SAN DIEGO — California’s cannabis tax has been rolled back, dropping from 19% back to 15% as of October 1. The change comes just months after the state increased the rate in July, and while it’s welcome news for customers and dispensaries, industry leaders say challenges remain.

On October 1, dispensaries began making price adjustments that customers quickly noticed.

“It’s a great move, because we need the regulations, but we also need to be affordable right now, especially in this economy,” said Alex Ayon, CEO and partner of Sessions by the Bay, a dispensary and cannabis lounge in National City.

Governor Gavin Newsom signed off on the rollback, saying the goal is to help legal businesses compete with the tax-free, illegal cannabis market.

“It is kind of easy for people to still shop at an unregulated store, or, you know, environment, because it’s more affordable, but it’s just not great. We need those regulations. We need it to be affordable. So, yeah, the more that they can keep money into our customers pockets, the healthier the industry will be,” Ayon said.

The drop from 19% to 15% saves customers about $1.50 on a $35 purchase. But buyers also pay local taxes — 10% in San Diego and 5% in National City.

California collects hundreds of millions of dollars in cannabis taxes each year, which go toward programs like youth education, substance abuse treatment, law enforcement and local services such as homeless programs. A portion also supports regulations to ensure product safety.

“The regulations that make sure cannabis is safe for people to consume, that the dosing is standardized,” Ayon said.

Unlike the regulated market, illegal cannabis is not tested and isn’t taxed, making it a strong competitor.

“Ideally, the point of legalizing cannabis is to bring that illegal market into the light and to integrate it into the formal economy, and to make sure that it is tested for pesticides, that it is tested for all sorts of other things, like mold,” said cannabis journalist and San Diego State University Professor Jackie Bryant.

Even with the lower state tax, Bryant said legal cannabis remains more expensive.

“The fact is, it’s still 20, 30, tax points higher than what you could get elsewhere. So even if you do see a little bit of a difference, it’s been changing over time, and it’s been high since the beginning,” she said.

Still, both Bryant and Ayon agreed the rollback is a step in the right direction.

“It is definitely not a cure all, but it does show some foresight, and it shows that the state of California has been listening to its constituents, especially the cannabis business lobby,” Bryant said.

The reduced 15% sales tax will remain in effect until June 30, 2028.