SAN DIEGO (KGTV) -- The San Diego City Council raised the cannabis tax in March 2025 to bring in more revenue, but the outcome has not been what they expected.
Receipts show the city’s cannabis business tax projections are falling short by about $1.5 million.
Meanwhile, many cannabis customers are feeling the impact of the city’s tax. A cannabis product that costs around $30 on the shelf can end up costing more than $40 at checkout in San Diego due to the 10% city tax stacked on top of the sales tax, plus the 15% state excise tax on cannabis.
It all adds up quickly, and workers in the industry say it is changing where people shop.
Luis Ituarte with Wellgreens, a company that operates 11 dispensaries across San Diego County, said customers are leaving the city to buy in nearby communities with lower tax rates.
Customers are also finding creative ways to secure the best prices, sometimes opting for a new shop each visit to take advantage of first-time buyer deals.
Others may be turning to the illegal market, where prices are cheaper but products are unregulated.
“It’s really hard to explain to customers why it’s more expensive to buy our products,” Ituarte said. “They don’t understand that you have to get lab-tested results, and there’s a lot of infrastructure and licensing fees that make those prices go higher.”
Ituarte said that since the tax increase in May 2025, sales have dropped at their San Diego locations, while stores in Chula Vista, Lemon Grove, and especially La Mesa are seeing stronger business.
La Mesa’s cannabis tax rate is just 4%, and it also has less restrictive zoning, allowing more dispensaries per capita than San Diego.
ABC 10News reached out to City Councilmember Henry L. Foster, who cast the only “no” vote on the tax increase last year, for comment but did not receive a response as of publication.
