Authorized hashish gross sales in California, the nation’s largest market, dipped to a five-year low after a since-repealed excise tax hike went into impact July 1, latest state information exhibits.
The predictable – and predicted – impact of elevated taxes in an already lagging mature market spells potential hassle for different states the place officers are elevating taxes reminiscent of Michigan, the place lawmakers lately authorized a brand new 24% wholesale tax.
California hashish retailers reported simply shy of $940 million in hashish gross sales within the third quarter of 2025, in response to California Division of Tax and Payment Administration information.
That’s down from $993 billion within the second quarter of 2025 and represents the bottom quarterly haul since early 2020, earlier than gross sales spiked in the course of the COVID-19 pandemic.
“The gross sales decline is unsurprising,” stated Hirsh Jain, a advisor and the principal of Los Angeles-based Ananda Technique.
“California was already one of many highest taxed states for authorized hashish, which is why it has lengthy had the bottom per-capita gross sales of any mature grownup use state.”
California hashish tax hike damage authorized gross sales – as predicted
Annual gross sales are additionally on tempo to dip for the third consecutive yr – and to drop earlier than $4 billion for the primary time because the market’s launch.
California authorized marijuana gross sales in 2023 topped $4.4 billion, in comparison with $4.2 billion in 2024.
As MJBizDaily reported, burdened retailers predicted a gross sales drop would observe the tax hike.
Nonetheless, it stays to be seen if the gross sales dip is momentary and whether or not gross sales will get well after the state lower taxes.
The state’s 15% excise tax elevated to 19% on July 1 as a part of a tax construction imposed when the state eradicated its per-ounce cultivation tax partially in response to complaints from struggling cultivators.
The excise tax reverted again to fifteen% as of Oct. 1 after Gov. Gavin Newsom signed a invoice into legislation that can maintain the excise tax at that degree till not less than 2028.
When state gross sales taxes in addition to native hashish taxes are accounted for, the whole tax burden for California hashish remains to be over 30% in lots of jurisdictions.
Will lawmakers lower marijuana taxes to assist out lagging markets?
New markets appear to acknowledge the issue posed by the tax burden in older markets like California, the place authorized gross sales started Jan. 1, 2018, after voters authorized legalization in November 2016.
For instance, the hashish excise tax in Ohio, the place gross sales started in August 2024, is barely 10%.
Many operators are calling for a extra dramatic lower to California hashish taxes to reverse the yearslong pattern of shoppers drifting towards cheaper illicit market choices.
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Illicit, unregulated hashish consumption in California remains to be greater than twice as massive because the authorized market, in response to a state-commissioned research revealed earlier this yr.
Mentioned Jain: “Barring tax and regulatory reform, it appears doubtless that California will within the coming years be overtaken in gross sales by another state with a fraction of its inhabitants and can not be capable to declare that it’s the largest hashish market on this planet.”
