California Governor Gavin Newsom has signed a bill aimed at providing relief to the state’s struggling recreational cannabis industry. The new law temporarily reduces the cannabis excise tax from 19% to 15% until 2028, a move intended to help legal dispensaries operate more competitively and increase their long-term growth.
The tax reduction is seen as a crucial step in addressing the industry’s struggles to surpass the illicit cannabis market, which has persisted since voters legalized marijuana nearly a decade ago. Proponents argue that years of overregulation have squeezed dispensaries’ profit margins, making it difficult for them to thrive.
Governor Newsom emphasized the importance of reducing the tax burden on legal cannabis businesses, stating that it will allow them to remain competitive and benefit local communities. The excise tax, which is imposed by the state before sales taxes are applied, was previously increased to 19% earlier this year. The new law suspends this increase until 2028.
The cannabis industry has long advocated for a reduction in the excise tax, citing its negative impact on their ability to operate successfully. The tax was introduced in 2022 as part of an agreement between the state and marijuana companies, replacing a previous fee intended to generate revenue for social programs. With this latest move, the state aims to support the growth of a legal cannabis industry that can provide safe products to consumers while benefiting local communities.
