California cannabis consumers began paying a higher excise tax today as the state's levy on marijuana products jumped from 15% to 19%, despite months of industry lobbying and political opposition that failed to block the increase.
The tax hike, which took effect July 1, will push total tax burdens on legal cannabis to as high as 50% at some retail locations across the state, according to the California Cannabis Operators Association. The increase stems from a legal requirement that the California Department of Tax and Fee Administration adjust the cannabis excise tax rate every two years.
Cannabis retailers warned the tax increase will drive more customers to California's thriving illegal market, which already controls an estimated 60% of total cannabis activity in the state1. At Off the Charts dispensary in Manteca, store manager Lauren Nair said the 4% increase will cost the average customer about $5 extra on purchases that typically run $120 to $1402.
"We're trying to sympathize with them because 4% is not a little bit," Nair told CBS Sacramento2. "It'll be on every product they purchase, so it'll be a hefty amount."
The tax increase comes as California's legal cannabis market continues to contract. Taxable cannabis sales dropped to $1.09 billion in the first quarter of 2025, down 30% from their peak in early 2021, according to the San Francisco Gate3. More cannabis licenses are now inactive or surrendered than active, representing the loss of thousands of jobs over two years1.
A campaign to halt the tax increase gained momentum in recent months, with Assembly Bill 564 passing the state Assembly unanimously 74-0 in June1. The bill, introduced by Assemblymember Matt Haney, would have delayed the tax increase until 20302.
Governor Gavin Newsom supported suspending the increase and pledged to sign legislation blocking it3. However, the state Senate rejected proposals to freeze the cannabis excise tax rate in budget negotiations, allowing the scheduled increase to proceed4.
"The State Senate has decided that Californians should pay more for safe, tested cannabis at the exact moment families are being forced to cut back on virtually everything else," said Amy O'Gorman Jenkins, executive director of the California Cannabis Operators Association5.
The tax increase results from a 2022 compromise that eliminated a cultivation tax on growers while requiring the excise tax to be adjusted to maintain revenue for programs including child care, environmental cleanup and substance abuse education6.
