Taxes on legal cannabis in California will go back down to what they were a few months ago, after Gov. Gavin Newsom signed a bill that rolls back a big recent increase in the retail weed tax.

Assembly Bill 564, by San Francisco Democrat Matt Haney, passed easily through the Legislature and was signed by the governor on Sept. 22. It lowers the excise tax — a statewide tax on all cannabis and cannabis products sold by licensed retailers — from 15% to 19% and keeps it at 15% until 2028, reversing a tax increase that went into effect July 1.

The state excise tax is usually the biggest single tax on legal weed, but it’s far from the only one. Cannabis retailers must also pay standard state and local sales taxes, and most cities and counties that allow retail sales also charge an additional local tax.

When the excise tax was at 19%, combined state and local taxes added as much as 40% to the cost of legal cannabis, dispensary owners in Ventura County told The Star in July. Even with a 15% excise tax, the total taxes on cannabis products can exceed 35%.

Taxes Make It Hard to Compete With Black Market: Retailers

Retailers say those tax levels make it hard to compete with the black market, where cannabis is entirely untaxed. Between the taxes and other costs of running a legitimate business, legal weed often costs twice as much as the illicit kind.

In 2024, seven years after the first legal recreational dispensaries opened, the black market still accounted for 62% of California cannabis sales, according to an industry report commissioned by the California Department of Cannabis Control.

Legal sales of cannabis and cannabis products have been declining for the past four years, according to data from the Department of Cannabis Control. Sales in 2024 totaled $4.7 billion, down 16% from 2021. The main factor is the decline in prices; the total volume of cannabis sold has remained about the same.

Legislators were trying to reverse the July 1 tax increase even before it happened. A bill to cancel that increase passed the Assembly unanimously in June, and Newsom said he would sign it, but it never made it to a vote in the Senate.

In Ventura County, cannabis retailers are allowed in the cities of Ojai, Ventura, Oxnard, Port Hueneme and Thousand Oaks. There are 35 brick-and-mortar dispensaries in those cities, all but eight of them in Oxnard or Port Hueneme, plus five licensed delivery services.

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Tony Biasotti is an investigative and watchdog reporter for the Ventura County Star. Reach him at tbiasotti@vcstar.com. This story was made possible by a grant from the Ventura County Community Foundation’s Fund to Support Local Journalism.

This article originally appeared on Ventura County Star: Newsom signs bill lowering retail weed tax

Reporting by Tony Biasotti, Ventura County Star / Ventura County Star

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