California’s legal cannabis industry can finally breathe a sigh of relief. In a move that gives much needed support for the state’s cannabis market, Governor Gavin Newsom has officially signed Assembly Bill 564 (AB 564) into law. This reverses a significant tax hike and provides a much-needed lifeline to legal operators who have been struggling to compete.
As we covered recently at Beard Bros Pharms when the bill reached his desk, the stakes were incredibly high. The legal market has been under immense pressure from burdensome taxes and competition from the illicit market. With AB 564 now signed, there is renewed hope for the stability and long-term success of the industry that California voters envisioned.
The bill’s signing marks a positive step for the many advocates, businesses, and consumers who have sought reform. It’s a critical acknowledgment from state leadership. They recognize that the existing tax structure was unsustainable and counterproductive, pushing consumers toward the unregulated market. Now, with this tax relief in place, the industry has a fairer chance to thrive.
Rollback on Cannabis Taxes
The core of AB 564 is the reversal of a 25% tax increase. It sets the state’s cannabis excise tax rate back to 15% through June 30, 2028. This move is a direct response to the challenges faced by legal businesses trying to stay competitive.
The previous tax structure, which saw the excise tax jump to 19% earlier in the year, made it nearly impossible for legal dispensaries to compete on price with the illicit market. This new legislation provides a five-year period of stability. It allows operators to plan for the future with more predictable tax obligations.
Governor Newsom talked about the importance of this change. He stated in a recent press release, “We’re rolling back this cannabis tax hike so the legal market can continue to grow, consumers can access safe products, and our local communities see the benefits.”
This highlights the dual goals of the bill: supporting legal businesses while ensuring consumer safety. By making the legal market more competitive, the state encourages consumers to purchase products that are lab-tested and regulated. This deters them from turning to potentially unsafe alternatives.
AB 564 Levels the Playing Field
The passage of AB 564 is a direct effort to address the price disparity between the legal and illegal cannabis markets. Assemblymember Matt Haney (D-San Francisco), who authored the legislation, celebrated the signing. He viewed it as a pivotal moment for the industry.
“California’s cannabis economy can bring enormous benefits to our state, but only if our legal industry is given a fair chance to compete against the untaxed and unregulated illegal market,” said Haney. He added, “AB 564 helps level the playing field. It protects California jobs, keeps small businesses open, and ensures that our legal cannabis market can grow and thrive the way voters intended.”
Haney’s words highlight the economic impact of this legislation. A thriving legal cannabis industry supports thousands of jobs and contributes significantly to the state’s economy. By providing tax relief, AB 564 helps protect these jobs and allows small businesses—the backbone of the industry—to survive and expand.
A Path Forward for the Cannabis Industry
While the signing of AB 564 is a monumental step, it is part of a larger strategy to fortify the legal market. The bill includes accountability measures. These require the California Department of Tax and Fee Administration (CDTFA) to report on the revenue impacts of the tax reduction.
This data will be essential for shaping future cannabis tax policy and ensuring a balance between industry health and state revenue.
The administration has also been clear that enforcement against illegal operators remains a top priority. The goal is to create an environment where legal, compliant businesses can flourish without being undermined by those who operate outside the law.
The unanimous support for AB 564 in the legislature, followed by the Governor’s signature, demonstrates a powerful consensus: a healthy legal cannabis market is good for California.
It’s a win for consumers who gain access to safer products, a win for businesses that can now compete more fairly, and a win for the state, which will see the long-term benefits of a stable and regulated industry.
What This Means for California Cannabis
The signing of AB 564 marks a turning point for California’s cannabis industry. After years of navigating a challenging regulatory and tax environment, operators finally have the breathing room they need. This relief will allow businesses to reinvest in their operations, retain employees, and offer more competitive pricing to consumers.
For consumers, this means better access to safe, tested, and legal cannabis products. By narrowing the price gap with the illicit market, AB 564 encourages more people to shop at licensed dispensaries. This, in turn, strengthens the entire legal framework.
As we move forward, therefore, the industry will be watching closely to see the real-world effects of this tax relief. The hope is that it will lead to a more robust, sustainable, and equitable cannabis market for everyone in California. Ultimately, this is the victory the community has been fighting for, and it lays the groundwork for a brighter future.
