California Collected $255M in Q4 Cannabis Tax Revenue

SACRAMENTO – California collected $255.1 million in Cannabis tax revenue during the fourth quarter of 2025, marking a decline from the previous quarter as sales softened and a short-term tax adjustment ended. The total includes $145.5 million from the Cannabis excise tax and $109.6 million in sales tax from licensed businesses, according to data from the California Department of Tax and Fee Administration.

This brings the state’s 2025 calendar-year Cannabis tax haul to approximately $1.04 billion, down slightly from $1.07 billion in 2024. Retail sales for the year fell to $3.9 billion, a drop from $4.2 billion the prior year, reflecting ongoing challenges in the market such as competition from unlicensed operators and price compression. The fourth-quarter figure represents a 10% decrease from the third quarter’s revised $285.5 million, largely tied to the end of a three-month excise tax increase to 19% that boosted collections in July through September. The $30 million drop in excise revenue reflects the return to the standard 15% rate rather than a sharp contraction in underlying sales activity.

The temporary rate hike, enacted under Assembly Bill 195 to offset the 2022 elimination of the cultivation tax, provided a brief revenue lift but did little to reverse broader trends. Quarterly breakdowns show steady but unremarkable growth earlier in the year: $243.1 million in the first quarter and $259.7 million in the second. Since legalization in 2018, cumulative tax revenue has exceeded $7.87 billion, funding programs in education, public health, and environmental restoration.

Yet, the data raises questions about sustainability. Fourth-quarter sales hit $979 million, nearly $46 million below the same period in 2024, signaling potential weakness in consumer demand, or supply chain issues. However, analysts point to regulatory burdens and illicit market competition as factors eroding licensed sales, with the Legislative Analyst’s Office projecting just $648 million in Cannabis taxes for the 2025-26 fiscal year – a modest uptick but below peak levels.