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California Cannabis Sales Dip Below $4 Billion Amid Tax Turmoil

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California Cannabis Sales Dip Below $4 Billion Amid Tax Turmoil

Licensed California cannabis dealers reported3.9 billion dollarsCannabis sales in 2025 are down significantly from $4.2 billion in 2024, according to government data released Thursday.

It is also the third straight year of decline in the country’s largest market. Cannabis sales in California will reach $4.4 billion in 2023, according to the state Department of Revenue.

Athe excise tax has since been abolishedthe increase, which took effect July 1, also may have contributed to lower sales in the nation’s largest legal hemp market.

But sales in the fourth quarter — after the tax hike was reversed on Oct. 1 — were still well below the same period a year ago, according to DTFA data.

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The CPIA tool uses artificial intelligence to scan images of cannabis packaging or labeling

California’s Department of Cannabis Control (DCC) has launched a new AI-based tool designed to help cannabis licensees assess whether the product’s packaging and labeling may be appealing to children.

The Cannabis Product Image Analyzer (CPIA) program, announced by the department this week, allows users to upload photos, screenshots or other supported image files of cannabis packaging and labels. The tool then analyzes the image and provides a summary that indicates whether the package is likely to attract children under the standards set forth in California’s regulations.

According to DCC, the agency does not store uploaded images or resulting summaries.

The department said the tool is designed to help licensees conduct their own independent assessments of packaging and labeling compliance. California regulations prohibit hemp products that are attractive to children.

Examples of prohibited images may include images of minors or persons under the age of 21, cartoons, similes of characters or phrases commonly used to advertise to children, imitation of candy packaging, and use of terms such as “candy,” “candy,” or alternative spellings including “kandi” and “candies.”

Regulators encourage licensees to test the new tool and provide feedback through a public survey. DCC said the responses will help guide future improvements and functionality.

The announcement was included in a broader regulatory update from the department that highlights several ongoing rulemaking efforts.

Among the recent changes, the DCC announced that emergency rules have been adopted to allow retail owners who hold both adult (A) and medical (M) use designations to separate those designations and create a matching M retail license in the same licensed premises. Eligible businesses can request a split through the newly available application process.

The Department is also accepting comments from the public on proposed updates to the Track and Trace system until July 20, 2026. The proposed changes would introduce additional safeguards against fraudulent transactions and potential abuse related to “lab purchases,” and would expand data entry requirements by requiring certain tax information from retailers and requiring retailers to provide certificates of analysis to customers upon request. A public hearing on the proposal is scheduled for July 21.

In addition, regulators continue to seek public input on proposed updates to pesticide testing requirements for cannabis products. Comments on this rulemaking proposal are accepted until June 12.

The DCC also announced upcoming public listening sessions as part of efforts to increase engagement between licensees and department management. In-person sessions are scheduled for June 24 in Redway and July 30 in Sacramento, with additional 2026 dates to be announced at a later date.

In another update, the department said grow license holders who requested both adult and medical use designations can now view both designations on their license certificates and license records. The agency reiterated that licensees can do business with other licensees regardless of whether their licenses are A- or M-designated.

The department said it continues to monitor developments in federal cannabis transfers and will provide updated resources as information becomes available.

The regulatory update also included recent consumer advice regarding the voluntary recall of one Teds Budz flower product due to the presence of Aspergillus terreus, issued on 2 June. Additional recall information remains available on the department’s recall portal.

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AB 2697

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Under AB 2697, businesses would need approval from local jurisdictions

The California Senate Committee approved and passed the Assembly bill that would allow marijuana retailers to offer drive-through windows serve customers.

The measure, which passed the Senate Business, Professions and Economic Development Committee on a 7-3 vote Monday, says licensed cannabis retailers and micro-businesses with storefronts can sell marijuana products “to a customer in a vehicle in a drive-thru located on the premises.”

Under AB 2697 by Assemblywoman Gail Pellerin (D), businesses that sell cannabis would need approval from the local jurisdictions in which they operate to add a drive-thru option.

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California Earned $248 Million in Q1 Cannabis Tax Revenue

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California Earned $248 Million in Q1 Cannabis Tax Revenue

California’s cannabis industry generated nearly $248 million in tax revenue during the first quarter of 2026, according to the California Department of Taxation and Fee Administration.

The total includes $143.6 million in cannabis excise and $104.3 million in cannabis sales taxes. The figures do not account for unpaid returns or those still being processed, officials at a press release.

Quarterly tax revenue represents a drop from the previous quarter, which officials revised to $257.6 million (from $255.1 million) due to amended and delayed returns.

Additionally, based on the latest figures, the market’s total tax revenue since California began sales of adult-use cannabis now exceeds $8.1 billion, including $4.34 billion in excise taxes, more than $3.28 billion in sales taxes and $500.6 million in a now-suspended cultivation tax, which lawmakers is eliminated in the year 2022.

Cannabis excise duty is applied at the retail level based on gross receipts. State sales tax is added after the excise tax is applied.

Meanwhile, in March, the Los Angeles City Council asked city officials draft language for an “amnesty” program for the city’s cannabis businesses, which collectively owed hundreds of millions in back taxes and fees.

Based in Portland, Oregon, Graham is the editor-in-chief of Ganjapreneur. He has been writing about the legalization landscape since 2012 and has contributed to Ganjapreneur since our official launch in…

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