California, September 4, 2025
News Summary
California will increase its cannabis sales tax from 15% to 19% effective July 1, 2024, as part of a law signed by Governor Newsom to combat declining revenue from the legal cannabis market. Industry leaders express concerns that this tax hike may drive consumers toward illegal sources, further destabilizing legitimate businesses. Assembly Bill 564 has been introduced in response, seeking to block the tax increase. The legal cannabis industry is already struggling with high operational costs and competition from the illicit market.
California is set to increase its cannabis sales tax from 15% to 19% effective July 1, 2024, as revenue from the legal cannabis market continues to decline. This increase, part of a law signed by Governor Gavin Newsom in 2022, is the highest tax rate allowed under state law and aims to counteract falling revenues exacerbated by the competition from the illicit cannabis market.
The California Department of Tax and Fee Administration confirmed that the tax rate hike was mandated as cannibalizing revenues triggered by sluggish market performance. Despite the state raising taxes, the legal cannabis industry, which is plagued by high operational costs and extensive regulations, is struggling to remain competitive. A recent study indicated that most cannabis users still purchase from illegal sources, which further threatens the viability of legitimate businesses.
In a related ruling, the California Office of Tax Appeals determined that the Ryan Burns Collective owes $120,600 due to the inclusion of city business license taxes in the calculation of gross receipts for sales tax. This ruling emerged from an audit covering transactions from July 2018 to June 2021, where it was concluded that all business licensing fees must be included in sales tax calculations.
The impending sales tax hike has drawn concern from industry leaders who believe the tax increase will push more consumers towards illegal sources. Jerred Kiloh, President of the United Cannabis Business Association, warned that the higher taxes would hinder legal stores, making it increasingly difficult to compete with lower-priced illicit cannabis. Lawmakers, such as San Francisco Assemblymember Matt Haney, have responded by introducing Assembly Bill 564 earlier this year. This bill, which seeks to prevent the tax increase, passed its latest committee vote unanimously on April 24 and is currently heading for consideration in the State Senate.
As the legal cannabis industry in California continues to contract, thousands of businesses are reportedly struggling to operate under the burden of high taxes and reducing sales revenues. In the last year, the cannabis sector has seen a sharp decline, diverging significantly from the projected growth trajectory since legalization.
In 2024, the excise tax from cannabis sales generated nearly $595 million, with revenues earmarked for essential programs, including child development and environmental recovery. However, despite the industry’s pleas for financial relief, Governor Newsom’s updated budget proposal did not include any tax relief measures for cannabis operators.
The cannabis market has faced significant challenges since the COVID-19 pandemic, with ongoing sales declines impacting the overall performance. Industry representatives are urging the government to reconsider tax increases and regulatory burdens to create a more favorable operational environment for legal cannabis businesses.
FAQ
What is the new cannabis sales tax rate in California?
The cannabis sales tax rate in California is set to increase from 15% to 19% starting July 1, 2024.
Why is the cannabis sales tax increasing?
The tax increase is mandated by state law in response to declining revenues from the cannabis industry.
What are the implications of the tax increase for cannabis businesses?
Industry leaders warn that the tax hike will cause more consumers to turn to the illegal market, potentially hindering the ability of legal businesses to compete effectively.
What efforts are legislators making regarding the tax increase?
Assembly Bill 564 aims to block the tax hike and has garnered unanimous support in its latest committee vote, moving forward to the State Senate for further consideration.
Chart of Key Features
| Feature | Details |
|---|---|
| Current Tax Rate | 15% |
| New Tax Rate | 19% |
| Effective Date | July 1, 2024 |
| Total Tax Liability for Ryan Burns Collective | $120,600 |
| Annual Excise Tax Revenue (2024) | $595 million |
Deeper Dive: News & Info About This Topic
- SFGate: California Cannabis Tax Increase
- Wikipedia: Cannabis in California
- Cannabis Business Times: California Lawmakers Vote to Repeal Cannabis Excise Tax Increase
- Google Search: California cannabis tax increase
- Los Angeles Times: Cannabis Tax Cut Losses for Child Care Funding
- Encyclopedia Britannica: Cannabis
Author: STAFF HERE HUNTINGTON BEACH
The Huntington Beach Staff Writer represents the experienced team at HEREHuntingtonBeach.com, your go-to source for actionable local news and information in Huntington Beach, 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 the Huntington Beach Surf City USA Marathon, the U.S. Open of Surfing, Fourth of July celebrations at the Huntington Beach Pier, and community festivals at Huntington Beach Central Park. Our coverage extends to key organizations like the Huntington Beach Chamber of Commerce and Visit Huntington Beach, plus leading businesses in retail, hospitality, and outdoor recreation that drive the local economy. As part of the broader HERE network, including HEREAnaheim.com, HERECostaMesa.com, HERESantaAna.com, and HERELosAngeles.com, we provide comprehensive, credible insights into Southern California's dynamic landscape.
