California’s cannabis sector remains the largest regulated market in the U.S., producing over $298 million in monthly retail sales in late 2025—even as prices and overall sales decline by nearly 10% year-over-year due to saturation and price compression. Roughly 40% of cannabis consumed in California now flows through state-licensed businesses, a figure rising steadily with expanded enforcement and ongoing efforts to move purchasers out of the illicit market.
But with high revenue, cash-heavy operations, and rapid regulatory changes, cannabis businesses often face rigorous CDTFA audits focused on excise tax, sales tax, and local surcharges.
We’ll analyze your compliance risks, explain CDTFA’s audit strategies, and detail your best defense—at no cost and with total confidentiality.
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Maintain meticulous, daily POS records, cash logs, and all purchase/sales invoices. File all excise and sales taxes on time, understand district rates, and retain all documentation for at least three years.
Retailers will no longer retain 20% of the excise tax. This may lower margins but increases audit risk for errors. Leading Tax Group will help you manage changing rules and compliance obligations.
Yes. Many California municipalities impose local cannabis taxes, and noncompliance can trigger state and local audits, license suspension, or loss of business.
CDTFA can estimate your sales based on foot traffic, average transaction size, or public info. This often results in higher assessed tax. Professional representation is vital to challenge unfair assessments.
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