📢 It’s Official: California Cannabis Excise Tax Set to Rise to 19% Starting July 1, 2025
California’s cannabis industry is bracing for a significant change. Starting July 1, 2025, the state’s cannabis excise tax will officially increase from 15% to 19%, as confirmed by the California Department of Tax and Fee Administration (CDTFA).
🚨 What’s Changing?
Previously, cannabis retailers paid a 15% excise tax based on the wholesale cost. However, under the revised rules, the tax will be calculated at 19% of the retail price, significantly impacting both retailers and consumers. This change is part of AB 195, a law passed in 2022 that shifted tax responsibilities from distributors to retailers and included an option for the CDTFA to adjust the rate to ensure consistent revenue.
💡 Why the Increase?
The CDTFA’s decision comes after a mandated review of cannabis tax revenues. To meet the state’s minimum revenue requirement of $670 million annually, the agency determined that a 19% rate is necessary starting in the new fiscal year.
💥 What This Means for the Industry
Retailers will need to update pricing strategies, recalibrate POS systems, and retrain staff to explain the higher tax to customers. This tax change is part of the broader landscape where the global legal cannabis market is expected to reach $58 billion by 2028 – a significant opportunity for retailers to grow their business as they adapt to the shifting market.
Consumers can expect to see higher total prices at checkout.
Operators in already-tight margins may face further challenges staying profitable.
🧮 Don’t Forget Local Taxes
On top of the excise tax, cities and counties can still impose local cannabis business taxes, which vary significantly across the state. In some areas, the total tax burden could exceed 30% when combined with sales and local cannabis taxes.
✅ What You Can Do Now
Review your pricing models and tax settings before July 1.
Notify customers in advance to avoid a surprise at checkout.
Consult your tax advisor or software provider for compliance adjustments.
Also, with Mother's Day cannabis sales approaching in 2025, it’s a great time to plan creative sales strategies to offset rising costs and maintain profitability during peak seasons.
Read the full CDTFA Special Notice here.
Stay ahead of the curve. Tax changes like this one can make or break dispensary margins—be proactive, stay compliant, and keep your customers informed.
As you have read in this article it is not as straightforward as other industries. Operating a cannabis business is extremely difficult, and not having the know-how can really affect your bottom line. Vende Platform is made to help its clients run the business they have always wanted. Providing you with all the necessary tools for your business to succeed is our goal. Schedule a demo with us today and see how running your business on the Vende can help.