The Internal Revenue Service has ruled that cannabis workers can’t claim the “No Tax on Tips” exemption that President Donald Trump signed into law, leaving tens of thousands of budtenders and trimmers in California without a tax break that bartenders and nail technicians now enjoy.

The IRS made it official through a IRS Federal Register filing, citing the fact that marijuana remains a Schedule I controlled substance under federal law. The agency didn’t slam the door permanently. It acknowledged that eligibility could shift if Congress moves on federal legalization, though that prospect looks distant from where the market stands right now.

California alone has roughly 40,000 licensed cannabis retail workers. Budtenders at high-volume dispensaries in Los Angeles and San Francisco can collect hundreds of dollars weekly in tips. Under the IRS ruling, every dollar of that stays fully taxable while a cocktail server two blocks away gets the write-off. It’s a gap that’s hard to defend on fairness grounds. These workers operate inside state-licensed storefronts, carry employee identification cards, follow the Department of Cannabis Control regulations, and pay into the federal tax system just like everyone else.

Thomas Winstanley of Edibles.com put it bluntly in a Marijuana Moment op-ed that the current IRS position “falls short of a comprehensive solution.” He wrote that “Only Congress can provide the clarity this market requires.” That’s not wrong. The Federal Register filing signals where the agency stands, but it can’t fix the underlying scheduling conflict. That’s legislative work.

For California’s cannabis industry, 2026 was supposed to be a year of market stabilization after years of price compression and license backlogs. The tip ruling doesn’t help. It’s one more signal to workers that the federal government doesn’t see their jobs as real, even when state regulators do.

The picture outside California isn’t uniformly grim, but it’s complicated. In Virginia, Del. Rozia Henson pushed back hard this week against Gov. Abigail Spanberger’s proposed amendment to a marijuana resentencing relief bill. Henson told reporters the amendment would let people “fall through the cracks simply because they lacked a lawyer or did not know to ask.” His written statement went further: “The amendment shifts that entire burden onto individuals navigating incarceration or active supervision; often without the information or resources to file a petition on their own.” Virginia’s debate over who gets resentencing relief and who doesn’t mirrors fights California advocates have had for years over expungement carve-outs.

Pennsylvania’s situation is its own kind of strange. The state House passed a budget that bakes in projected recreational cannabis revenue even though recreational use isn’t legal there yet. A separate senator is pushing the House to take up his legalization bill directly. The budget math only works if legalization actually passes, and that’s still an open question in Harrisburg.

Maryland moved in a quieter direction. Gov. Wes Moore signed legislation this week giving veterinarians legal protection to recommend medical cannabis for animals. Under that new law, vets can’t face discipline from the State Board of Veterinary Medical Examiners for making those recommendations. A narrow fix, yes, but it closes a real gap for pet owners who’ve been getting inconsistent guidance.

Back on the hemp side, there’s a separate argument percolating about how property taxes get calculated for farms that cultivate hemp indoors. The contention is that assessed value should be “commensurate with marijuana growing underneath the roof” when that’s actually what’s happening, not based on the hemp classification alone. That’s a dispute that’s going to land in more county assessor offices as the hemp and marijuana markets continue to overlap in ways that 2018 Farm Bill drafters didn’t anticipate.

The IRS tip ruling is the story with the widest reach in 2026. It affects 16 different job categories under the No Tax on Tips law, and cannabis workers aren’t in any of them. That’s where things stand.