, or im-
prisoned not more than 1 year, or both. 
‘‘(c) LIABILITY TO TAX.—Any person who possesses 
marijuana or marijuana products in violation of subsection 
(a) shall be liable for a tax equal to the tax on such arti-
cles.’’. 
(b) STUDY.—Not later than two years after the date 
of the enactment of this Act, and every five years there-
after, the Secretary of the Treasury shall— 
(1) conduct a study concerning the characteris-
tics of the marijuana industry, including the number 
of persons operating marijuana enterprises at each 
level (e.g., producers, distributors, manufacturers), 
the volume of sales, the amount of tax collected each 
year, the areas of evasion, and 
(2) submit to Congress recommendations to im-
prove the regulation of the industry and the admin-
istration of the related tax. 
(c) 
CONFORMING
AMENDMENT.—Section 
6103(o)(1)(A) of such Code is amended by striking ‘‘and 
firearms’’ and inserting ‘‘firearms, and marijuana’’. 
(d) CLERICAL AMENDMENT.—The table of chapters 
for subtitle E of title I of such Code is amended by adding 
at the end the following new chapter: 
‘‘CHAPTER 56. MARIJUANA.’’. 
(e) EFFECTIVE DATE.— 
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(1) IN GENERAL.—The amendments made by 
this section shall apply to sales, and applications for 
permits under section 5912 of the Internal Revenue 
Code of 1986 (as added by subsection (a)), after 
180 days after the date on which marijuana (as de-
fined in section 5904 of such Code (as so added)) 
in any form is removed from all schedules under the 
Controlled Substances Act (21 U.S.C 812(c)). 
(2) SPECIAL
RULES
FOR
EXISTING
BUSI-
NESSES.—In the case of any producer operating 
under a permit issued on or before the date of the 
enactment of this Act under State law, the require-
ments under section 5912 of such Code (as so 
added) shall apply beginning on the date that is 6 
months after the date of the enactment of this Act. 
Æ 
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