Image via the California Department of Cannabis Control

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PREVIOUSLY

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As expected, California Governor Gavin Newsom today signed into law Assembly Bill 564, rescinding a recent increase in the state excise tax on cannabis. That tax rate jumped from 15 percent to 19 percent on July 1, but the passage of this bill means it will drop back down to 15 percent on October 1 and remain there through at least June 30, 2028. 

From that point onward, the California Department of Cannabis Control (DCC) will decide every other year whether or not to increase the rate, with the eventual goal of recouping the revenue lost when the state discontinued its cannabis cultivation tax in June 2022. However, the excise tax rate can never exceed 19 percent.

While weed industry professionals are applauding the new law, others are less excited.

For example, Dr. Lynn Silver, director of a Public Health Institute initiative called Getting it Right from the Start, said in a press release:

We are profoundly disappointed that the legislature passed, and Governor Newsom chose to sign, AB 564 (Haney), siding with the cannabis industry’s false narrative of being ‘in crisis’ instead of standing with California’s children, families, and environment. In doing so, the Governor has embraced a massive tax giveaway to Big Cannabis — one that will permanently cut the legally guaranteed baseline for future annual funding for childcare, youth substance use prevention, environmental restoration, and law enforcement — the very programs Proposition 64 promised voters.

You can read more about opposition to the bill in our previous stories, linked above. 

Here’s a press release from Newsom’s office:

SACRAMENTO – As California’s legal cannabis market continues to mature, Governor Gavin Newsom today signed legislation, AB 564 (Haney), that eliminates a 25% tax increase on California’s legal cannabis industry, building on the Administration’s ongoing work to ensure the long-term success of the legal cannabis market.

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.

Governor Gavin Newsom

“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,” said Assemblymember Matt Haney (D–San Francisco). “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.”

California’s regulated cannabis market is the largest in the world, fostering environmental stewardship, compliance-tested products, and fair labor practices, while driving economic growth and funding vital programs in education, public health, and environmental protection. AB 564 reverses a 25% tax increase on California’s legal cannabis industry and sets the state’s cannabis excise tax rate at 15% until 2028, allowing legal businesses to remain competitive and promoting the industry’s long-term growth.

The Administration recently enacted measures to bolster long-term enforcement efforts against illegal operators by dedicating cannabis tax revenue to fund civil and criminal enforcement activities. This will reduce the burden on legal businesses while ensuring sustained actions against illegal operators. In addition, Board of State and Community Corrections (BSCC) grant eligibility has expanded to local jurisdictions, especially those allowing retail access, to further enhance and support local enforcement efforts against illegal cannabis activity. 

A unified strategy across California 

So far, the Unified Cannabis Enforcement Taskforce (UCETF), which was established in 2022 by Governor Newsom, has seized and destroyed over 317 tons, or over 635,303 pounds, of illegal cannabis worth an estimated retail value of $890 million through nearly 230 multiagency operations.

UCETF has enhanced collaboration and enforcement coordination between state, local, and federal partners. Partners on the task force include the Department of Cannabis Control, the Department of Pesticide Regulation, the Department of Toxic Substances Control, and the Department of Fish and Wildlife, among others. 

To learn more about the legal California cannabis market, state licenses, and laws, visit cannabis.ca.gov.