California cannabis retailers are breathing a measured sigh of relief after Gov. Gavin Newsom signed a major tax cut into law on Monday.
Under Assembly Bill 564, authored by San Francisco Assemblymember Matt Haney, California’s cannabis excise tax will revert back to 15% on Oct. 1.
That cancels a nearly 25% increase t0 19% that took effect July 1.
And 15% is where excise taxes will stay until at least 2028.
“We’re rolling back this cannabis tax hike so the legal market can continue to grow, consumers can access safe products, and our local communities see the benefits,” Newsom said in a statement Monday.
That’s a welcome development for the state’s struggling legal industry.
But operators squeezed by a combination of illicit market competition, oversupply and high taxes have been begging for an even more dramatic cut.
California cannabis tax cut comes after market contraction
The total tax burden for California cannabis, when state sales taxes and local taxes are applied, is still over 30% in many jurisdictions.
Even this tax cut angered public health advocates skeptical of the cannabis industry’s challenges.
In a statement, Lynn Silver, a physician and director of the Public Health Institute, which has resisted cannabis industry-friendly reforms in Sacramento, called claims of industry struggles “a false narrative.”
Silver said Newsom “embraced a massive tax giveaway to Big Cannabis — one that will permanently cut the legally guaranteed baseline for future annual funding for childcare, youth substance use prevention, environmental restoration and law enforcement.”
California’s excise tax increased as scheduled under terms of a prior deal that saw the state’s cultivation tax eliminated.
The increase in the excise tax was meant to offset any loss of revenue from the cultivation tax.
However, the overall tax burden is one suspect blamed for a decline in legal cannabis sales.
Legal sales through the first half of the year totaled $1.94 billion, down from $2.14 billion over the same time period in 2024.
California’s cannabis taxes are still some of the highest in the country.
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