Governor Gavin Newsom has signed Assembly Bill 564 into law, reducing California’s cannabis excise tax back to 15% effective October 1.

The measure, sponsored by Assemblymember Matt Haney (D–San Francisco), locks the state’s cannabis excise tax at 15% through 2028, rolling back a recent increase to 19%.

Haney said the move is essential to keep licensed businesses competitive against the untaxed illicit market.

“California’s cannabis economy can bring enormous benefits to our state, but only if our legal industry is given a fair chance to compete against the untaxed and unregulated illegal market,” Haney said. “AB 564 helps level the playing field. It protects California jobs, keeps small businesses open, and ensures that our legal cannabis market can grow and thrive the way voters intended.”

Governor Newsom added that the rollback was about protecting consumers and communities. “We’re rolling back this cannabis tax hike so the legal market can continue to grow, consumers can access safe products, and our local communities see the benefits,” he said.

California’s legal marijuana market remains the largest in the world, supporting jobs and small businesses while generating revenue for education, public health, and environmental programs. AB 564 ensures the industry won’t face a steep tax hike that many argued would push more consumers back to the illicit market.

The state has also stepped up enforcement against illegal operators, directing cannabis tax revenue toward both civil and criminal actions. Local jurisdictions allowing retail marijuana sales are now eligible for Board of State and Community Corrections grants to help expand enforcement.

With excise taxes capped and enforcement resources strengthened, state leaders say the changes give California’s marijuana industry a stronger foundation for growth in the years ahead.