By Shelby Huffaker, MPH | Chair, San Diego Chapter of Americans for Safe Access

With several tax increases on the horizon at both the state and local levels, the San Diego chapter of Americans for Safe Access has launched a new initiative to give patients and consumers a platform to demonstrate to lawmakers the already high cost of legally purchased cannabis products in the city. Members of the public are encouraged to upload their receipts for cannabis products purchased in San Diego using the following Google Form.

Background

In 2022, California made a significant shift in its approach to cannabis taxation, amending its tax law to eliminate the cultivation tax on cannabis products entering the commercial market. While this change was seen as a step forward in easing the financial burden on cannabis producers, it came with an important caveat: the state would make adjustments to the cannabis excise tax to offset the loss in revenue from the cultivation tax. As a result, California’s cannabis excise tax is set to increase from 15% to 19% starting in July of 2025, unless action is taken by state lawmakers.

Meanwhile, in the City of San Diego, consumers already pay over 30% in taxes at the final point of sale—including an 8% local cannabis business tax, the previously mentioned 15% cannabis excise tax, and a 7.75% city-wide sales tax. Yet, despite the already-high cost of legal cannabis, Mayor Todd Gloria is proposing a 2% increase in the 8% cannabis business tax as part of efforts to shore up the City’s struggling budget, bringing local tax rates on cannabis to a hefty 17.75%.

As a result of these state and local tax increases, San Diego consumers could soon be required to pay up to six percentage points more for legally acquired cannabis products—almost 40% in total taxes. This increase will impact all cannabis consumers but will place a particular strain on both patients and small and mid-sized cannabis businesses, threatening equity in access and cannabis business ownership while undermining public health goals and sustainable revenue generation. 

The Impact on Patients

For the 1.9 million registered medical cannabis patients in California, cannabis is more than just a recreational product; it is a vital source of medicine. Still, most cannabis and cannabinoid products are not covered by health insurance plans. This is due to their Schedule I status under the Controlled Substances Act and the subsequent lack of FDA approval of all but one cannabidiol (CBD) product and three synthetic tetrahydrocannabinol (THC) products. In addition, while Medical Marijuana Identification Card-carrying patients are exempt from the local sales tax and may receive free donated product through California’s medical cannabis compassionate donation program, the registration process is complicated and expensive, and donated products do not always match patients’ needs. As a result, patients who rely on cannabis to manage chronic conditions, pain, anxiety, or other medical issues report facing significant financial barriers to accessing regulated products, and the rising costs associated with state and local tax hikes could make it even more difficult to access the products they need.

California’s medical cannabis program was intentionally designed to provide safe access to those in need. However, as prices continue to rise, patients may be forced to turn to unregulated sources to meet their needs. This could not only compromise their health but also jeopardize the safety and efficacy of the products they consume.

The Strain on Small and Mid-Sized Cannabis Businesses

In addition to the impact on patients, looming tax increases are also a cause for concern for small and mid-sized cannabis businesses across California. With high operational costs, a complex, labor-intensive regulatory environment, and fierce competition from both large corporations and the unregulated market, many of these businesses already struggle to stay afloat. 

A 4-6% tax hike could be the tipping point for many smaller businesses already operating on slim margins. Larger corporations, with their vast resources, are better positioned to absorb such an increase, but small and mid-sized businesses are more vulnerable. This could result in closures, layoffs, and a reduction in the diversity of businesses within the legal cannabis market. Business owners from groups disproportionately harmed by decades of cannabis prohibition, including Black, Indigenous, and people of color (BIPOC), are likely to be most harmed by these impacts due to the lasting impacts of overcriminalization and economic disinvestment. To help those most impacted by Drug War policies thrive in the now-legal market, it is therefore essential to prevent further tax hikes while also implementing robust cannabis social equity programs.

High Costs Undermine the Regulated Market

Increasing cannabis taxes would also reduce the ability of licensed cannabis businesses to compete with the unregulated market. In California, the sale of unregulated products already presents a serious challenge to the legal cannabis industry ($8 billion annually), as consumers seek out cheaper, untaxed products from illicit sources—even as state and local officials invest enormous public resources into eradicating these suppliers.

By raising taxes on legal cannabis, the city and state could unintentionally push more consumers to shop from the unregulated market, where products are less likely to be tested for safety, potency, and contaminants. It could also prevent would-be licensed operators from entering or remaining in the regulated market. This could not only undermine the goals of the legal cannabis industry but also create additional public health risks and loss of tax revenue for local jurisdictions.

How You Can Help

Fortunately, there is still time to take action to prevent further increases in the cost of cannabis. Whether you are a patient who relies on cannabis as medicine or a small business owner struggling to make ends meet, your input will be vital to ensuring that lawmakers understand the real-world impacts of this tax hike. In addition to participating in San Diego ASA’s receipt collection campaign, we encourage stakeholders to engage in the actions outlined below.

To prevent state cannabis excise tax increases, California NORML has sponsored California Assembly Bill 564 (Haney), which “would repeal the requirement that the department adjust the cannabis excise tax rate” and retain “the existing cannabis excise tax rate of 15%.” To express your support for AB 564, use the lookup tool on www.findyourrep.legislature.ca.gov to identify your lawmakers and contact them via phone or email, or attend the California NORML/Americans for Safe Access Lobby Day in Sacramento on March 24, 2025 for a chance to speak with your representatives directly.

To help stop the proposed increase in the local cannabis business tax, make your voice heard by submitting a public comment to the City Council—in person, virtually, or in writing. The City Council is currently set to consider the tax increase on March 3, 2025, but non-agenda public comments are accepted at any City Council meeting. Refer to the San Diego Americans for Safe Access guide for tips on submitting an effective comment. You can also contact your City Councilmember directly via email or request a meeting to discuss your concerns. 

Finally, stay informed by signing up for the San Diego ASA newsletter and following us on Facebook and Instagram for updates on the proposed tax increases.

Conclusion

The potential increases in California’s cannabis excise tax and San Diego’s local cannabis business tax are more than just fiscal issues; they are a matter of access to medicine for patients and the survival of smaller businesses. Even a 6% increase could have far-reaching consequences in a landscape where prices are already high and the competition fierce. By speaking up, you can help ensure that San Diego’s cannabis market remains safe, accessible, sustainable, and fair for all.