A new law reversing a previous state tax hike on cannabis went into last week with the goal of trying to help sustain the state’s struggling legal cannabis industry. 

“We’re rolling back this cannabis tax hike so the legal market can continue to grow, consumers can access safe products, and our local communities see the benefits,” Gov. Gavin Newsom said after signing the bill on Wednesday. 

In July this year, the state excise tax on cannabis rose from 15% to 19%, adding another burden to the already struggling legal cannabis industry. 

Since 2021, the legal market share of total cannabis consumption has been around 40%. The extra costs of purchasing legal cannabis have allowed the illegal industry to thrive as consumers opt to buy marijuana without the added taxes, according to the state Department of Cannabis Control. 

AB 564, written by Assemblymember Matt Haney, D-San Francisco, freezes the state cannabis tax at 15% until 2028. 

“California’s cannabis economy can bring enormous benefits to our state, but only if our legal industry is given a fair chance to compete against the untaxed and unregulated illegal market,” Haney said in a statement. “AB 564 helps level the playing field.” 

Origins Council, a nonprofit based in Ukiah that does policy advocacy for cannabis cultivation in rural regions, was one of several organizations to sponsor the bill.

“There’s much more to be done, but AB 564 is a step in the right direction,” Origins Council wrote in a social media post after Newsom signed the bill.