California, September 4, 2025
News Summary
California will increase its cannabis sales tax from 15% to 19% effective July 1, 2023, the highest permitted by state law. The tax hike is in response to declining excise revenue and aims to address financial losses faced by the state. Industry leaders are concerned about the impact on legal cannabis sales, with rising competition from the illicit market and challenges to maintaining profitability. A proposed bill, AB564, aims to halt the tax increase, but has yet to alleviate industry concerns.
California is set to experience a significant increase in cannabis sales tax, rising from 15% to 19% beginning July 1, 2023. This marks the highest tax rate permitted by state law at a time when the legal cannabis industry is facing formidable challenges, including competition from the illicit market and declining sales.
The impending tax hike comes in response to a ruling from the California Office of Tax Appeals, which determined that cannabis retailers, like Ryan Burns Collective, must include the city business license tax in their gross receipts calculations for sales tax. As a result, Ryan Burns Collective faces a tax liability of $120,600 due to audits conducted over a three-year period spanning from July 2018 to June 2021.
The increase in the cannabis sales tax stems from a law signed by Governor Gavin Newsom in 2022, which mandates higher taxes if cannabis excise revenue declines. This policy was implemented following the removal of the cultivation tax, and state officials reported a decrease in cannabis revenue that necessitated the tax increase.
Industry leaders have expressed increasing concern that the tax hike will further complicate the legal cannabis market’s ability to compete. The president of the United Cannabis Business Association warned that elevated tax rates are making it difficult for legal retailers to match prices set by illegal sources. Studies indicate that a substantial portion of cannabis users continue to purchase products from these unregulated markets, citing lower prices as a primary factor in their choice.
The legal cannabis market in California has seen a steady decline in sales since the COVID-19 pandemic. Thousands of businesses have shuttered operations, resulting in significant reductions in tax revenue. During 2024, the California excise tax is projected to generate $595 million, with allocated funds directed toward child development and environmental recovery programs. However, ongoing industry pressures, such as high taxes and expensive regulations, complicate recovery efforts.
Amidst this backdrop, Assemblymember Matt Haney proposed AB564, a bill aimed at halting the impending tax increase. The bill has progressed through various legislative hurdles, recently passing a committee vote unanimously and moving to the State Senate for further consideration. Despite this proposed relief, Governor Newsom’s updated budget plan does not include any measures to alleviate the financial burdens faced by the cannabis industry, leaving many stakeholders anxious about the future.
As the legal cannabis market grapples with these challenges, the intersection of high taxation and competition from illegal sales threatens to undermine progress made since the legalization of cannabis in California.
Frequently Asked Questions
What is the current cannabis sales tax rate in California?
The current cannabis sales tax rate in California is 15%, which is set to increase to 19% starting July 1, 2023.
Why is the cannabis sales tax increasing?
The increase in cannabis sales tax is a result of declining revenues due to competition from the illicit market and is mandated by state law if cannabis excise revenue falls.
What impact will the tax hike have on the legal cannabis market?
Industry leaders fear that the tax increase will hinder legal retailers’ ability to compete with illegal prices, potentially resulting in more business closures and reduced tax revenue.
Is there any legislative action to prevent the tax increase?
Yes, Assemblymember Matt Haney has introduced a bill, AB564, which is currently progressing through the legislative process to block the tax hike.
Key Features of the California Cannabis Tax Increase
| Feature | Details |
|---|---|
| Current Tax Rate | 15% |
| New Tax Rate | 19% |
| Effective Date | July 1, 2023 |
| Reason for Increase | Decline in cannabis revenue and mandated by state law |
| Impact | Challenges for legal cannabis businesses to compete with the illegal market |
| Legislative Action | Bill AB564 introduced to block the tax hike |
Deeper Dive: News & Info About This Topic
- SFGate: California Cannabis Tax Increase
- Wikipedia: Taxation in California
- Cannabis Business Times: Lawmakers Vote to Repeal Cannabis Tax Increase
- Google Search: California cannabis tax increase
- CBS News: AB564 Cannabis Tax Hike Halted
Author: STAFF HERE MISSION VIEJO WRITER
MISSION VIEJO STAFF WRITER The MISSION VIEJO STAFF WRITER represents the experienced team at HEREMissionViejo.com, your go-to source for actionable local news and information in Mission Viejo, Orange County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as Oso Fit 5K Fun Run and Community Health Fair, Walk Against Drugs & Community Fair, and National Night Out. Our coverage extends to key organizations like the Mission Viejo Chamber of Commerce and Providence Mission Hospital Mission Viejo, plus leading businesses in retail and education that power the local economy such as The Shops at Mission Viejo, Capistrano Unified School District, and Amazon Delivery Station. As part of the broader HERE network, including HEREAnaheim.com, HEREBeverlyHills.com, HERECostaMesa.com, HERECoronado.com, HEREHollywood.com, HEREHuntingtonBeach.com, HERELongBeach.com, HERELosAngeles.com, HERESanDiego.com, and HERESantaAna.com, we provide comprehensive, credible insights into California's dynamic landscape.
