California's excise tax on legal weed is increasing, despite efforts to keep it lower to help the struggling industry.

An excise tax is a levy imposed on a good by the state before sales taxes are applied.

The excise tax for weed is 19% as of July 1, up from 15%.

A push to freeze the cannabis excise tax through the state budget failed in June but the legislature is still advancing a bill that could lower the rate back to 15% for the next six years.

Since legal sales of recreational weed began in 2018, California has struggled to bring its market out of the shadows.

The industry blames high taxes that consumers don't pay on illicit weed.

Taxable cannabis sales in California dropped to $1.09 billion for the first quarter of 2025.

That's down 30% from their peak in early 2021, and the lowest quarterly sales in five years.

It's a crisis for the industry, as communities that traditionally relied on cannabis production have collapsed economically.

It's also a problem for the state's finances.

Tax revenues from weed sales provide guaranteed funding for child care slots, environmental cleanup, substance abuse education, and impaired driving prevention efforts as California faces a growing budget deficit.

In 2022, state officials offered relief to growers by eliminating a cultivation tax However, they planned to eventually raise the excise tax to make up for the lost revenue.

Now the industry is asking for help again.

During budget negotiations last month, Governor Gavin Newsom and Assembly Speaker Robert Rivas supported freezing the excise tax.

They could not get agreement from Senate President Pro Tem Mike McGuire, who argued that state programs needed the additional revenue.

Newsom has pledged to sign the bill halting the tax increase if it reaches his desk.

They're working on that.

I'll leave it at that.

I'm intimately familiar with the conversations around that and have great confidence that we'll achieve our stated goals.

For CalMatters, I'm Alexei Koseff.