California Just Slashed Its Cannabis Tax to Save Its Dying Industry

SACRAMENTO — Assemblymember Matt Haney’s (D–San Francisco) bill to roll back a devastating 25% tax increase on California’s legal cannabis industry on Oct. 1 became law. AB 564, authored by Haney, received overwhelming bipartisan support in the Legislature and was signed by Gov. Gavin Newsom last week.

California is widely known as the birthplace of cannabis culture in the United States, with an industry boasting hundreds of thousands of employees and generating hundreds of millions in revenue annually. But over the past five years, the licensed cannabis market has been in a sharp decline as evidenced by plummeting sales and tax revenue.

AB 564 reverses a July 2025 cannabis tax hike of nearly 25%, which threatened closure for many small cannabis businesses and a wave of more consumers opting to turn to the illegal market. Taxes as high as 45% in some areas have already weakened California’s licensed industry, allowing states like Michigan and Colorado—with lower taxes—to surpass California in sales.  The bill will freeze the state excise tax rate at 15% until 2028.

“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,” said Assemblymember Matt Haney. AB 564 helps level the playing field. It protects California jobs, keeps small businesses open, and ensures that our legal cannabis market can grow and thrive the way voters intended.”

California’s cannabis industry employs hundreds of thousands and generates millions in revenue, but sales and tax receipts have plummeted in recent years. By suspending the tax increase, AB 564 gives the industry a chance to recover and helps keep small businesses afloat.

The bill, backed by major cannabis industry organizations, went into effect Oct. 1.