San Diego, December 28, 2025
San Diego has introduced significant changes to its cannabis market, such as raising the business tax rate to 10%, extending dispensary operating hours, and launching consumption lounges. The city aims to improve its budget while addressing concerns that higher taxes may drive consumers to unlicensed sellers. With initiatives supporting local businesses, San Diego is positioning itself as a leader in the legal cannabis industry, capitalizing on the economic potential of these developments.
San Diego’s Legal Cannabis Market Takes New Turns
San Diego, California – In recent developments, San Diego has implemented significant changes to its legal cannabis market, including tax increases, extended operating hours, and the introduction of consumption lounges.
Tax Increase to 10%
On March 10, 2025, the San Diego City Council voted to raise the cannabis business tax rate from 8% to 10%, effective May 1, 2025. This decision aims to address the city’s budget deficit, with an estimated $3.97 million in additional annual tax revenue anticipated if gross receipts remain consistent. However, there are concerns that higher taxes may drive consumers to unlicensed sellers or neighboring areas with lower tax rates.
Extended Operating Hours
To support licensed cannabis retailers and boost revenue, the San Diego Planning Commission unanimously approved a proposal to extend operating hours for these businesses. The new hours will allow dispensaries to operate from 6 a.m. to 10 p.m., effective August 17, 2025, outside the Coastal Overlay Zone, and September 11, 2025, within the Coastal Overlay Zone. This initiative is expected to generate an additional $1.7 million in cannabis tax revenue for the fiscal year 2026.
Introduction of Consumption Lounges
In April 2025, San Diego County opened its first marijuana consumption venue, Sessions by the Bay, in National City. This three-level space includes a cannabis store and a restaurant, where patrons can enjoy infused food and beverages or pair traditional fare with curated marijuana products. The establishment reflects a broader trend in California, where legislation has legalized the creation of “Amsterdam-style” cannabis cafés, allowing licensed dispensaries and lounges to serve non-psychoactive food and beverages and host live entertainment.
Social Equity Program
San Diego County is developing a Socially Equitable Cannabis Program to establish a permitting and licensing system for new commercial cannabis activities, including retail, cultivation, manufacturing, distribution, testing, microbusinesses, and temporary events. The program aims to provide greater opportunities for individuals negatively or disproportionately impacted by cannabis criminalization and the War on Drugs.
Background
The legalization of recreational cannabis in California in 2016 marked a significant turning point, but it’s San Diego that has truly embraced the industry’s potential. The city has implemented various measures to regulate and support the legal cannabis market, including tax adjustments, extended operating hours, and the introduction of consumption lounges. These initiatives aim to balance economic growth with public health and safety considerations.
Conclusion
With these recent changes in the legal cannabis market, San Diego is positioning itself as a leader in the industry while encouraging entrepreneurship and supporting local businesses. As local laws evolve to meet the demands of consumers and entrepreneurs, the potential for economic growth remains substantial. It is crucial for residents and stakeholders to stay engaged and support initiatives that promote a thriving business environment in San Diego.
FAQ
- What is the new cannabis business tax rate in San Diego?
- The San Diego City Council increased the cannabis business tax rate from 8% to 10%, effective May 1, 2025.
- What are the new operating hours for cannabis dispensaries in San Diego?
- San Diego dispensaries can now operate from 6 a.m. to 10 p.m., effective August 17, 2025, outside the Coastal Overlay Zone, and September 11, 2025, within the Coastal Overlay Zone.
- Where is the first marijuana consumption venue in San Diego County located?
- The first marijuana consumption venue, Sessions by the Bay, is located in National City, a coastal suburb about 6 miles south of downtown San Diego.
- What is the purpose of San Diego County’s Socially Equitable Cannabis Program?
- The program aims to establish a permitting and licensing system for new commercial cannabis activities and provide greater opportunities for individuals negatively or disproportionately impacted by cannabis criminalization and the War on Drugs.
- When was recreational cannabis legalized in California?
- Recreational cannabis was legalized in California in 2016.
| Key Feature | Details |
|---|---|
| Tax Increase | San Diego City Council raised the cannabis business tax rate from 8% to 10%, effective May 1, 2025. |
| Extended Operating Hours | Dispensaries can now operate from 6 a.m. to 10 p.m., effective August 17, 2025, outside the Coastal Overlay Zone, and September 11, 2025, within the Coastal Overlay Zone. |
| Consumption Lounges | San Diego County opened its first marijuana consumption venue, Sessions by the Bay, in National City. |
| Social Equity Program | San Diego County is developing a program to establish a permitting and licensing system for new commercial cannabis activities and provide opportunities for individuals impacted by cannabis criminalization. |
| Recreational Cannabis Legalization | Recreational cannabis was legalized in California in 2016. |
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