California lawmakers stood united in the back of extending a lifeline to the state’s floundering hashish business after they unanimously complex regulation on April 22 to cancel an excise tax build up on dispensary gross sales.
In spite of heated opposition from hashish tax income beneficiaries, the state’s Meeting Trade and Professions Committee voted, 15-0, to improve Meeting Invoice 564. All through Tuesday’s listening to, supporters emphasised that the regulation would simply freeze the state’s present 15% excise tax fee, no longer reduce taxes.
With out A.B. 564, subsidized by way of Matt Haney, D-San Francisco, the California Division of Tax and Rate Management (CDTFA) could be required below 2022 regulation orchestrated by way of Gov. Gavin Newson to jack the excise tax fee to 19% on July 1, 2025, representing a 27% build up on an already overtaxed market.
Along with the excise tax, hashish shops also are at the hook for remitting as much as a ten.75% state gross sales tax and as much as a ten% native gross sales tax in towns like Los Angeles, San Diego and San Jose.
Haney referred to as the approaching excise tax hike an “extinction match” for the state’s approved hashish operators.
“The prison hashish business wishes a lifeline to stay small companies open, to stay loads of 1000’s of staff hired and stay the promise we made to electorate to make hashish prison and obtainable,” Haney mentioned throughout Tuesday’s listening to.
California’s approved retail footprint has flatlined at kind of 1,225 energetic shops since mid-2023, as 57% of the state’s towns and counties nonetheless limit hashish dispensaries, in keeping with the California Division of Hashish Regulate (DCC).
As well as, California led the country with 12,600 hashish jobs misplaced in 2023 and 5,000 hashish jobs misplaced in 2024, in keeping with business employment company Vangst.
“California has at all times been on the center of The usa’s hashish economic system and tradition, however since electorate handed Prop. 64, California has no longer given the prison hashish business an opportunity to develop in its possible,” Haney mentioned. “The prison hashish business, which is matter to state and native taxes and charges, is continuously at danger of being overtaken by way of the unlawful, untaxed business.”
Haney pointed to a March 2025 financial document commissioned by way of the DCC that estimated 38% of hashish fed on by way of Californians in 2024 got here from approved assets, whilst the bulk got here from unregulated and untaxed assets. “This implies California is lacking out on tens of millions in misplaced possible income from illicit, untaxed gross sales,” he mentioned.
Attesting in improve of A.B. 564, Caren Woodson, who serves at the board of the California Hashish Business Affiliation, instructed lawmakers to not confuse “survival with balance” when taking into account whether or not operators can resist a tax hike. Woodson may be the senior director of compliance and licensing for Kiva Manufacturers Inc.
Woodson discussed the new collapses of enormous California operators like Glide Hashish Co., Herbl, MedMen, Prime Occasions, Statehouse Holdings, Gold Plant life and Grassdoor.
“I will inform you from revel in, even final class leaders like Kiva aren’t immune,” she mentioned. “We’ve skilled 3 consecutive discounts in pressure since 2022. If corporations with funding experience, scale and logo energy are folding, what hope is there for a mom-and-pop operator or for social fairness licensees? The ones companies are disappearing quietly with out press releases or receiverships—simply extra consolidated storefronts, extra empty warehouses and extra goals deferred.”
Woodson additionally discussed any other danger going through hashish companies: price lists.
RELATED: Prime Price lists Hurting Hashish Sector, With Little Reduction in Sight
From packaging to {hardware}, equipment and compost, each and every sector of the hashish provide chain is going through inflationary drive, she mentioned.
“New price lists and a tax build up?” Woodson mentioned. “The ones at the breaking point received’t live to tell the tale. Squeezing extra from the rest 40% out there received’t generate new revenues; it is going to shrink them. Each minute we spend debating tax will increase is a minute we’re no longer spending on answers that topic, like increasing retail get entry to, strengthening enforcement and bringing customers to the prison marketplace.”
Amid California’s business hardships, the CDTFA reported $219 million in general hashish tax income from the fourth quarter of 2024—together with $127.8 million from excise taxes—the lowest-generating quarter since Q1 of 2020. The tax company has but to document the primary quarter of 2025.
As well as, the state’s approved hashish shops reported $1.08 billion in gross sales for the primary quarter of 2025, representing a 23% lower from a marketplace height in the second one quarter of 2021, in keeping with the DCC.
Whilst the ones in improve of A.B. 564 argued that elevating the excise tax would handiest pressure customers out of the approved marketplace and subsequently shrink state income, the ones whose organizations are at the receiving finish of the excise tax income antagonistic the invoice throughout the April 22 committee listening to.
Tona M. Pena, the executive of tribal methods and advocacy at Formative years Ahead, one among two number one testifiers in opposition of the invoice, instructed committee participants that she was once representing 98 early life and environmental organizations that rely on hashish tax income.
“I’m right here as of late to induce you to prioritize investment for youngsters, early life and the surroundings over the hashish business,” she mentioned. “Formative years organizations in rural and concrete communities are the toughest hit by way of the warfare on medicine, together with tribal organizations and international locations.”
Pena mentioned tribal international locations all over Northern California and the Central Valley have suffered for many years from hashish cultivators polluting waterways and growing “poisonous waste dumps” on their lands. The ones environmental compliance problems, then again, essentially contain unlicensed operations, no longer the ones regulated by way of the DCC.
Heidi Keiser, the director of presidency affairs at Kid Motion Inc., a company that helps circle of relatives and kid care suppliers in Sacramento, additionally testified in opposition.
“The revenues derived from the hashish excise and cultivation taxes constitute a a very powerful investment flow for kid care slots wanted by way of households with decrease earning,” she mentioned. “Right here in Sacramento County, no fewer than 4,000 kids are nonetheless on our wait checklist, urgently expecting a kid care slot.”
Those kid care methods and early life teams, together with environmental methods, legislation and justice organizations, and drug remedy and prevention facilities, are a number of the Tier 3 recipients of California’s hashish excise tax income that Newsom struck a handle in 2022.
Somewhat than offering those organizations a extra strong type of investment, the governor orchestrated a state funds in 2022 that precipitated the hashish excise tax fee build up on July 1, 2025, will have to the excise tax income fall under a baseline of $680 million every year for 3 years. The shrinking excise tax income has but to hit that benchmark.
Committee Chairman Marc Berman, D-Menlo Park, mentioned that whilst he wasn’t an assemblymember when electorate authorized citizen-initiated Proposition 64 within the November 2016 election, he reveals the present Tier 3 investment warfare “irritating” and “unlucky.”
“I want they didn’t put it in combination the best way they did as a result of we will have to be investment implausible neighborhood organizations within the funds,” he mentioned. “We will have to be investment them philanthropically. I in my view don’t love tying it to different issues, as a result of then when the ones different issues fight and we wish to make adjustments to what our means was once going to be and what the promise was once, then it negatively affects the good organizations which are right here as of late and that spoke against the invoice, as a result of we’re no longer giving them the investment that they have been promised that they concept they have been going to get.”
Berman additionally identified that California’s funds problem received’t repair itself whilst the Trump management “slashes investment” for methods reminiscent of organizations that make up the state’s Tier 3 entities.
In spite of the investment troubles, the committee chairman indicated that taxing California’s hashish business to loss of life serves no one.
“We’re dedicated to creating positive that our communities have the sources that they want whilst doing what’s essential to verify a hashish business nonetheless exists to tax within the first position,” he mentioned.
