California’s major tax increase on marijuana has been in effect for three months. Now, the new law that halts this hike officially came into force.
Gov. Gavin Newsom, (D), signed late last month the tax relief bill from Assemblymember Matt Haney, (D). Now, as of Wednesday, consumers will not be paying the increased excise tax—at least until October 2028.
Newsom stated at the time the bill was signed that “we’re rolling this tax back so the market can grow legally, the consumers can have safe products and the local community can see the benefits.”
Haney stated that California’s marijuana economy could bring immense benefits to the state. But only if it is allowed to compete with an untaxed, unregulated market.
He added that AB 564 “levels the playing fields”. It protects Californian jobs, keeps the small business open and makes sure that our legal marijuana market grows and thrives as intended by voters.
In June, state officials announced that cannabis excise taxes would rise from 15% to 19% on July 1. This caused concern among industry participants and consumer advocates.
Newsom had previously supported the inclusion of a tax-freeze in a trailer budget bill. However, this didn’t happen. Assembly Speaker Robert Rivas supported the tax freeze, too. But Senate President pro Tempore Mike McGuire blocked the inclusion of the bill in the budget.
The newly passed legislation would have halted the increase in cannabis taxes until June 30th 2030, before it was amended by the committee. A summary states that regulators will adjust the tax rates on a bi-annual basis to generate revenue equivalent to that collected by the cultivation tax prior to it being discontinued.
The Senate Appropriations Committee voted to extend the reduced period of time to October 2028.
The new law will make it so the California Department of Tax and Fee Administration (CDTFA), working with the Department of Finance, will be required to “adjust the cannabis excise tax rate upon purchasers of cannabis or cannabis products” based on the “additional percentage of the gross receipts of any retail sale by a cannabis retailer that the department estimates will generate an amount of revenue equivalent to the amount that would have been collected in the previous fiscal year,” the text says.
It will be necessary for the department to estimate the revenue collected by the weight-based tax in the fiscal year prior.
According to the legislation, “The cannabis excise rate reduction has the specific purpose of providing immediate tax relief for the marijuana industry.” “The effectiveness of this goal can be measured by lawmakers by the amount in gain or losses of cannabis excise revenue resulting from cannabis excise rate reductions allowed by this measure.”
It also mandates that CDTFA, on or before December 1, 2026 and each subsequent year the California “submit a report to the Legislature…detailing the amount of gain or loss in cannabis excise tax revenues resulting from the cannabis excise tax rate reduction allowed by this act.”
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A leading veterans’ group has called on the Governor to sign a law that will streamline research into marijuana and psychedelics.
Assemblymember Christopher Ward’s (D) legislation would allow the Research Advisory Panel of California to speed up reviews of cannabis research on marijuana and psychedelics until January 2028.
California officials are also inviting research proposals for a second round of grants under a program meant to better educate the public on the state’s marijuana law and help policymakers make informed decisions on the issue.
In June, the Governor’s Office of Business and Economic Development (GO-Biz) announced the recipients of over $52 million in community reinvestment grants to nonprofits and local health departments, also funded by marijuana tax revenue.
That marked the seventh round of cannabis-funded California Community Reinvestment Grants (CalCRG) under the state program.
California legalization has resulted in a new set of grant programs designed to address the negative effects of marijuana prohibition, and foster a robust industry that is well regulated.
California’s Supreme Court separately delivered a victory for the state’s marijuana program in June, rescinding a lower court ruling in a case that suggested federal prohibition could be used locally to undermine the cannabis market.
The state Supreme Court ruling also came just weeks after California officials unveiled a report on the current status and future of the state’s marijuana market—with independent analysts hired by regulators concluding that the federal prohibition on cannabis that prevents interstate commerce is meaningfully bolstering the illicit market.
The governor did sign a bill in 2022 that would have empowered him to enter into interstate cannabis commerce agreements with other legal states, but that power was incumbent upon federal guidance or an assessment from the state attorney general that sanctioned such activity.
Meanwhile, a California Senate committee recently declined to advance a bipartisan bill that would have created a psilocybin pilot program for military veterans and former first responders.
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