California Governor Gavin Newsom signed legislation, AB 564 (Haney), that eliminates a 25% tax increase on California’s legal cannabis industry.
“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 (D–San Francisco). “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 regulated cannabis market is one of the largest in the world, helping drive economic growth and fund vital programs in education, public health, and environmental protection. But in recent years, it's been struggling.
According to SFGate, taxable sales at California’s legal cannabis stores fell by 11% during the first quarter of 2025, which the publication called the "largest such drop in the history of legal cannabis sales in California."
To help California's legal market return to growth, AB 564 reverses the 25% tax increase and sets the state’s cannabis excise tax rate at 15% until 2028.
California is also focused on shutting down its illicit cannabis market. The Unified Cannabis Enforcement Taskforce (UCETF), which was established in 2022 by Newsom, has seized and destroyed more than 317 tons of illegal cannabis worth an estimated retail value of $890 million through nearly 230 multiagency operations.
