This tax could kill this industry. California cannabis operators brace for increase

California's cannabis excise tax increased from 15% to 19% on July 1, raising alarms among industry operators who fear it could harm their already precarious businesses. Despite a strong campaign led by Gov. Gavin Newsom to suspend the tax hike, lawmakers continue to debate tax relief measures, including a proposal to lower the rate back to 15% for the next six years. The cannabis market has faced a steep decline, with taxable sales plummeting to $1. 09 billion in the first quarter of 2025, a 30% drop from its peak in early 2021.

Legal cannabis sales represent less than 40% of total consumption in California, largely due to high taxes that inflate prices. Advocates argue that tax revenues are vital for funding essential public services, including child care and environmental programs. Newsom and Assembly Speaker Robert Rivas support extending the pause on the excise tax, but negotiations with Senate leadership have stalled. Industry leaders express deep concern over the future of California's cannabis market, with many fearing that the tax increase could drive consumers back to the illegal market. The ongoing struggle reflects broader issues of regulation, taxation, and market stability in the state's cannabis industry.