California Pauses Cannabis Tax Hike

OG Article By Kyle Jaeger

September 23 2025

Overview

Governor Gavin Newsom signed AB 564 to pause a cannabis tax increase. The bill aims to support the legal cannabis market.

Bill Details

• Pauses 25% excise tax hike for five years, effective October 2025.

• Maintains 15% tax rate until June 30, 2030.

• Requires California Department of Tax and Fee Administration to adjust rates based on prior revenue estimates.

Statements

• Newsom: “We’re rolling back this tax hike so the legal market can grow, and communities benefit.”

• Assemblymember Matt Haney: “AB 564 protects jobs and ensures the legal cannabis market thrives.”

Industry Impact

• Reverses tax increase from 15% to 19% that began July 2024.

• Aims to weaken illegal market and support legal businesses.

Additional Measures

• Senate committee passed legislation to integrate hemp-derived products into cannabis programs.

• California offers cannabis-funded grants to address prohibition’s impacts.

Context

• California’s Supreme Court upheld the state’s cannabis program in June 2025.

• Federal prohibition continues to challenge legal market growth.