California’s legal cannabis industry has been struggling to stay afloat under high taxes and stiff competition from the illicit market. A new law signed by Governor Gavin Newsom is being hailed as a much-needed lifeline because it keeps the state’s cannabis excise tax at 15% until 2028 instead of allowing it to rise to 19%. For operators already paying multiple layers of taxes, holding the excise tax steady provides a measure of relief.
Assembly Bill 564, introduced by San Francisco Assemblymember Matt Haney, aims to give licensed businesses a fighting chance. Many dispensary owners said the planned excise tax increase would have been the final straw as they struggle to compete with unlicensed shops that don’t pay any taxes. By freezing the excise tax rate, the state hopes to keep more businesses in the legal market and protect consumer safety.
Andre Special, operator of the long-running Cannabis Buyers Club Berkeley, expressed her gratitude for the decision. She explained that despite offering tested and regulated products, her shop was losing customers to unlicensed stores where there is no excise tax, no testing, and lower prices. Special’s goal is to make safe cannabis accessible to everyone, but she noted that the combined state sales tax, local tax, and excise tax can drive prices so high that consumers simply go elsewhere.
Yet the cannabis excise tax still generated nearly $150 million in revenue in the second quarter alone. Advocates argue that this demonstrates both the importance of the excise tax to the state budget and the need to balance it against the health of the legal market.
Special says the freeze on the excise tax until 2028 is welcome but not a complete solution. She believes consumers are willing to pay a reasonable excise tax for tested products but only within reason. If prices climb too high, the illicit market will continue to thrive.
For now, the cannabis industry views the governor’s action as a step in the right direction. By holding the excise tax steady, California is signaling support for its regulated businesses while giving them time to adjust. Whether this move will be enough to pull more consumers into the legal market remains to be seen, but operators like Special are hopeful that a stable excise tax is the start of meaningful reform.
