November 18, 2022
In November 2016, California voters approved Proposition 64, which legalized the nonmedical use of cannabis. Proposition 64 created two excise taxes on cannabis: a retail excise tax and a cultivation tax.
First Revenue Data Following Elimination of Cultivation Tax. Chapter 56, Statutes of 2022 (AB 195, Committee on Budget) eliminated the cannabis cultivation tax effective July 1, 2022. The revenue estimates reported in this post represent the first quarter of cannabis tax revenues without the cultivation tax.
Preliminary Total for First Quarter of 2022-23: $128 Million. The administration currently estimates that retail excise tax revenue was $128 million in the first quarter of 2022-23 (July through September).
Retail Excise Tax Revenue Declined Faster Than Ever Before. As shown in the figure below, state cannabis tax revenues have declined for five consecutive quarters. The loss of cultivation tax revenue accounts for a large part of last quarter’s revenue decline. At the same time, retail excise tax revenue---which, in theory, should benefit from the elimination of the cultivation tax---declined at the fastest rate we have observed since California’s licensed cannabis markets opened in early 2018.