RESOLUTION NO. (XX)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COTATI URGING
THE STATE OF CALIFORNIA TO HALT THE SCHEDULED CANNABIS EXCISE
TAX INCREASE
WHEREAS, California voters approved Proposition 64 in 2016 to legalize, regulate, and tax cannabis sales in order to establish a safe, controlled, and equitable marketplace while eliminating the illicit market; and
WHEREAS, the legal cannabis industry in California has faced increasing economic and regulatory challenges, including excessive taxation, burdensome compliance costs, and competition from unlicensed operators who evade state oversight and taxation; and WHEREAS, the scheduled increase in the state cannabis excise tax from 15% to 19% on July 1, 2025, as mandated by AB 195 (Budget Committee, 2022), threatens to further destabilize the legal cannabis industry by increasing prices, reducing legal sales, and pushing more consumers into the unregulated market; and
WHEREAS, since 2021, California’s legal cannabis market has experienced a 19% decline in annual sales and a 13% drop in state excise tax revenue, with projections for FY 2025- 26 revenue unlikely to meet state estimates due to market contraction; and WHEREAS, the number of inactive or surrendered cannabis licenses in California now exceeds active licenses, with 10,828 inactive licenses compared to 8,514 active licenses, as reported in February 2025 by SFGATE, demonstrating a declining market that is forcing businesses to shut down or consolidate; and
WHEREAS, the impact of high taxation and unlicensed competition has led to significant job losses, with nearly 5,000 cannabis jobs lost in 2023 alone, following 12,600 job losses in 2022, according to the 2024 Vangst Jobs Report; and WHEREAS, the illicit market continues to thrive as unregulated operators evade taxation and safety requirements, undermining public health, consumer safety, and the integrity of the legal cannabis framework established under Proposition 64; and WHEREAS, instead of raising taxes in a way that weakens the legal market and benefits illicit operators, the state should focus on targeted tax relief and stronger enforcement measures to stabilize the market, protect small businesses, and maximize state revenues; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Cotati formally urges Governor Gavin Newsom, the California State Legislature, and the Department of Cannabis Control to take immediate action to:
• Maintain the state cannabis excise tax at no more than 15% to prevent further market destabilization and protect state tax revenues.
• Support AB 564 and any other legislation that would amend the law that requires a tax hike on cannabis in California. We need lower taxes, not higher ones. Ensure that all intoxicating THC products, regardless of source, are taxed appropriately—if companies are selling THC, they owe the state cannabis excise tax (licensed or not), and if they are selling any product, they owe the state sales and use tax. Enforcing these obligations will ensure fair market competition, protect public health, and recover lost revenue.
• Reinvest cannabis tax revenue into stronger enforcement and business support programs to combat illicit sales and provide relief to licensed operators struggling under excessive regulatory costs.
BE IT FURTHER RESOLVED that the City Manager is directed to transmit copies of this resolution to:
• Governor Gavin Newsom
• The California State Legislature
• The California Department of Cannabis Control (DCC)
• The California State Association of Counties (CSAC)
• The League of California Cities (CalCities)
IT IS HEREBY CERTIFIED that the foregoing resolution was duly adopted at a regular meeting of the City Council of the City of Cotati held on May 13, 2025, by the following vote, to wit:
Approved:___________________________
Mayor
Attest:______________________________
Kevin Patterson, Deputy City Clerk
Approved as to form:______________________________
City Attorney