CA Monthly Puff: DCC Group Tagging, SF Cafés, Sonoma Zeroes Cultivation Tax

CA Monthly Puff: DCC Group Tagging, SF Cafés, Sonoma Zeroes Cultivation Tax for a Year

California cannabis retail July 2026 brought major regulatory movement across the state. The DCC advanced group plant tagging to replace individual METRC tags, San Francisco signed a cannabis café food and beverage ordinance, and Sonoma County zeroed out cultivation and manufacturing taxes for the coming fiscal year. Oceanside had scheduled a public lottery for its final storefront retail license, but the lottery was postponed at the unanimous request of the tied applicants and referred to City Council for further direction, while Mendocino County ran a large unlicensed cultivation sweep.

Top Headlines This Month

• DCC proposes group METRC tagging to replace individual tags
• Oceanside lottery postponed; tied applicants refer decision to City Council
• San Francisco signs cannabis café food and beverage law
• Mendocino sweep eradicates 173,244 plants, seizes 26 firearms
• Sonoma County zeroes cultivation and manufacturing cannabis taxes for FY2026-27

California: DCC Proposes Group Plant Tagging to Replace Individual METRC Tags

The California Department of Cannabis Control posted Notice of Proposed Rulemaking Action DCC-2026-03-R on June 12, 2026, proposing to replace the current individual plant tagging requirement with group tagging of cannabis plants. The rulemaking implements statutory changes from SB 622 (2023), which removed the requirement for a physical tag at each plant’s base, and AB 8 (2025), which removed the requirement for a unique identifier per plant. The proposal affects a significant number of licensed cultivation businesses and retailers across California, with a large share of those businesses qualifying as small businesses. According to the DCC’s economic analysis, cultivators would see average annual cost savings of approximately $2,000 per operation, with expected annual materials costs under the new system dropping to approximately $70 per cultivation licensee. The written comment period closed July 27, 2026, and a public hearing was held July 28, 2026, via WebEx. Beyond the cost savings, the DCC noted that existing METRC plant tags are considered non-recyclable e-waste. Group tagging would reduce the total volume of single-use tags deployed.

For more on the California cannabis retail compliance landscape, see our detailed market page.

Oceanside: Public Lottery Postponed at Applicants’ Request; Decision Referred to City Council

Oceanside completed Phase 3 interviews for its storefront retail cannabis licensing process, with M and A Inc. DBA March and Ash ranking first. Three applicants tied for second place: Oceanside Responsible and Compliant Retail LLC DBA Embarc Oceanside, Oceanside Retail OPCO LLC, and Green Venture Farms, LLC. Because of the three-way tie, staff had originally proposed a public lottery to determine which tied applicant receives the final storefront retail local license. However, pursuant to the unanimous request of the three tied applicants, staff postponed the scheduled lottery and will be bringing the matter to the City Council in August 2026 for further direction. In Phase 2, nine public applicants scored 100 points and advanced to Phase 3. Two priority applicants, Oceanside Retail, LLC DBA MedLeaf and Noble Victory LLC, also scored 100 points and were already issued local licenses. The city is not currently accepting applications for manufacturing, distribution, cultivation, or testing lab licenses. The postponed lottery reflects how competitive storefront licensing has become in the San Diego County market. With multiple recognized brands among the tied applicants, the path to the city’s remaining retail position will now be determined through a City Council process rather than a drawing.

Explore other California dispensary licensing market trends and lotteries.

San Francisco: Mayor Lurie Signs Cannabis Café Food and Beverage Ordinance

San Francisco Mayor Daniel Lurie signed legislation on July 23, 2026, allowing the city’s licensed cannabis retailers to serve food and nonalcoholic beverages inside their consumption lounges. Board of Supervisors President Rafael Mandelman introduced the ordinance in March, after more than a year of collaboration between his office, state Assemblymember Matt Haney, and city agencies including the Office of Cannabis and the Planning Department. The ordinance creates a permit that cannabis retailers can pair with their existing licenses. Alcohol and tobacco remain barred from the premises. Café operators must hold a consumption permit from the Department of Public Health, meet the same health and food code standards as other food establishments, and verify each customer’s age electronically at the door. For the first year, only existing retailers and their equity partners can apply for the new permits. The ordinance takes effect August 23, 2026, when the Office of Cannabis begins accepting café permit applications. City officials cited the unlicensed market as context for the move. A DCC-commissioned market study released in March 2025 estimated that roughly 60% of the cannabis Californians consumed in 2024 came from unlicensed sources, and the café ordinance gives permitted retailers a consumer experience that unlicensed sellers cannot replicate. The equity-first rollout during year one limits the initial applicant pool to established and equity-affiliated retailers.

See how other large cities are approaching retail opportunities in the New York cannabis market.

Mendocino County: Sheriff’s Sweep Eradicates 173,244 Plants and Seizes 26 Firearms

Between July 1 and July 24, 2026, the Mendocino County Sheriff’s Office, with assistance from the Lake County Sheriff’s Office and state and federal partners, investigated numerous unlicensed cannabis cultivation sites in the Covelo, Laytonville, Potter Valley, and Redwood Valley areas. Authorities eradicated approximately 173,244 marijuana plants, seized 10,369 pounds of processed marijuana, 26 firearms, and 626 ounces of illegal pesticides. Investigators documented water diversions and banned pesticides in foreign-language labeled containers near local waterways and sensitive habitats. At several sites, investigators contacted victims of suspected forced labor trafficking, with workers living in poor and overcrowded conditions, limited freedom of movement, and exposure to hazardous chemicals. Reports are being forwarded to the Mendocino County District Attorney’s Office for formal charging. The operation involved state and federal agencies and produced forced labor documentation alongside evidence of large-scale organized cultivation activity. The volume of plants eradicated and the breadth of agency coordination reflect ongoing multi-agency pressure on unlicensed cultivation networks across Mendocino County.

Sonoma County: Board Zeroes Out Cultivation and Manufacturing Cannabis Taxes for FY2026-27

On May 19, 2026, the Sonoma County Board of Supervisors adopted Ordinance No. 6566, amending the Cannabis Business Tax Ordinance to set cultivation and manufacturing tax rates to zero for fiscal year 2026-27. Effective July 1, 2026, outdoor, mixed-light, and indoor cultivation are each taxed at $0.00 per square foot, and the manufacturing tax rate dropped to 0%. The retail tax rate remains at 3% and was not changed by the ordinance. The Board approved the rate reset on April 28, 2026, and has framed it as a step toward eliminating the tax altogether rather than a permanent repeal. The tax revision followed a broader round of regulatory updates: the Board adopted Ordinance Nos. 6536 and 6538 on December 9, 2025, amending the Cannabis Land Use Ordinance, and Ordinance No. 6537 establishing a cannabis business license program, and then adopted Ordinance No. 6548 on January 13, 2026, amending the Right to Farm Ordinance. Zeroing out cultivation and manufacturing taxes is a direct cost reduction for licensed cannabis businesses operating in Sonoma County. The change, now in effect, is part of a broader overhaul of the county’s cannabis program that revised land use rules and introduced a new business license structure over the past several months.

For current tax environments in other regions, visit our Ohio cannabis retail page.

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The Bottom Line

California cannabis retail in July 2026 leaned toward cost relief and program modernization, with the DCC’s group tagging proposal, Sonoma’s one-year zeroing of cultivation and manufacturing taxes, and San Francisco’s café ordinance all landing in the same window. At the same time, Oceanside’s contested licensing process and Mendocino’s enforcement sweep show that licensing complexity and unlicensed cultivation pressure remain defining features of the California cannabis market.