AB 564: What California’s Cannabis Tax Rollback Means (and What It Doesn’t)

September 10th, 2025

AB 564: What California’s Cannabis Tax Rollback Means (and What It Doesn’t)

California NORML chart showing cannabis pre-roll excise $1.57 at 19% ($1.24 at 15%) vs wine 1¢/5oz, beer 2¢/12oz, liquor 8¢/1.5oz, cigarette 14¢; notes 7/1/25 hike and AB 564 would roll taxes back.

Source: California NORML; based on DCC “Price Per Unit” report and LAO analysis.

Update — Sept 10, 2025: The California Senate passed AB 564 to roll back the cannabis excise tax from 19% to 15% starting Oct 1 (if enacted). The bill now returns to the Assembly for concurrence on Senate amendments, which must happen by the end of day Friday, Sept 12. If the Assembly concurs, the bill goes to Governor Newsom, who has until Oct 12, 2025 to sign or veto. Marijuana Moment+1

California’s excise tax jumped from 15% to 19% on July 1, 2025. AB 564 would keep 19% through Sept 30, then restore 15% from Oct 1, 2025 through June 30, 2028. After that, the “trigger” could resume—capped at 19%. The bill has already cleared the Assembly and is on third reading in the Senate. CDTFA+1 trackbill.com leginfo.legislature.ca.gov

How we got here

In 2022, California eliminated the cultivation tax and set the retail excise tax at 15%, but added a mechanism to raise the rate in 2025 to replace lost cultivation-tax revenue. That trigger kicked in on July 1, 2025, lifting the excise tax from 15% to 19%. CDTFA+1

What AB 564 would do

Keep the 19% excise rate in place through Sept 30, 2025.
Reduce the excise rate back to 15% from Oct 1, 2025 through June 30, 2028.
Require state agencies to report on market impacts and options for future changes.
Beginning in FY 2028–29, the adjustment mechanism (capped at 19%) could resume. leginfo.legislature.ca.gov

Status right now: AB 564 passed the Assembly (74–0) and, as of Sept 8, was read a second time in the Senate and ordered to third reading (i.e., ready for a floor vote). trackbill.com

What AB 564 does not change

It doesn’t change regular state and local sales taxes or any local cannabis business taxes.
It doesn’t overhaul broader regulations.
It doesn’t, by itself, address federal tax burdens like 280E.

Autumn Brands cannabis flower jar with two buds on a white background (3.5g)

What this could mean

Consumers: If AB 564 is enacted, the state excise portion would drop by four percentage points starting Oct 1. Shelf prices are set by retailers and influenced by local taxes and costs, so real-world price changes may vary. leginfo.legislature.ca.gov
Licensed operators: Restoring 15% could help legal operators compete with the illicit and intoxicating-hemp markets—one piece of a larger puzzle that still includes enforcement, local access, and compliance costs. (Lawmakers have also weighed hemp reforms in separate legislation this session.) [Context only; not a request to cite]

What’s next (key dates)

Final legislative deadline: Sept 12, 2025 — last day for either chamber to pass bills this session.
If AB 564 passes the Legislature: it goes to Governor Gavin Newsom, who has until Oct 12, 2025 to sign or veto.
Governor’s stance: Newsom has previously indicated he intends to sign the bill.

Timeline at a glance

July 1–Sept 30, 2025: Excise tax = 19% (currently in effect). CDTFA
Oct 1, 2025–June 30, 2028: If AB 564 becomes law, excise tax = 15%. leginfo.legislature.ca.gov
FY 2028–29 onward: Adjustment mechanism may resume (≤19%). leginfo.legislature.ca.gov

Note: This post is informational and not tax or legal advice. For filing and rate application details, see CDTFA’s tax guide and rate notices. CDTFA+1