Authorized hashish gross sales in California, the nation’s largest market, dipped to a five-year low after a since-repealed excise tax hike went into impact July 1, current state knowledge exhibits.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 comparable to Michigan, the place lawmakers lately permitted 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 line with California Division of Tax and Price Administration knowledge.
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 through the COVID-19 pandemic.
“The gross sales decline is unsurprising,” stated Hirsh Jain, a guide 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 12 months – 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, harassed retailers predicted a gross sales drop would comply with the tax hike.
Nevertheless, it stays to be seen if the gross sales dip is short-term and whether or not gross sales will get better after the state reduce 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 hold the excise tax at that stage till not less than 2028.
When state gross sales taxes in addition to native hashish taxes are accounted for, the full tax burden for California hashish continues to be over 30% in lots of jurisdictions.
Will lawmakers reduce 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 permitted 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 reduce to California hashish taxes to reverse the yearslong development of shoppers drifting towards cheaper illicit market choices.
Subscribe to the MJBiz Factbook
Unique trade knowledge and evaluation that can assist you make knowledgeable enterprise selections and keep away from expensive missteps. All of the info, not one of the hype.
What you’ll get:
- Month-to-month and quarterly updates, with new knowledge & insights
- Monetary forecasts + capital funding developments
- State-by-state information to rules, taxes & market alternatives
- Annual survey of hashish companies
- Client insights
- And extra!
Illicit, unregulated hashish consumption in California continues to be greater than twice as huge because the authorized market, in line with a state-commissioned examine printed earlier this 12 months.
Mentioned Jain: “Barring tax and regulatory reform, it appears seemingly that California will within the coming years be overtaken in gross sales by another state with a fraction of its inhabitants and can not have the ability to declare that it’s the largest hashish market on this planet.”
