Newsom Signs Bill Rolling Back California's Cannabis Tax Hike

SACRAMENTO — Gov. Gavin Newsom signed Assembly Bill 564 into law in late September 2025, reversing a 2025 excise tax increase on California's legal cannabis industry that had jumped from 15% to 19% on July 1.[1][2][3] Authored by Assemblymember Matt Haney, D-San Francisco, the measure passed the Assembly 74-0 in June and the Senate 39-1 on Sept. 11 before landing on Newsom's desk.[2] "We're rolling back this cannabis tax hike so the legal market can continue to grow, consumers can access safe products, and our local communities see the benefits," Newsom said in a statement.[1][2] The tax rollback, effective Oct. 1, 2025, freezes the rate at 15% until June 30, 2028, suspending adjustments tied to the discontinued cultivation tax under prior law AB 195.[7] Legal cannabis captures just 40% of total consumption, with taxable sales dropping from $1.5 billion to $1.2 billion amid competition from untaxed illicit operators, according to state data.[1][4] Haney argued the change "levels the playing field" for licensed businesses in hubs like Oakland and Los Angeles, where compounded taxes once hit 39% including sales and local levies.[1][6] Despite the relief, Los Angeles dispensary owners report ongoing woes, with some shops teetering despite the rollback.[5] The California Department of Cannabis Control must deliver a legislative report by Oct. 1, 2027, analyzing tax impacts and proposing reforms to fulfill Proposition 64's goals.[7] Nonprofits and conservation groups opposed the bill, citing potential revenue losses, but industry advocates hailed it as vital for sustainability.[4]