California Governor Gavin Newsom recently signed legislation that reverses a 25 percent tax increase for the legal cannabis industry in California.
AB 564 The Governor’s Office says that this will allow legal cannabis businesses to stay competitive, and encourage the long-term development of the industry.
We’re rolling back the cannabis tax increase so that the legal market continues to grow and consumers have safe products. Our local communities will also benefit. said the Governor.
California’s Cannabis Tax Law imposed a 15% excise on cannabis and cannabis products purchased in California.
The cultivation tax will be discontinued in 2022. However, AB 195, beginning in the 2025–26 fiscal year and every 2 years thereafter, required the California Department of Tax and Fee Administration (CDTFA) to adjust the cannabis excise tax rate by a percentage that would make up for any shortfall. Observing that law, the department increased the cannabis excise tax rate to 19% (the maximum amount allowable) for the 2025–26 fiscal year.
AB564 will reduce the tax to 15% from June 30 to October 1 2028. After that date, there will be more increases.
The sales tax and use taxes do not apply to medical cannabis. California was the first US state to establish a medical program; which was originally enacted by Proposition 215 in 1996 and then Senate Bill 420 in 2003.
In other cannabis news out of the state, measures have been enacted to enhance long-term enforcement efforts against illegal operators by dedicating cannabis tax revenue to fund civil and criminal enforcement activities.
The Unified Cannabis Enforcement Taskforce has, to date, seized and destroyed more than 317 tons worth $890,000,000 in illegal cannabis through 230 operations involving multiple agencies. The Department of Cannabis Control is one of the partners of the Task Force, along with the Department of Pesticide Regulation and Toxic Substances Control and the Department of Fish and Wildlife. In 2022, Governor Newsom established the UCETEF.
A May update by the Governor Newsom stated that more than 316 million dollars in illegal cannabis, and nearly $474,000 cash were seized from January to now.
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