Newsom Signs Bill Slashing California's Cannabis Tax Hike

Gov. Gavin Newsom signed Assembly Bill 564 on Monday, September 15, 2025, officially reversing a cannabis excise tax hike from 15% to 19% that took effect July 1, 2025.[1][2][3] Authored by Assemblymember Matt Haney, D-San Francisco, the bill passed the Assembly 74-0 in June and the Senate 39-1 on September 11 before reaching the governor's desk on September 17.[1][2] It locks the tax at 15% through June 30, 2028, after which the California Department of Tax and Fee Administration must adjust it to match revenue lost from a terminated cultivation tax.[2] The rollback addresses strains on California's legal cannabis sector, where taxable sales dropped from $1.5 billion to $1.2 billion amid competition from an untaxed illicit market capturing 60% of consumption.[4] "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][3] Haney emphasized fairness: "California’s cannabis economy can bring enormous benefits to our state, but only if our legal industry is given a fair chance to compete against the untaxed and unregulated illegal market."[3] In Los Angeles and the Bay Area, business owners welcomed the change but noted ongoing challenges from compounded taxes reaching 39% including sales and local levies.[5][6][7] A Bay Area cannabis store operator called the prior 19% rate "too much" on top of other taxes, while LA shops reported persistent struggles despite the relief.[5][6] Nonprofits and conservation groups opposed the measure, citing lost revenue potential, but the industry views it as vital for survival.[4]