California’s two largest cities are hiking fees and taxes on licensed cannabis businesses, even as the state’s legal marijuana market faces steep revenue declines and growing competition from the illicit trade.
In San Diego, legal cannabis sales have plunged nearly 50% in the latest fiscal year compared to 2021, according to NBC San Diego. Despite the downturn, the City Council voted in March to raise the local cannabis tax from 8% to 10% as part of an effort to plug a wider budget shortfall.
Los Angeles, meanwhile, is moving to increase annual licensing fees for marijuana retailers. The City Council voted unanimously this week to raise renewal fees from $8,486 to $12,617, citing a drop in cannabis licensing revenue that no longer covers the costs of its marijuana regulatory agency, which has almost doubled its staff in recent years, the Los Angeles Times reported.
Industry operators warn the higher costs could push struggling legal stores over the edge. “Many of the remaining LA retailers are on the verge of closing and personal bankruptcy now. They don’t have any extra funds for more fees,” said Timothy Dodd, CEO and co-founder of the Sweet Flower retail chain, in an email to the paper.
Los Angeles’ legal cannabis sales have fallen sharply—down 20% in the last quarter compared to a year earlier and 41% compared to the same period in 2021, according to state data. Illegal dispensaries, which avoid taxes and licensing fees, continue to flourish across the city, further eroding the licensed market’s share.
The fee hikes come as the state government also raises costs. In July, California increased its cannabis excise tax from 15% to 19%—a 26% jump. That move followed the largest quarterly sales drop since legalization, with statewide revenue falling 11% year-over-year in early 2025, even as unit sales ticked up slightly, suggesting consumers are shifting to cheaper products.
Cannabis industry advocates have long warned that excessive taxes and fees, coupled with weak enforcement against illegal operators, are making it nearly impossible for the legal market to survive. As Dodd put it, “In the current state of affairs, you could argue that cannabis operators are better off operating without a license. The fee increase just solidifies that argument.”
Read the whole article from SFGate here.
