Background. In November 2016, California voters approved Proposition 64, which legalized the nonmedical use of cannabis. Proposition 64 created two excise taxes on cannabis: a 15 percent retail excise tax and a cultivation tax. Chapter 56, Statutes of 2022 (AB 195, Committee on Budget) eliminated the cultivation tax on July 1, 2022. As required by this law, the administration raised the retail excise tax rate to 19 percent on July 1, 2025.
Preliminary Total for Second Quarter of 2025: $147 Million. For cannabis excise tax returns filed for the second quarter of 2025, the total amount of tax due is $147 million. Preliminary revenues tend to differ modestly from actual revenues for various reasons, such as delays in filing or payment.
Current LAO Estimate for 2024-25: $603 Million. We currently project cannabis tax revenues of $603 million in 2024-25 and $773 million in 2025-26. As shown in the figure below, these estimates are slightly higher than the revenues anticipated by the 2025-26 budget package, which used a forecast from the 2025 Governor’s May Revision. Our forecast and the administration’s both reflect the recent tax increase noted above. Both forecasts assume that this tax hike will reduce the size of the licensed cannabis market. This negative effect, however, likely will offset only a small share of the revenue raised by the tax hike.
