KentuckySB 2022025 Regular SessionSenateWALLET

AN ACT relating to regulated beverages and declaring an emergency.

Sponsored By: Julie Raque Adams (Republican)

Signed by Governor

Technical CorrectionsAdministrative Regulations and Proceedings

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Bill Overview

Analyzed Economic Effects

16 provisions identified: 2 benefits, 6 costs, 8 mixed.

Annual license fees for cannabis businesses

A cannabis-infused beverage retail package license costs $500 each year. A primary cannabis-beverage distributor license costs $520 each year. A supplemental distributor license costs $100 each year.

Cannabis retailers face package-only sales rules

Retailers can sell cannabis drinks only in areas allowing those sales, by the package, for use off-site. They need both a quota retail package license and a cannabis-infused beverage retail package license. They must buy the drinks from licensed cannabis-beverage distributors, and the law bars two specified license combinations. Licensees cannot let customers possess, share, or drink cannabis beverages bought elsewhere on their licensed premises.

Stricter screening for cannabis business licenses

Cannabis-beverage applicants must disclose relevant convictions and license revocations and promise to follow state and local beverage laws. A qualifying alcohol- or cannabis-related misdemeanor or license revocation for cause within the prior two years blocks eligibility. Related restrictions apply to businesses and covered owners, partners, members, officers, and directors. Licenses must be denied for noncompliant applicants or premises, conduct allowing revocation, or a false statement about an important fact. Alcoholic-beverage applicants also need any required local license approval.

Local fees extend to cannabis sales

Eligible cities and counties can charge regulatory license fees on gross receipts from cannabis-drink sales, up to 5%. These fees must support qualifying local policing, regulation, or administration costs, with separate accounting, audits, and reporting. Direct shippers must remit applicable local fees as though they were local establishments. Direct-shipper rates cannot exceed the city or county rate in effect on January 1, 2019.

Unpaid cannabis taxes put licenses at risk

Overdue Kentucky taxes tied to cannabis-drink distribution or sales can lead to referral for possible license revocation. Protest and appeal rights must have expired, and tax officials must have contacted the taxpayer about the debt. The taxpayer must receive at least 20 days' notice by certified mail before referral. Current, timely installment payments under an agreement prevent this referral.

Direct cannabis shipping with fees and limits

Approved manufacturers can obtain a $100 annual direct-shipper license, with Public Health licensing and current manufacturing or supply authority in their home state. They must meet product, registration, recordkeeping, reporting, inspection, and audit requirements; qualifying third parties can fulfill shipments. Alcoholic-beverage suppliers can ship cannabis drinks only when they are the primary source of supply. Common-carrier shipments are capped at 10 cases per customer monthly and must go to lawful addresses; recipients must show valid identification proving age 21 or older and sign. Consumers intentionally shipping to unlawful addresses face a $250 first fine and $500 for each later offense.

License penalties with payment alternatives for businesses

Beginning July 1, 2025, qualifying cannabis-beverage, tax, and local-rule violations can lead to license suspension or revocation. Specified convictions, including illegal sales and two violations within two consecutive years, also support revocation. Renewing a license does not erase earlier violations. With board approval, distributors can pay $400 per day and retail package licensees $50 per day instead of some or all suspension days. The payment provisions concerning local administrators do not apply to cannabis-beverage licensees.

New distribution options with business restrictions

Approved manufacturers can distribute their own cannabis drinks, and qualified businesses can obtain a distributor license. Distributors can hold a primary license or add a supplemental license to an existing distributor or wholesaler license. They can buy from approved manufacturers and licensed distributors, then sell to licensed retailers or distributors. Distributors need a licensed Kentucky location, separate licenses for each covered business location, and vehicles meeting transport and sign rules. They cannot also hold a cannabis-beverage retail package license.

Cannabidiol sellers cannot make disease claims

Labels and advertising for ingestible or cosmetic cannabidiol products cannot claim to diagnose, treat, cure, or prevent disease. The ban covers products sold or distributed in Kentucky. It applies to businesses making, processing, distributing, or selling those products.

More local options for restaurant alcohol sales

Eligible local governments can authorize alcoholic drinks at qualifying restaurants and dining facilities seating at least 50 people. Eligibility covers cities or counties with the specified restaurant-sales election before January 1, 2016, or cities with qualifying limited-sale precincts created before July 14, 2022. Local lawmakers must find economic hardship and determine that expanded sales can aid growth. They must hold a properly noticed public hearing before adopting an ordinance. Existing limited-restaurant licensing authority and licenses remain unchanged.

State licensing and records for cannabis businesses

Distribution, retail sales, and transport require the proper license, with exceptions for authorized representatives and qualifying direct-shipper helpers. Licensees must use legally authorized buyers and sellers and keep transaction records available under state rules. The health cabinet licenses manufacturers, while Alcoholic Beverage Control oversees distribution and retail sales and enforces Public Health rules until its own rules take effect. Its rules are due by July 1, 2026; exclusive distribution and retail oversight begins when rules are issued or that date, whichever comes first. Local officials have only the authority granted by law.

Adult cannabis deliveries require age checks

Authorized transporters can deliver cannabis drinks to adults 21 or older in Kentucky areas allowing those sales. The transporter, sender, and recipient must have legal authority for their part of the shipment. Packages need an adult-signature warning, and carriers must check government identification when adult-signature-only service is requested. Retail delivery workers must check valid identification, refuse underage or intoxicated customers, and carry a physical or electronic license.

Age and strength limits for cannabis drinks

People under 21 cannot buy or drink cannabis-infused beverages. Retailers cannot provide them to minors or people whose apparent intoxication threatens safety or unreasonably bothers others. Retailers retain the existing defense based on fraudulent identification in prosecutions for sales to minors. Covered drinks must use cannabinoids from a USDA-sanctioned domestic hemp program and contain no more than 5 milligrams per 12-ounce serving. Medical cannabis, hemp tinctures, and products containing only nonintoxicating cannabinoids fall outside this beverage category.

Businesses gain regulated inventory transfer options

Licensees can move cannabis drinks between their licensed locations in the same county without a transporter license. Cross-county moves require prior written approval for good cause, and transaction records must remain available to state agencies. Inventory-disposal rules also cover closures, bankruptcy, court orders, and sales by secured creditors or landlords. Disposal periods after revocation or closure are 90 days for manufacturers, 30 days for wholesalers or distributors, and 20 days for retailers. Required approvals and notices still apply, and businesses staying open cannot sell remaining stock to the public below cost.

Temporary cannabis sales exceptions reach deadlines

Wholesalers, distributors, and retailers holding affected stock on the law's effective date received a temporary sales exception ending June 1, 2025. It covered drinks above the new cannabinoid limits and intoxicating cannabinoid drinks of any strength sold by the drink. A separate exception allowed approved cannabis-beverage retailers, distributors, and manufacturers to sell at fairs, festivals, and similar events until January 1, 2026. Events had to be in areas allowing sales, using drinks lawfully made or purchased by the licensee. Daily limits were 9 liters in package sales and 1¾ ounces in free samples per person.

Business inspections expand with seizure appeal rights

State officials can inspect businesses selling, storing, or handling cannabis drinks without first getting a search warrant and can confiscate contraband. Any amount found at a business is presumed to be there for sale unless that presumption is rebutted. After a seizure, the department must notify the licensee of the violation within 14 days or return the drinks. Licensees can request a board hearing to challenge the seizure. During declared emergencies, officials' jurisdiction and police powers remain subject to the state's emergency-law limits.

Sponsors & Cosponsors

Sponsor

Julie Raque Adams
Republican • Senate

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 128 • No: 36

Senate vote • 3/13/2025

passed

Yes: 22 • No: 13 • Other: 1

House vote • 3/12/2025

3rd reading, passed

Yes: 77 • No: 17

Senate vote • 3/7/2025