California’s marijuana excise tax is set to rise from 15% to 19% on Tuesday, July 1.
The automatic hike was triggered by a decline in cannabis excise revenue, despite industry warnings that the increase will further burden legal businesses already struggling to compete with the illicit market.
The California Department of Tax and Fee Administration confirmed the change last month, citing statutory requirements. Industry leaders, however, have been urging lawmakers to intervene, with some warning the tax hike could devastate the state’s licensed marijuana sector.
Assembly Member Matt Haney has been leading a legislative effort to prevent the increase. His bill, AB 564, would freeze the excise tax at 15%, but despite passing the Assembly 74 to 0, it has not yet received a vote in the Senate. Even if signed into law, the measure would not take effect until January 1, 2026.
A last-ditch attempt to insert a tax freeze into the state’s $321 billion budget package failed earlier this week, reports MJBizDaily. Although Governor Gavin Newsom and Assembly Speaker Robert Rivas reportedly supported including the freeze in the budget trailer bill, the proposal was ultimately rejected by Senate President Pro Tempore Mike McGuire.
“The budget trailer bill was our best shot to stop this hike before it took effect,” said Senator Christopher Cabaldon, who supported the freeze. “I’m very concerned that we’re going to see less revenue as a result of this increase… and significantly advantaging the illicit and illegal activities around our state.”
Starting Tuesday, California’s licensed marijuana retailers will face among the highest tax burdens in the nation. On top of the 19% excise tax, marijuana purchases remain subject to the state’s base sales tax rate of 7.25% to 10.75%, as well as any local cannabis taxes.
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