Cannabis Taxes Increase in Maryland and California Tomorrow, July 1

In California, the marijuana excise tax will jump from 15% to 19%, one of the steepest state-level tax hikes in the industry’s history. The increase is triggered automatically under state law due to a dip in cannabis excise tax revenue. While the California Department of Tax and Fee Administration confirmed the change last month, marijuana businesses and lawmakers have pushed for a freeze, warning the increase could further cripple the already struggling legal market. Assembly Member Matt Haney introduced AB 564, a bill that would halt the increase and keep the rate at 15%. The measure passed the Assembly unanimously but has stalled in the Senate and wouldn’t take effect until January 2026 even if approved. A proposal to include the freeze in the state’s $321 billion budget failed after opposition from Senate leadership.

Senator Christopher Cabaldon, who backed the effort, said he fears the higher rate will drive consumers back to the illicit market, ultimately reducing overall tax revenue. On top of the new 19% excise tax, marijuana transactions in California remain subject to the state’s sales tax—ranging from 7.25% to 10.75%—as well as any local marijuana taxes.

In Maryland, the state’s tax on adult-use marijuana will rise from 9% to 12%, following legislation approved last year that permits gradual increases through 2030. The new tax applies only to recreational purchases; medical marijuana patients remain exempt.

Revenue from marijuana taxes in the state is used for community reinvestment, health programs, and cannabis business support. Future increases are already scheduled, with the rate set to hit 13% in 2027 and 15% by 2030.

Legal marijuana sales began in Maryland in July 2023, one year after voters approved a statewide legalization measure. They began in California in 2018, around 14 months after voters approved legalization in November 2016.