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- California lawmakers voted 150–0 to prevent a cannabis tax hike that threatened to damage the legal market.
- The cannabis excise tax will remain at 15% instead of jumping to 19% in 2025.
- Shrinking legal sales and high consumer prices are driving people back to the illicit market.
- Legal cannabis businesses say tax relief is essential for survival amidst high overhead and local restrictions.
- Keeping taxes flat supports access to tested, regulated, and safer cannabis options.
California just avoided a big price jump on legal weed. A unanimous vote by lawmakers stopped a planned increase in the state’s cannabis excise tax. The tax would have gone from 15% to 19% in July 2025. This decision helps consumers. And it gives support to an industry struggling with low profits, tough competition, and strict rules.
What Is the Cannabis Excise Tax?
The cannabis excise tax is a required state tax on cannabis sales in stores. In California, it is 15%. It is figured using the wholesale price. And then shops pass it on to the buyer when they pay. This tax is the same everywhere in the state.
Proposition 64 started this tax. That is the law that made recreational cannabis legal in 2016. The tax had two main goals. One goal was to bring in steady state money for things like youth drug education and clean-up efforts. The second was to make a system where cannabis products could be tracked and tested in labs. This was supposed to make sure buyers were safe.
But things did not work out as planned. All the taxes together, including local fees, became too much for both buyers and businesses. The excise tax has become a key part of California’s changing marijuana tax law. Many say it is a big reason why the legal market is not doing better.
A Timeline to the Proposed 2025 Tax Hike
In 2022, California lawmakers passed Assembly Bill 195. This bill made big changes to help cannabis businesses. They were struggling with low prices across the state and rising costs to run things. The biggest change was getting rid of the state cultivation tax. This tax made licensed growers pay for harvested cannabis, even if they did not sell it.
But AB 195 had conditions. It said that if the state did not collect enough cannabis tax money each year, the excise tax would go up on its own. It would jump from 15% to 19% by July 1, 2025.
This part of the law was not popular from the beginning. People in the industry said the extra tax would hurt legal sales more. They also warned it would make it harder to get people to buy legal cannabis instead of illegal cannabis. But the condition stayed in the law.
The Revenue Targets That California Didn't Meet
The planned tax hike for 2025 depended on California collecting a certain amount of cannabis tax money. The state was counting on collecting hundreds of millions in tax money. This money was supposed to pay for state programs and enforcing the rules.
But the state did not collect as much money as it hoped. Several problems hurt the legal market. Some places had few or no stores because local rules banned them. Over 60% of California areas ban cannabis stores. Also, it cost a lot to follow the rules, get licenses, and do testing. The price of cannabis dropped because there was too much of it, so the state collected less tax per item sold. And not as many people bought cannabis as they thought would.
Because of this, the total amount of cannabis tax money collected went down. According to one report, tax money dropped from over $1.1 billion in 2021 to just under $950 million by 2023. The tax law's money goals were not met. This started the automatic tax increase written in AB 195.
A Historic Vote: 150–0 to Cancel the Tax Hike
People in the cannabis industry, small businesses, and worker groups put more and more pressure on lawmakers. And then California lawmakers made a rare choice that everyone agreed on: stop the planned excise tax increase.
The 150–0 vote meant more than just lawmakers agreeing. It showed everyone felt it was a bad idea for the economy to raise the tax to 19% when the market was weak. Lawmakers agreed that higher taxes would likely hurt businesses that follow the rules. And they knew it would push more buyers to the illegal market, where prices are still 30–50% lower.
What is also important is that stopping the state tax increase does not change things for local areas. Cities and counties can still add their own taxes or fees. This continues to make it hard for the legal market to offer good prices compared to the illegal market.
But keeping the state excise tax at 15% does give the industry needed space to adjust.
Behind the Struggles of Legal Growers and Retailers
Legal cannabis businesses in California face one of the most expensive and complicated markets in the country. From growing to selling, every step has expensive rules. Growers have to pay for regular lab tests, security systems, and packaging that follows the rules. Stores have to pay for local permits, security workers, insurance, training for staff, and more.
Also, small businesses often have trouble getting money because of federal banking rules.
With all these costs to run the business, the planned tax hike would have made it impossible for many to keep going. Small growers, who are often praised for their quality and care for the environment, are especially at risk. They do not have the money benefits that bigger businesses get from selling a lot.
If the marijuana tax law had increased the excise tax, it would have hurt small growers and new stores the most. They are already finding it hard to make ends meet.
Industry and Union Support Push Reform Forward
Important groups in the industry helped push the effort to stop the tax hike. For example, the California Cannabis Industry Association (CCIA) and United Food and Commercial Workers (UFCW) both supported canceling the tax increase. They worked together to make their case.
Their reason for this was not only about making money. At the core of what they asked for was saving thousands of legal jobs, keeping buyers safe, and protecting how California's legal cannabis system works in the future.
"Stable taxation means stable jobs for our union members," the UFCW leaders said. "It is about seeing the workers, many from areas that haven't had many chances, who have helped build this industry from the start."
Their work shows that when the cannabis industry and worker groups join forces, changing laws is more likely to happen. And it gets more support from the public.
Why Prices—and Taxes—Still Drive Consumers Underground
Even though cannabis is legal, California's illegal market is still huge. Reports say it is worth more than $8 billion a year, while the legal market is about $5 billion. Why? Price.
Illegal weed might not follow rules, but it is often half the price of what you find in stores. Legal buyers pay state sales tax, local taxes, and the 15% state excise tax. These are added before the store even marks up the product price. Many cities charge taxes on each product sold, plus other fees for businesses.
Even people who prefer buying legally might think about buying illegally when the price difference is too big. The state deciding to keep the excise tax at 15% shows they get this problem. And it shows they know that stopping people from leaving the legal market starts with smart marijuana tax laws.
What Staying at 15% Means for Everyday Consumers
For everyday buyers, this decision means prices will be more affordable and it will be easier to get cannabis. Prices stay steady, so it costs less to buy legal cannabis. Buyers can also afford more types of products. People using cannabis for pain or anxiety also face fewer money problems.
It also helps stores offer more sales, have more kinds of products, and sell to more people.
For people who like to roll their own, keeping taxes low means they have more money for things like rolling papers. Brands like Purple Rose Supply make rolling easier. This turns buying cannabis into something more enjoyable.
Affordability as a Catalyst for Innovation
Lower cannabis taxes mean businesses have more money to spend on new ideas and making things better. Small brands can try out new rolling tools, mix different kinds of flower, or use packaging that is better for the environment.
People creating new things can afford to test products without losing all their money. This means buyers get better products, like a cannagar with lots of flavor or a cannabis product with no sugar.
By keeping the cannabis excise tax the same, California is slowly making it possible for new ideas to happen. This helps build a steady cannabis market that will last.
Tax Reform Isn’t the Only Fix—What’s Still Needed?
Tax rules are important, but experts agree that fixing California’s legal weed problems needs more changes. Real fixes need more changes to the whole system.
The state needs to stop illegal growing and stores that do not have licenses in a better way. This is especially true in rural areas. More cities and counties should be allowed to have cannabis stores. This could happen if rules about where stores can be located were made easier. It should be easier for people from communities hurt by past drug laws, and for small businesses, to get licenses. The state should also push for safe banking and ways for cannabis businesses to get money. And the state should be clearer about how it spends the cannabis tax money it collects.
Businesses that follow the rules often deal with slow waits for permits, rules that are not always enforced the same way, and lots of paperwork. This makes it hard for people who want to do things right.
Changing California’s marijuana tax law will only work in the long run if other things are done too. The state needs a plan to make cannabis businesses a normal part of the economy more effectively.
Why This Decision Matters to Cannabis Culture
Rolling cannabis, liking good quality flower, and the idea of doing things yourself are important parts of cannabis culture. But when taxes make it hard to buy, the culture is hurt. Keeping state excise taxes low means
More people can get good rolling tools, strains, and gear.
People from different income levels can take part more fairly.
It is easier for creative business people to start. They can bring new ideas to cannabis.
At Purple Rose Supply, we have seen that when people can afford things more easily, it helps them be more creative. People in our community make detailed cannagars. First-time rollers find they enjoy the process.
Also, when carefully grown cannabis is not too expensive, the link between the plant and the person means more. You are not just smoking weed. You are using flower grown with care and respect.
Final Hit: Leveling the Playing Field One Roll at a Time
The choice to keep the cannabis excise tax at 15% is more than just a money rule. It shows support for being fair, for creativity, and for letting people get cannabis.
It sends a message. It says good cannabis and using it responsibly should not only be for rich or well-connected people. By making taxes less of a burden, lawmakers took a needed step to make things more fair for everyone. This helps buyers, small businesses, and cannabis culture.
So if you are rolling a single cannagar outside or getting ready for a group smoke with friends, you can do it knowing California has not made it too expensive for your own ritual.
