California, September 4, 2025
News Summary
California is set to raise its cannabis sales tax from 15% to 19% effective July 1, 2024, escalating challenges for legal retailers competing with the illicit market. This tax increase, part of Governor Newsom’s strategy to address declining revenues, has drawn significant criticism from industry leaders who fear it will exacerbate existing struggles. With legislative measures proposed to obstruct this hike, the future of the legal cannabis industry remains uncertain as operators face costly regulations and high competition.
California Cannabis Sales Tax Set to Increase from 15% to 19% Amid Industry Struggles
California is set to increase its cannabis sales tax from 15% to 19% effective July 1, 2024. This change comes as part of Governor Gavin Newsom’s strategy to address declining revenues from the cannabis sector, which has been heavily impacted by competition from the illicit market. This new tax rate will be the highest allowed under state law.
The California Department of Tax and Fee Administration announced the tax increase following a directive that states taxes must rise if cannabis excise revenue falls below a specific threshold. This ruling has been framed within an ongoing challenge faced by legal cannabis retailers who struggle to maintain competitiveness against illicit market prices.
Recently, the California Office of Tax Appeals ruled that Ryan Burns Collective, a California cannabis retailer, is liable for $120,600 in unpaid taxes due to the inclusion of business license fees in sales tax calculations. This amount covers an audit period from July 2018 to June 2021, emphasizing broader financial vulnerabilities within the industry.
Impact of Higher Taxes on Cannabis Retailers
Industry leaders contend that the increase in taxes will further burden legal cannabis businesses already facing tough competition from illegal operations. Jerred Kiloh, the president of the United Cannabis Business Association, evaluates that these tax hikes make it increasingly difficult for legitimate stores to attract customers while offering competitive prices against illicit products.
A recent study revealed that a significant number of cannabis users still purchase from illegal sources, highlighting the ongoing challenges the legal industry faces. Factors contributing to these struggles include high taxation rates and expensive regulatory requirements that disproportionately afflict licensed disposals compared to their illicit counterparts.
Statistical Overview and Legislative Responses
The decline in California’s legal cannabis market has resulted in closures of thousands of businesses and ongoing reductions in sales and tax revenues. The previous year saw California’s excise tax yield nearly $595 million, which was allocated to child development and environmental recovery initiatives. However, despite these contributions, continual pressures placed on the industry have raised concerns regarding sustainability.
In response to the impending tax hike, Assemblymember Matt Haney from San Francisco proposed Assembly Bill 564 (AB564), which seeks to obstruct the scheduled increase. AB564 received unanimous approval in its latest committee vote on April 24 and is now advancing to the State Senate for further consideration. The urgency of this legislative action underscores the growing concern over the viability of the cannabis industry in California.
As the cannabis market grapples with substantial challenges, including a sustained downturn in sales post-COVID-19, many operators are apprehensive about the future. Amy O’Gorman Jenkins of the California Cannabis Operators Association expressed doubts about the industry’s ability to sustain operations under the proposed 19% tax rate.
Despite clear indications of an industry in distress, Governor Newsom’s recent budget proposal did not include measures for tax relief, leaving many stakeholders hoping for alternative solutions to alleviate the significant pressure on legal cannabis businesses.
Summary of Key Features
- California cannabis sales tax will rise to 19% on July 1, 2024.
- Ryan Burns Collective faces a $120,600 tax liability following a ruling requiring inclusion of business license fees.
- The tax increase is mandated by declining cannabis excise revenues.
- Legislative efforts, including AB564, aim to block the tax hike amidst concerns for industry survival.
- California’s legal cannabis industry continues to struggle against a robust illicit market.
FAQ Section
Why is California increasing its cannabis sales tax?
The sales tax is increasing from 15% to 19% due to declining revenues from the legal cannabis market, necessitating tax hikes under state law when revenues fall.
How does the tax increase impact cannabis retailers?
The increase makes it harder for legal retailers to compete with prices from the illicit market, creating significant challenges for their continued operations.
What legislative actions are being taken in response to the tax hike?
Assembly Bill 564 has been introduced to block the pending tax increase and has successfully passed through committee voting, moving to the State Senate for further discussion.
What financial struggles are California cannabis businesses currently facing?
California cannabis businesses are facing high taxes, costly regulations, and competition from illicit sellers, leading to a decline in sales and the closure of numerous businesses.
Chart of Cannabis Industry Financials
| Year | Excise Tax Revenue ($ millions) | Tax Rate (%) |
|---|---|---|
| 2024 | 595 | 19 |
| 2023 | Not available | 15 |
| 2022 | Not available | Not available |
Deeper Dive: News & Info About This Topic
- SFGATE: California Cannabis Tax Increase
- Wikipedia: Cannabis in California
- Bloomberg Tax: California Cannabis Sellers Taxable Measure
- Google Search: California Cannabis Sales Tax
- Cannabis Business Times: California Lawmakers Vote
- Google Scholar: California Cannabis Tax Policies
- CBS News: California AB564 Cannabis Tax Hike
- Encyclopedia Britannica: Legalization of Cannabis
- MJ Biz Daily: Gavin Newsom Won’t Stop Tax Increase
- Google News: California Cannabis Industry Challenges
Author: Anaheim Staff Writer
Anaheim Staff Writer The Anaheim Staff Writer represents the experienced team at HEREAnaheim.com, your go-to source for actionable local news and information in Anaheim, 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 major conventions at the Anaheim Convention Center, including NAMM and VidCon, exciting games at Angel Stadium and Honda Center, and developments at Disneyland Resort Our coverage extends to key organizations like the Anaheim Chamber of Commerce and Visit Anaheim, plus leading businesses in hospitality, entertainment, and innovation that power the local economy As part of the broader HERE network, including HERECostaMesa.com, HEREHuntingtonBeach.com, HERESantaAna.com, and HERELosAngeles.com, we provide comprehensive, credible insights into Southern California's dynamic landscape.
