Taylor, of Gresham, Middlesbrough, was already on licence from a previous jail sentence and has now been recalled to prison.
He listened via videolink as lawyers puzzled over the case and discussed potential sentences of up to six years.
Alex Bousfield, defending, said: "It's an unusual case. He has not been supplying drugs to anyone.
"Surely the real peril in the offence of drugs is it contributes in continuing that misuse of drugs and everything else that follows from it.
"He knows throughout, he's the only one who knows, these are not drugs. He knows it's not a drug, so it's a difficult one."
Prosecutor Rachel Masters said: "Essentially, the defendant is purporting to sell drugs in the way that a drug dealer would sell drugs. He's making a fair bit of money out of it as a result."
Judge Simon Bourne-Arton QC, the Recorder of Middlesbrough, said he needed some time to think about the case.
He said he was not sure about passing sentence from guidelines for offences involving real drugs.
He adjourned the case, telling Taylor: "You knew throughout you were selling a product which was not drugs. I know that.
"It's just not easy to work out what the principles of sentencing are in your case. I'm going to sentence you next Monday. In the meantime you're remanded in custody."
