Can the Mississippi State Treasurer invest the excess tax dollars Mississippi collects from medical cannabis sales in a money market fund?

Plain-English summary

State Treasurer David McRae asked the AG whether excess state funds collected from Mississippi's taxes on medical cannabis can be invested in an SEC-registered money market fund.

The answer is yes, conditionally. The path through the statute is more interesting than the answer. The two cannabis tax streams (a cultivation excise tax under Section 27-72-1(2)(a) and a 7% retail sales tax under Section 27-65-17(1)(a)) both flow into the State General Fund. Section 27-105-9 then says state funds "not required for current operation" must be invested under Section 27-105-33.

Section 27-105-33 establishes a priority hierarchy. Subsections (a) through (c) list higher-priority investment options that the Treasurer must use first if available. If those options are not viable, the Treasurer can drop to subsection (d), which includes "United States government agency, United States government instrumentality or United States government-sponsored enterprise obligations, the principal and interest of which are fully guaranteed by the government of the United States." Subsection (e) clarifies that the (d)(iii) authority extends to "securities of, or other interests in, any open-end or closed-end management type investment company or investment trust" that is registered under the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.), but only if the fund's portfolio is limited to direct obligations of the United States or its agencies, instrumentalities, and government-sponsored enterprises.

Money market funds that hold only Treasury and agency paper fit. Money market funds that hold corporate paper, repos with non-government counterparties, or other private credit do not. Whether a particular fund qualifies is a factual determination the Treasurer (and the Department of Finance and Administration) makes, not the AG.

The opinion's footnote points out that the State Investment Policy Statement already authorizes investment in "Stable Net Asset Value Government or Treasury Only Money Market Mutual Funds as defined in § 27-105-33(e)" (38 Miss. Admin. Code Pt. 1, R. 4.1, amended Aug. 14, 2023). So the operating practice is consistent with the statutory analysis.

What this means for you

If you are working in the State Treasurer's investment department

The path is set out cleanly: cannabis tax dollars sit in the General Fund like any other tax revenue, and the same Section 27-105-33 hierarchy applies. Run through subsections (a)-(c) first. If you reach (d)/(e) and want to use a government-only money market fund, document (1) why (a)-(c) options were not used, (2) that the fund is registered under 15 U.S.C. § 80a-1 et seq., and (3) that the fund's portfolio is limited to direct U.S. obligations or U.S. agency/instrumentality/GSE obligations. The State Investment Policy Statement (38 Miss. Admin. Code Pt. 1, R. 4.1) already provides the standing authorization for this category.

If you are a state legislator considering changes to cannabis-tax allocation

This opinion is narrow: it confirms current statutory mechanics route cannabis taxes through the General Fund and lets the Treasurer invest excess funds under existing rules. If the legislature wanted cannabis revenue to flow into a separate dedicated fund (e.g., for substance-abuse treatment, schools, or specific health programs), that would require amending Section 27-72-1 and/or Section 27-65-75 to redirect the deposit. Until that happens, cannabis revenue is undifferentiated General Fund money.

If you are a public-finance attorney advising the State

The big takeaway is that there is no special "cannabis money" rule. Once the dollars hit the General Fund, ordinary state-investment law controls. The AG flatly declines to interpret federal law (the federal government's classification of cannabis-related funds is not addressed). If a federal classification or banking question arises (e.g., a money-fund custodian's policy on accepting cannabis-derived deposits), that is outside the AG's opinion and outside the scope of Section 27-105-33.

If you are an investment consultant pitching the State Treasurer

The fund you are pitching has to clear two filters: it must be registered under the Investment Company Act (open-end or closed-end), and its portfolio must be limited to direct U.S. obligations or U.S. agency/instrumentality/GSE obligations. Prime money market funds (with corporate paper) do not qualify under Section 27-105-33(e). Treasury-only or government-only money funds do.

Common questions

Q: What's the difference between the cannabis excise tax and sales tax?
A: Section 27-72-1(2)(a) imposes an excise tax on medical cannabis cultivation facilities, deposited directly into the State General Fund. Section 27-72-1(3) requires medical cannabis dispensaries to collect the standard 7% retail sales tax under Section 27-65-17(1)(a). After Section 27-65-75 distributions, any remaining sales tax revenue lands in the General Fund.

Q: Why can't all cannabis tax dollars just go into a dedicated fund?
A: Because the legislature did not write that into the statute. Section 27-72-1 and Section 27-65-75 explicitly direct the relevant streams to the General Fund. Changing that requires legislative action.

Q: What's "excess" for purposes of Section 27-105-33?
A: Section 27-105-33 puts the determination on the State Treasurer and the Executive Director of the Department of Finance and Administration. They have to find that the cash is "in excess of the amount required to meet the current needs and demands of no more than seven (7) business days on such funds." Anything above that seven-day operating cushion can be invested.

Q: Are all money market funds eligible?
A: No. Section 27-105-33(e) limits eligibility to investment companies or trusts whose portfolios are limited to direct U.S. obligations or U.S. agency/instrumentality/GSE obligations. Prime money market funds (which hold commercial paper, certificates of deposit, and other private credit) do not qualify. Government-only or Treasury-only money funds do.

Q: Why didn't the AG analyze federal law on cannabis?
A: AG opinions under Section 7-5-25 are limited to prospective questions of state law. Federal cannabis classification, federal banking law, and federal preemption are outside the AG's opinion authority. The AG cited its 2024 Ladner opinion for that point.

Q: Could the State Treasurer hold cannabis-tax cash in a non-bank custodial arrangement?
A: This opinion does not address custody arrangements at all. It addresses investment authority. Custody is a separate question; ordinary state-treasury custody rules and any specific Treasurer policies would govern.

Background and statutory framework

Mississippi's medical cannabis program was created in 2022 (the Mississippi Medical Cannabis Act). The tax mechanics were filled in by Section 27-72-1, which imposes an excise tax on cultivators and triggers the state's standard retail sales tax on dispensary sales. As amended by 2025 Miss. Laws S.B. 2573, Section 27-65-75 sends retail sales tax through a series of statutory allocations (to municipalities, specific entities, and programs) and then deposits the remainder in the General Fund.

The investment of state funds is governed by Sections 27-105-9 and 27-105-33. Section 27-105-9 establishes the basic rule that excess state funds must be invested. Section 27-105-33 sets the priority hierarchy. The Treasurer must use the higher-priority options in subsections (a)-(c) first; only if those are unavailable can the Treasurer drop to subsection (d) for U.S. government and agency obligations, and (e) for funds investing in those obligations.

This regime traces back to MS AG Op., Bennett (Dec. 20, 1989), which set out the basic framework. The 2026 McRae opinion does not change the framework; it applies it to a new revenue source. The legal answer is that cannabis tax dollars are no different from any other General Fund money once deposited.

The State Investment Policy Statement (38 Miss. Admin. Code Pt. 1, R. 4.1) operationalizes Section 27-105-33(e) by listing "Stable Net Asset Value Government or Treasury Only Money Market Mutual Funds" as authorized investments. That gives the Treasurer's investment department a documented procedure to use without needing case-by-case board action.

Citations and references

Statutes:
- Miss. Code Ann. § 27-72-1 (medical cannabis taxes)
- Miss. Code Ann. § 27-65-17 (state sales tax)
- Miss. Code Ann. § 27-65-75 (sales tax allocations, as amended by 2025 S.B. 2573)
- Miss. Code Ann. § 27-105-9 (interest-bearing accounts for state funds)
- Miss. Code Ann. § 27-105-33 (investment of excess state funds)
- Miss. Code Ann. § 7-5-25 (AG opinion authority)

Federal law:
- 15 U.S.C. § 80a-1 et seq. (Investment Company Act of 1940)

Administrative code:
- 38 Miss. Admin. Code Pt. 1, R. 4.1 (State Investment Policy Statement, amended Aug. 14, 2023)

Prior AG opinions referenced:
- MS AG Op., Bennett (Dec. 20, 1989) (basic Section 27-105-33 framework)
- MS AG Op., Montgomery (Aug. 3, 2012) (Section 27-105-33(d)(e) mechanics)
- MS AG Op., Ladner (Feb. 20, 2024) (AG cannot interpret federal law)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2026/01/D.-McRae-January-23-2026-Excess-State-Funds-from-State-Imposed-Taxes-on-Medical-Cannabis.pdf

Original opinion text

January 23, 2026

The Honorable David McRae
Treasurer, State of Mississippi
Post Office Box 138
Jackson, Mississippi 39205

Re: Excess State Funds from State-Imposed Taxes on Medical Cannabis

Dear Treasurer McRae:

The Office of the Attorney General has received your request for an official opinion.

Question Presented

May excess funds collected from state-imposed taxes on medical cannabis be invested in an SEC-registered money market fund?

Brief Response

Excess funds collected from state-imposed taxes on medical cannabis may be invested in an SEC-registered money market fund if it is determined that such fund meets the requirements set forth in Mississippi Code Annotated Section 27-105-33.

Applicable Law and Discussion

We first note that this opinion addresses considerations under Mississippi law only and does not interpret federal law, rules, or regulations. See Miss. Code Ann. § 7-5-25 (authorizing the Attorney General to opine upon prospective matters of state law only).

Under Mississippi law, there are two types of taxes on the sale of medical cannabis: excise tax and sales tax. Section 27-72-1(2)(a) "impose[s], levie[s] and assesse[s] an excise tax on medical cannabis cultivation facilities." Section 27-72-1(2)(e) specifies that "[a]ll excise taxes collected under the provisions of this subsection shall be deposited into the State General Fund."

Section 27-72-1(3) compels medical cannabis dispensaries to "collect and remit the sales tax levied in Section 27-65-17(1)(a) from the gross proceeds derived from each retail sale of medical cannabis." Section 27-65-17(1)(a) states that "upon every person engaging or continuing within this state in the business of selling any tangible personal property whatsoever there is hereby levied, assessed and shall be collected a tax equal to seven percent (7%) of the gross proceeds of the retail sales of the business." Section 27-65-75, as amended by 2025 Miss. Laws S.B. 2573, specifies in detail how sales tax revenue should be allocated and distributed to municipalities, entities, and programs. Section 27-65-75(25), as amended by 2025 Miss. Laws S.B. 2573, provides that "[t]he remainder of the amounts collected under the provisions of" the Sales Tax chapter of the Mississippi Code Annotated "shall be paid into the State Treasury to the credit of the General Fund."

Per these sections, excise taxes and excess sales taxes from the sale of medical cannabis are deposited into the State General Fund. Section 27-105-9 states that "State funds not required for current operation, as determined under Section 27-105-33, shall be deposited in one or more interest-bearing accounts or time certificates of deposit, or otherwise invested under Section 27-105-33." It is the duty of the State Treasurer and the Executive Director of the Department of Finance and Administration to determine what cash is "in excess of the amount required to meet the current needs and demands of no more than seven (7) business days on such funds." Miss. Code Ann. § 27-105-33; see also MS AG Op., Bennett (Dec. 20, 1989). "The State Treasurer is directed to invest all such excess funds pursuant to the statutory scheme or schedule under Section 27-105-33(a)-(c)." MS AG Op., Bennett at *1.

If he finds that the excess funds cannot be invested according to Section 27-105-33(a)-(c), the State Treasurer is directed to invest the excess funds in one of the options provided in Section 27-105-33(d). Miss. Code Ann. § 27-105-33(d). One of those options is "United States government agency, United States government instrumentality or United States government-sponsored enterprise obligations, the principal and interest of which are fully guaranteed by the government of the United States." Miss. Code Ann. § 27-105-33(d)(iii). Section 27-105-33(e) clarifies this subsection by stating that the State Treasurer may invest excess funds in "securities of, or other interests in, any open-end or closed-end management type investment company or investment trust registered under the provisions of 15 USCS Section 80(a)-1 et. seq.," which are limited to direct obligations issued by the United States or its government agencies, government instrumentalities, or its government-sponsored enterprises.

In summary, where the State Treasurer and Executive Director of the Department of Finance and Administration determine 1) that the taxes from medical cannabis sales are excess funds, and 2) that the excess funds are not required to meet the current needs or demands of no more than seven days on the funds, and the State Treasurer also determines 3) that the excess funds cannot be invested according to Section 27-105-33(a)-(c), then the State Treasurer may invest the excess funds in any of the types of investments stated in Section 27-105-33(d). See MS AG Op., Bennett at *1. Section 27-105-33(d) authorizes investment in open-end or closed-end management type investment companies registered under 15 USCS Section 80(a)-1 et. seq. with portfolios limited to obligations issued by the United States or its government agencies, government instrumentalities, or government-sponsored enterprises. Miss. Code Ann. § 27-105-33(d); see also MS AG Op., Montgomery (Aug. 3, 2012).

You ask whether excess funds collected from state-imposed taxes on medical cannabis could be invested in an SEC-registered money market fund. As shown, nothing in Section 27-105-33 prohibits the State Treasurer from investing excess funds from medical cannabis taxes in money market funds. That said, whether said such investment is allowable is ultimately a fact determination to be made by the State Treasurer. Miss. Code Ann. § 27-105-33. If the State Treasurer determines that the subject money market fund meets the requirements set forth in Section 27-105-33(e), including the requirement that the investment company or trust's portfolio be limited to direct obligations issued by the United States or its government agencies, government instrumentalities, or government-sponsored enterprises, then excess funds collected from the sale of medical cannabis may be invested therein.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Kristi D. Kennedy
Kristi D. Kennedy
Special Assistant Attorney General