Proposed Bill Seeks to Give California’s Legal Cannabis Industry a Tax Break

Heavy state taxes and a growing black market continue to crush the state’s legal pot sales.

A customer buys cannabis products at a store in West Hollywood, Calif., on Jan. 2, 2018. David McNew/Getty Images

A California legislator announced a bill on March 24 to give the legal cannabis industry a tax break from the state’s high taxes as retailers struggle to survive a growing threat from the black market.

Assemblyman Matt Haney (D-San Francisco) introduced Assembly Bill 564 to prevent the state’s scheduled cannabis tax increase in July that “would devastate California’s legal cannabis industry by forcing many small businesses to close and driving even more consumers toward the illegal market,” according to a news release Monday.

The state planned to increase taxes on dispensary sales from 15 to as high as 19 percent—a 27 percent increase—starting July 1.

“If we continue to pile on more taxes and fees onto our struggling small cannabis businesses, California’s cannabis culture is under serious threat of extinction,” Haney said in a statement. “Instead, we should be looking at how we can support this industry which has barely been given a chance to survive after legalization.”

The bill is expected to be heard in the Assembly Revenue and Taxation and Business and Professions committees in April.

The California Cannabis Industry Association said on Monday that the industry was already struggling under the crushing weight of a 15 percent excise tax and the illegal cannabis market.

“Nearly a decade after Californians overwhelmingly approved legalization, the industry is struggling under the crushing weight of a 15% excise tax. Any increase—particularly a 25% rate increase—would not only be bad public policy, but devastating to operators already on the brink,” the group’s president Caren Woodson said in a social media post.

In 2022, Gov. Gavin Newsom signed Assembly Bill 195, which suspended the state’s cannabis cultivation tax and kept the 15 percent cannabis excise tax.

The legislation also called for the state’s Department of Tax and Fee Administration to adjust the tax every two years, starting this year, to a rate that will generate the amount of revenue that would have been raised by the canceled cultivation tax, but not to exceed 19 percent.

Marijuana plants grow at the Green Pearl Organics marijuana dispensary in Desert Hot Springs, Calif., on Jan. 1, 2018. Robyn Beck/AFP via Getty Images

Newsom’s office declined to comment on the proposed legislation Wednesday. A spokesperson told The Epoch Times in an email that the office doesn’t typically comment on pending legislation.

On Monday, the director of the California Department of Cannabis Control, Nicole Elliott, defended Newsom from allegations that he was responsible for the cannabis tax hike.

“Did you know the state cannabis excise tax is slated to increase by force of law, not because [Newsom] says it must be so? Shoutout to all those people steering this type of energy to where it really belongs—on advocating for statutory changes,” she wrote on the social media platform X.

California NORML, a cannabis consumer advocacy organization, asked on X if Newsom planned to support Haney’s measure. The organization backed a bill in 2022 that would have ended the cultivation tax while not raising the excise tax.

Several industry groups also publicly objected to the 2022 tax increase bill, including the United Cannabis Business Association, the California Cannabis Manufacturers Association, the Cannabis Distribution Association, and the California Cannabis Industry Association.