California is taking steps to ease pressure on its struggling legal cannabis industry. A bill to delay a planned tax increase passed unanimously in the State Assembly, highlighting lawmakers’ concerns about the survival of licensed businesses and the growing threat of unregulated sales.
What’s Changing with Cannabis Taxes?
The state had planned to raise the cannabis excise tax from 15% to 19% starting July 1. However, many worried that this would harm licensed retailers and drive more consumers toward the illegal market. In response, Assemblymember Matt Haney introduced AB 564, a bill that would postpone the tax hike for five years.
The Assembly approved the bill with a 74-0 vote. It now moves to the Senate, where supporters hope it will be included in a larger budget measure. If approved, the delay could take effect as soon as that broader package is adopted.
Why the Delay Matters
The legal cannabis market in California is shrinking, with many operators struggling to stay afloat. Labor leader Joe Duffle of UFCW Local 1167 warned that raising taxes could drive even more licensed dispensaries out of business, handing more control to illegal sellers.
By freezing the tax rate, AB 564 provides legal operators with the necessary room to survive, enabling them to compete against untaxed and unregulated products that continue to circulate widely.
Managing Revenue Without Overburdening Retailers
The bill also includes a revenue oversight system. The California Department of Tax and Fee Administration (CDTFA), in collaboration with the Department of Finance, will establish future tax rates based on historical sales data and revenue targets.
This system is meant to maintain stable state revenue while avoiding sudden increases that could harm small cannabis businesses.
Monitoring the Long-Term Effects
Starting in 2026, the CDTFA will issue annual reports measuring the financial impact of the delayed tax hike. This allows lawmakers to track whether lower taxes actually help stabilize the market and keep revenues consistent.
These reports will help the state decide if it should extend, modify, or end the delay in future years.
What This Means for California’s Cannabis Future
Delaying the tax hike shows California is listening to its legal cannabis operators and trying to keep the market viable. It also signals a willingness to adjust regulations based on real-world outcomes, not just revenue goals.
As the bill moves to the Senate, the debate continues. Still, this decision could be a turning point in how states balance taxation, public safety, and market sustainability in the cannabis industry.
Rita Ferreira
Rita is a seasoned writer with over five years of experience, having worked with globally renowned platforms, including Forbes and Miister CBD. Her deep knowledge of hemp-related businesses and passion for delivering accurate and concise information distinguish her in the industry. Rita's contributions empower individuals and companies to navigate the complexities of the cannabis world, and her work remains a valuable resource for those seeking a deeper understanding of its potential.
