Under a 2022 law, CDTFA is authorized to raise California’s 15% cannabis excise tax up to 19% by July 1, 2025, to offset revenue losses from eliminating the cultivation tax.
Now, California lawmakers are reconsidering the state's planned cannabis excise tax hike.
Why Are Lawmakers Attempting To Delay the Tax Hike?
Sales are down, many patients and consumers are priced out of the legal market, and the unregulated market is thriving.
Lawmakers are worried that raising taxes again would make the black market exodus even worse. Assembly member Matt Haney introduced AB 564 to delay this tax hike for five years to allow the industry time to recover from its current economic woes.
Why AB 564 Is In the News
AB 564 just passed the Assembly unanimously and is now heading to the state Senate. If the bill passes the Senate and is signed by the governor, taxes would remain capped at 15% until 2030.
However, AB 564 would not go into effect until 2026, so there could be a temporary price hike until the new law takes effect.
Lawmakers are trying to add this provision to the budget trailer so the tax delay takes effect immediately.
What Happens If the Tax Delay Doesn't Pass?
To avoid the likely tax increase, the Governor must sign a budget trailer bill with the delay provision before July 1, 2025.
- If AB 564 passes (instead of being included in the budget trailer bill), taxes will temporarily increase before the bill is fully enacted, and will then return to the 15% rate.
- If lawmakers can't pass either AB 564 or the budget trailer bill, the cannabis excise tax could rise up to 19% on July 1, 2025 and would remain higher.
How Will This Affect Patients?
A $100 purchase will cost $119 at the register instead of $115. A small but meaningful increase, especially as costs add up and inflation chips away at consumers' wallets.
Patients already struggling to make ends meet will be forced to pay more at the register or go without needed products. It may also push more people back into the unregulated market, which isn't tested for safety or purity.
Legal retailers will likely see lower sales at the register, and possibly lose customers.
Summary
Price-sensitive patients in California should watch this legislation closely so they can stock up before July 1 if the Senate is unsuccessful in passing a delay.
We'll keep you updated on the latest as the situation evolves.
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The information in this article and any included images or charts are for educational purposes only. This information is neither a substitute for, nor does it replace, professional legal advice or medical advice, diagnosis, or treatment. If you have any concerns or questions about laws, regulations, or your health, you should always consult with an attorney, physician or other licensed professional.
