NOTE: This article is provided for informational purposes only and does not constitute tax or legal advice. Always consult with your legal and tax professional to learn more about your legal obligations and compliance with any applicable laws.
Beginning July 1, 2025, the California state cannabis excise tax is scheduled to increase from 15% to 19% per Assembly Bill 195 passed in June 2022.
The latest information can be found on CDTFA's website here. Be sure to check this website frequently leading up to July 1, 2025 for any potential changes to the excise tax increase and your related responsibilities under the increase.
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Assembly Bill 195
Assembly Bill 195 eliminated the cultivation tax in California and stipulates that the CDTFA, in consultation with the Department of Finance, assess and adjust the state cannabis excise tax beginning in 2025 and every two years thereafter by an amount that would generate an amount of the revenue that would have previously been generated by the cultivation tax. Read more about Assembly Bill 195 on California's Legislature Information website.
Assembly Bill 564
Assembly Bill 564 was introduced in February 2025 in an attempt to repeal the cannabis Excise Tax increase introduced by AB 195. As of the writing of this article, AB 564 has passed the Assembly but has NOT yet passed the Senate and has not been signed into law. Read more about Assembly Bill 564 on California's Legislature Information Website.
What do I need to do?
Consult your legal and tax professional to understand your obligations under the excise tax increase and ensure you are properly charging taxes.
Ensure your Excise Tax setup in Config Page > Taxes > Point of Sale Tax Setup is updated after close of business on June 30th, 2025 or before opening on July 1st, 2025.
Check both your Adult Use and Medical tax setup to ensure your excise tax entry has a Rate of 19%.
If your Rate is set to "Automated" you will need to:
Create a custom tax called "CA Excise Tax"
Edit the tax layer where Tax Label = "Excise Tax"
Replace "Excise Tax" with the new custom tax you created.
Confirm the Rate is set to 19% and not "Automated"
Save your changes
Confirm your tax rate with your legal or tax professional by using a draft sale in POS.
NOTE: You do not need to complete the sale in order to verify the tax calculation as it will be displayed in the bottom left of the cart in POS. Additionally, you can print a receipt for the draft sale to see how it would display to the customer by clicking the "Print Receipt" button at the bottom center of the cart in POS.
After your tax updates have been made, check any saved or draft sales that were previously created to ensure the updated tax calculation is reflected prior to completing the sale.
If you are using Post Tax pricing, you may want to review your Post Tax price to ensure it is accounting for the increase in the excise tax. If you do not change your pricing, your margins may be impacted as your out-the-door price will remain the same but the factored-in excise tax will be increased, reducing your profit margins.