Newsom Signs Cannabis Excise Tax Rollback

Gov. Gavin Newsom signed Assembly Bill 564 on Sept. 22, rolling back the July 1 increase that raised California’s cannabis excise tax from 15% to 19% and returning it to 15% effective Oct. 1. The bill passed overwhelmingly (Assembly 74‑0; Senate 39‑1) and fixes the 15% excise rate through at least mid‑2028 while directing the California Department of Cannabis Control to review the rate every two years, with a statutory cap of 19%. Supporters and industry officials say the rollback will help the legal market grow, protect jobs, and make regulated products more competitive with the untaxed black market, which industry reporting estimates still accounts for about 62% of sales. Lawmakers and industry representatives say legal sales have declined in recent years even as volumes stayed steady and note that cumulative state and local taxes in some markets can approach 40–50% of retail price. Critics, including public‑health and environmental groups that have received cannabis tax revenue for prevention and other programs, warned the cut could harm youth prevention and other priorities as the state seeks to recoup revenue after eliminating the cultivation tax. Supporters call AB 564 an important but partial step toward stabilizing and rebuilding California’s regulated cannabis market.