The La Mesa City Council has pushed forward a plan to raise its cannabis taxes from the lowest in the county to one equal to the rates in Lemon Grove and Oceanside.
A motion from vice mayor Lauren Cazares on Tuesday kickstarted the process to raise the tax from 4 to 5%. She said it was a necessary step to stabilize the city’s revenue while demand for services has remained constant.
Mayor Mark Arapostathis, who initially helped bring legal cannabis sales to La Mesa, seconded her motion. The rest of the council also voted yes.
“Sales tax revenues have not kept (up) with expectations, while the cost of providing essential public services continues to rise,” Cazares said.
Like many jurisdictions, La Mesa’s sales tax revenues have decreased in recent years as people purchase less amid an affordability crisis. Cazares estimates raising the cannabis tax would bring in over $750,000. Current cannabis taxes bring in a projected $2.5 million per year.
Rather than raising the general sales tax or property taxes, Cazares views raising the cannabis tax as a way to improve the city’s finances without adding a financial burden to La Mesa residents.
“This approach, I believe, will also allow the cost of local government to be supported by a regional customer base that chooses to shop at La Mesa rather than placing the burden solely on our residents,” Cazares said.
While some of La Mesa’s residents certainly purchase at local dispensaries, the city is also a cannabis destination for people to the east and west. La Mesa’s low tax rate spurred some of that cannabis “tourism.”
Dispensaries like The Grove celebrate La Mesa’s tax rate in its advertising.
“We definitely hype the tax, because it’s real,” said Sean McDermott, owner of The Grove.
Even in La Mesa, with its low tax rate, taxes spur constant complaints from customers, who pay local and state sales taxes in addition to the state excise taxes and local cannabis taxes.
“Everyone’s mad about the tax. You hear it multiple times a day at the register,” McDermott said. “They’d be super bitter.”
Although the tax hike would make La Mesa equivalent to neighboring city Lemon Grove, Cazares believes La Mesa would still remain competitive in the market because it is still half the cost of purchasing in the city of San Diego. Plus, another neighboring city, El Cajon, does not have any dispensaries at all.
“Even with the increase, La Mesa will remain one of the lowest and most competitively taxed cities in the region,” she said. “Our cannabis prices remain significantly lower than neighboring jurisdictions and I believe that competitive advantage will continue.”
However, cannabis taxes are not an automatic cash cow. Legal sales in California have dropped year over year since 2021, despite it being the biggest cultivator state in the nation.
The state walked back a 4% tax hike last summer because industry professionals were concerned that a 19% excise tax would drive customers to illegal cannabis purchases while the legal industry faced slim margins.
San Diego encountered a similar issue when increasing its tax from 8 to 10%. In 2025, the city raised its cannabis tax amid a budget shortfall, which brought the total combined tax rate to above 30% of the base retail cost of cannabis.
While this provided a small boost, the city’s tax revenue fell millions short of expectations as San Diego residents turned to suburban cities like La Mesa or the illegal market instead.
Meanwhile, California’s Department of Cannabis Control estimates that only 40% of cannabis consumed in 2024 was purchased legally.
La Mesa’s cannabis taxes go into the general fund and Cazares said the proceeds have boosted emergency services and law enforcement staffing.
The sole public commenter on the tax bump pushed for law enforcement and youth substance abuse prevention programs to receive the bulk of the funds.
“These funds can support law enforcement efforts to combat the illegal cannabis market, which we know is a continuing concern,” Becky Rapp told the council. “Illegal sales do not pay their fair taxes.”
Even with La Mesa’s tax increase, the total tax on each purchase would remain far below the cost to cannabis consumers in San Diego. But with competition from illegal sellers and additional dispensaries in the market as cities like Santee bring them online, The Grove owner McDermott fears what a tax hike might do in the fledgling industry.
“Increasing the tax could be catastrophic,” he said.
The council members voted to direct city staff to prepare an ordinance raising the cannabis business tax rate. The council did not decide when the hike will go into effect.
