CaCOA Launches Campaign to Fight 25% Cannabis Tax Hike

*SACRAMENTO, Calif. –* California cannabis consumers and patients will
start paying over 25% more in excise taxes on safe, regulated products on
July 1st, pushing total tax burdens on legal cannabis to as high as 50% at
retail locations across the state.

The tax hike takes effect after the California State Senate rejected a
proposal to freeze the cannabis excise tax rate in the recent budget
trailer bill, allowing the scheduled increase to proceed. Inclusion of the
freeze would have averted the hike entirely. Instead, millions of
Californians, already facing record-high inflation and affordability
challenges, will now pay significantly more for legal cannabis, while
unregulated, untaxed products remain widely accessible on the illicit
market.

“The State Senate has decided that Californians should pay more for safe,
tested cannabis at the exact moment families are being forced to cut back
on virtually everything else,” said Amy O’Gorman Jenkins, Executive
Director of the California Cannabis Operators Association. “You cannot
squeeze blood out of a stone. This short-sighted decision will push more
Californians toward dangerous illicit products, hurt public health, and
ironically cost the state millions in lost tax revenue, directly hurting
the youth drug prevention programs and community initiatives that depend on
these funds.”

California’s legal cannabis market has been in steep decline since 2021,
with licensed sales dropping 34% while illicit operators control an
estimated 60% of total market activity. More cannabis licenses are now
inactive or surrendered (10,828) than active (8,514), representing the loss
of 7,100 small farms, thousands of brands, and nearly 22,000 jobs over two
years.

Michigan, with just one-quarter of California’s population, now outsells
the Golden State in legal cannabis due to lower taxes and expanded retail
access.

The tax increase particularly impacts social equity operators and
low-income consumers, undermining the goals of California’s equity programs
designed to address decades of cannabis prohibition’s disproportionate harm.

“This tax increase is a direct blow to the survival of equity businesses
like mine,” said Kika Keith, founder of Gorilla Rx. “We’ve already endured
years of broken promises, underfunding, and structural barriers, and now
we’re being taxed out of existence. Our customers are from the very
communities harmed by the War on Drugs: working families, elders, and
patients who can’t afford a 25% hike on medicine. Sacramento’s policies are
pushing people back into the illegal market and leaving social equity
operators to carry the burden. This isn’t equity—it’s exploitation. We need
immediate relief, not more roadblocks.”

Economic analysis shows cannabis taxes in California now reach 78% of
wholesale value, compared to just 8.4% for alcohol and 29.5% for tobacco.
Research demonstrates that even modest price increases drive cannabis
consumers to illicit alternatives, where products are untested for
pesticides, mold, and dangerous chemicals.

State modeling indicates that even a 10% drop in legal sales following the
tax increase would result in a net revenue loss exceeding millions of
dollars for California, creating a lose-lose scenario that reduces both
consumer safety and state funding for community programs.

Assembly Bill 564, authored by Assemblymember Matt Haney (D-San Francisco)
would roll back the excise tax to 15%, protecting consumer access while
stabilizing state tax revenue. The bill passed the Assembly with strong
bipartisan support and is now pending in the California State Senate.

However, because AB 564 is a policy bill and not part of the state budget
process, it cannot take effect until the fall, well after the July 1 tax
hike already took effect, leaving consumers and licensed businesses to
absorb the financial fallout in the meantime. Many of the businesses that
close and consumers who turn to the illicit market during this period will
never return to the legal system, creating permanent damage to California’s
regulated cannabis marketplace.

“A 25% tax hike on an industry that’s barely hanging on is a full-blown
disaster, and absolutely should have been avoided,” said Assemblymember
Haney. “Raising this tax is a slap in the face of small cannabis businesses
who simply can’t afford it and are competing with an illegal market that is
booming. When you put a huge tax increase on a struggling industry that is
already facing high taxes and is barely hanging on, it’s going to hurt
businesses, workers, and consumers. That’s economics 101, and it’s common
sense. I’m incredibly frustrated that the support was not there in the
State Senate to stop this tax increase before July 1, but I’m going to keep
fighting like hell to get AB 564 out of the Senate to the Governor’s desk
and deliver real tax relief for small businesses that desperately need it.
I appreciate that the State Assembly has already unanimously passed my
bill, AB 564, to freeze the tax, and that Governor Newsom has publicly
expressed his support. This is an existential moment for California’s legal
cannabis industry. We will keep working to get this done.”

The legislation is supported by a broad coalition of cannabis operators,
labor unions, patient advocates, and consumer groups representing hundreds
of licensed businesses and millions of Californians who rely on safe, legal
cannabis access.

“Every day we delay action on AB 564, more Californians are priced out of
the legal market and into the hands of illegal dealers who don’t care about
testing or safety, let alone paying their taxes,” Jenkins said. “We urge
the State Senate to honor their commitment to public health, consumer
protection, and the will of California voters.”
About CaCOA

The California Cannabis Operators Association (CaCOA) is the largest and
most influential cannabis industry association in the Golden State. They
are proud to represent the backbone of the legal cannabis industry:
licensed operators across the supply chain who work to ensure safe, tested,
and accessible cannabis for consumers and patients every day.

CaCOA’s unified voice represents 300+ operators across 125 municipalities,
with members operating more than 475 licenses throughout the supply chain.
Their retail members provide access to legal cannabis in 85%+ of the
state’s authorized local markets through 200+ stores, serving 50%+ of
California’s total population. Across the supply chain, members operate in
90%+ of the state’s communities where at least one type of cannabis
business is allowed.