California’s Cannabis Excise Tax Increase Sparks Industry Concerns

LOS ANGELES- Effective July 1, 2025, California’s cannabis excise tax will rise from 15% to 19%, as mandated by Assembly Bill 195 signed in 2022. This adjustment, announced by the California Department of Tax and Fee Administration (CDTFA), is triggered by a decline in cannabis tax revenues and aims to compensate for the shortfall.

Industry stakeholders express concern that the increased tax burden may exacerbate challenges faced by legal cannabis businesses, including competition from the illicit market, which operates without such taxes. A recent study indicates that a significant portion of cannabis consumed in California originates from unlicensed sources.

In response, Assemblymember Matt Haney has introduced Assembly Bill 564, proposing to freeze the excise tax at 15%. The bill has passed the Assembly Business and Professions Committee unanimously and is under further legislative consideration.

The outcome of this legislative effort will significantly impact the state’s legal cannabis industry, which has contributed approximately $7 billion in tax revenues since 2018.