(Image Credit: IMAGN) Lower-tier shelf flower is seen at Mango Cannabis, a dispensary store at 1051 McNutt Road, Sunland Park, New Mexico, on Wednesday, Jan. 29, 2025.
SAN DIEGO, CA – Buying marijuana from dispensaries in San Diego may soon become more expensive as the city council considers a proposal to increase the local cannabis tax.
On Monday, the San Diego City Council will discuss raising the city’s tax on recreational cannabis businesses from 8% to 10%, making it one of the highest local cannabis taxes in California. The tax is applied to a retailer’s total sales, meaning consumers may see higher prices at the city’s more than two dozen licensed dispensaries. If approved, the tax increase would take effect on May 1, 2025.
San Diego’s cannabis tax was first approved by voters in 2016 with the passing of Measure N. Initially set at 5%, the rate gradually increased to 8% by 2019, with the potential to reach the state-mandated cap of 15% in the future. However, in 2022, the city council lowered the tax for cannabis manufacturers to 2% to encourage local production and reduce reliance on out-of-town suppliers. That separate rate for indoor cannabis farms and edible manufacturers would remain unchanged under the new proposal.
City officials estimate the 2% tax increase could generate an additional $3.97 million annually for San Diego’s general fund, which is currently facing a $258 million deficit. However, a city staff report warns that raising the tax could lead to lower sales if consumers turn to dispensaries in other cities or the black market to avoid higher prices.
Currently, the total fees imposed on San Diego cannabis retailers add up to a 31.75% markup when factoring in state excise taxes and general sales taxes.
The city council is scheduled to debate the proposal at its Monday meeting.
