Cannabis consumers in California and Maryland are now subject to steeper taxes on state-licensed products, following legislative changes that took effect on July 1, 2025.
California’s Excise Tax Jump: 15% → 19%
A legally mandated adjustment has sharply increased California’s cannabis excise tax from 15% to 19%, effective July 1, 2025, applied to gross retail receipts. This automatic hike followed the 2022 repeal of a cultivation tax; state law stipulates that the excise rate be adjusted to compensate for its removal.
-
Impact on consumers and retailers:
-
Shopkeepers are reporting mounting strain. Retail owners in Big Sur and Manteca warn that legal dispensaries are becoming less competitive compared to untaxed black-market counterparts.
-
As per the Department of Cannabis Control, approximately 60% of California’s cannabis is sold illicitly, largely due to the heavy tax burden on legal products.
-
-
Legislative response underway:
-
In February and April 2025, Assemblymember Matt Haney introduced AB 564, aiming to delay this increase until 2030—this passed the Assembly unanimously (74–0).
-
However, the Senate has yet to act, and attempts to embed a freeze into the state budget did not succeed.
-
Governor Newsom has publicly endorsed halting the tax hike and signaled readiness to sign a legislative freeze if it passes.
-
-
Why this matters:
-
Finance officials argue the tax supports vital public services including childcare, environmental cleanup, drug education, and impaired driving prevention.
-
Yet, with legal cannabis sales down 19% since 2021 and excise revenues plummeting 44% in 2023, opponents stress that further hikes will likely accelerate consumers back to illicit sources.
-
Maryland’s Retail Sales Tax Increase: 9% → 12%
Starting July 1, 2025, Maryland consumers now pay a 12% sales tax on adult-use cannabis—up from the previous 9%.
-
Origin and objective:
-
The increase is part of the Budget Reconciliation and Financing Act of 2025, a comprehensive fiscal plan designed to address a $3 billion deficit.
-
Although the package includes a broader spectrum of taxes—such as on IT services, capital gains, income, and virtual currency kiosks—the cannabis tax rise explicitly aims to bolster the general fund.
-
-
Supporting rollout:
-
The Maryland Comptroller’s Office has distributed technical bulletins, hosted webinars, and updated its online portal to guide retailers through compliance.
-
Emergency regulations—and a public notice period—preceded the formal regulation adoption expected by November 2025.
-
-
Industry reaction:
-
Vendors caution that the steeper tax could burden the nascent legal market, undermining investments by many licensed operators.
-
Broader National Landscape
This summer, Minnesota and Maine also approved increased taxes on state-regulated cannabis. Additional tax proposals are active in Michigan and New Jersey, and in Ohio, Governor Mike DeWine’s plan to double the cannabis tax was ultimately rejected by lawmakers.
Public Warning: Consumers Are Not Revenue Streams
Cannabis advocates and industry leaders have expressed concern that state budgets are increasingly leaning on marijuana taxes as a dependable source of revenue. As tax rates rise, there is growing fear that such policies could backfire by shrinking the legal consumer base.
Rising prices could drive many consumers back to underground sources, undermining the regulated market and depriving states of the very tax revenues they seek to secure.
Final Thoughts
California and Maryland have both raised taxes on legal cannabis—with California implementing a 4-point excise tax surge, and Maryland elevating its sales tax by 3 points. While intended to support state budgets, both moves are stirring deep concern. Consumers face steeper prices, retailers risk losing customers to black‑market alternatives, and advocates argue these policies could ironically shrink the very revenue streams they aim to enhance.
Critics urge prudent recalibration. They contend that sustainable legalization depends on maintaining legal routes that are safe, accessible, and competitive.
{{widget type="FloraFlex\Blog\Block\Widget\ProductList" products_count="5" conditions_encoded="^[`1`:^[`type`:`Magento||CatalogWidget||Model||Rule||Condition||Combine`,`aggregator`:`all`,`value`:`1`,`new_child`:``^],`1--1`:^[`type`:`Magento||CatalogWidget||Model||Rule||Condition||Product`,`attribute`:`category_ids`,`operator`:`==`,`value`:`281`^]^]" template="FloraFlex_Blog::widget/productlist.phtml"}}
