California Marijuana Taxes for Cannabis Retailers Made Simple

Cannabis businesses across California have been subject to new cannabis taxes since the regulated market opened. The exact tax burden depends on where your dispensary operates, since local rates vary. Understandably, this creates plenty of questions and confusion for retailers. Fortunately, the California Department of Tax and Fee Administration (CDTFA) publishes guidance and tutorials that break the cannabis tax code down.

In general, dispensaries deal with taxes at three levels: state, district, and city or county. At the state level, the main categories are sales tax, excise tax, and use tax. Below, we’ll walk through each one and point you to resources for the rates that apply to you.

Important: California’s cannabis tax rules have changed several times since launch. The state eliminated the cultivation tax in 2022 and moved excise-tax collection to retailers in 2023. The excise rate then rose to 19% on July 1, 2025, before returning to 15% of gross receipts on October 1, 2025, and the next scheduled adjustment is delayed to the 2028-2029 fiscal year. Because rates and rules keep changing, always confirm current figures with the CDTFA tax guide before filing.

Marijuana Sales Tax

Every taxable transaction from your dispensary POS system carries sales tax. It applies to cannabis flower, infused products, and related accessories. Some medicinal sales qualify for an exemption, but as a rule, sales tax applies to each purchase.

California adds sales tax at the point of sale, and local jurisdictions may add more on top. As a result, rates differ from one area to the next, so it’s important to know the combined rate for your location. Because these rates change over time, look up your current local rate through the CDTFA rather than relying on a fixed figure.

Cannabis Excise Tax

Unlike sales tax, the cannabis excise tax applies to medical and adult-use customers alike. As of October 1, 2025, the rate is 15% of gross receipts from the retail sale, after a brief period at 19% from July through September 2025. The collection process has also changed: retailers now calculate the excise tax on gross receipts and remit it directly to the state, rather than routing it through distributors as the original system did. Because the rate can be adjusted by law, always confirm the current excise rate on the CDTFA Special Taxes and Fees rates page before filing.

Use Tax

Use tax typically applies to items purchased outside California. In addition, any product pulled from retail inventory for personal use is subject to use tax. These situations are less common, but they still need to be tracked.

Record Keeping

Accurate records are essential in case of an audit. New cannabis regulations require dispensaries to keep complete sales records and produce them on request. These can be hard copies or digital files, and they must reflect every tax applied. An advanced marijuana POS software makes this straightforward.

Records of commercial cannabis transactions must be kept on file for at least seven years. The IndicaOnline POS system applies multiple tax rates to each sale automatically. Staff set up customer classifications, such as medical ID holders, doctor-recommendation patients, and adult-use buyers, and assign the right tax preset to each. Our cannabis POS software in California keeps those presets, sales records, and reports aligned with CDTFA rules. Schedule a demo today to learn how to configure tax presets for your dispensary.