California Governor Gavin Newsom has signed a law that rolls back a 25% tax increase on the state’s legal cannabis industry to help licensed operators compete with the illicit market.
Newsom signed the Assembly Bill 564, authored by Assemblymember Matt Haney (D-San Francisco), into law on Monday, following its passage in the State Senate on September 11 with a 39-1 vote, in the Assembly in June.
The new law reinstates the retail excise tax on cannabis sales to 15%, reversing a scheduled increase to 19% that had followed the elimination of a cultivation tax in 2022. The earlier tax increase, along with falling wholesale prices, made legal cannabis more expensive than illegal cannabis, making it harder to get people to buy from legal stores.
“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,” Newsom said in a statement.
California’s cannabis tax structure has shifted several times since its recreational use became legal in 2016.
When California got rid of the cultivation tax in 2022, lawmakers passed a law letting the state adjust cannabis sales taxes every two years to make up for any lost money.
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