The festival's organisers said will be contacting those who had already purchased a ticket "to offer further information and advise next steps".
In an statement released via the official Facebook Page for the event, the organisers tragically announced that cancelling on such short notice was a decision nearly completely out of their hands.
The festival had a stacked lineup of both local and global faves, featuring Angus & Julia Stone, What So Not, Courtney Barnett, Nothing But Thieves, Skeggs, Yungblud and Ruby Fields - to name just a few.
"The combination of excessive costs, additional licensing conditions and the enforcement of a stricter timeline left us no option but to cancel the event", said the organisers in a statement posted to Facebook.
"A mere seven days out from the event, further conditions and financial obligations were imposed on the festival, which were impossible to meet", organisers said, adding that they were "blindsided".
Read the full statement below.
However, they were then told they would have to pay an extra $200,000 for 45 police officers. That's 0.30% of the entire festival, with no deaths or serious drug-related incidents ever recorded during the event's entire running time.
The Mountain Sounds Festival's organisers characterised the cancellation as a casualty of the Liberal party's "war on festivals in NSW".
Blasting the "out of touch" state government for "fear-mongering, bullying and oppressing the youth", they write.
NSW Police had also been accused of attempting to shut down Boehmian Beatfreaks, after the three-day festival was slapped with a $200,000 quote for police attendance - almost 12 times the cost of policing last year's 3000-capacity event.
Organisers say their event submission was consistent with last year's operation.
"However, due to current increased pressure around safety, licensing and security we have had to modify our site, staging and infrastructure so the event can go ahead".
Meanwhile, Rabbits Eat Lettuce announced earlier this month that it was relocating to Queensland following NSW Police lodging action in the Supreme Court, leaving the festival "in a fragile financial position after forking out $100,000 to fight last year's action by NSW Police", a statement read.
The Psyfari festival also took aim at the state government on Wednesday when they announced they were cancelling their event.
"The information initially provided to police did not accurately reflect the number of expected attendees and revealed numerous breaches", a NSW Police spokeswoman said.
It is the second NSW music festival to be cancelled this week - the Psyfari music festival cancelled its 2019 event scheduled for September - amid the publicity surrounding festival drug use and deaths.
Each application will need to be approved by a panel comprised of NSW Health, NSW Police, NSW Ambulance and Liquor and Gaming NSW before a licence can be issued.
"NSW police work closely with all event organisers to ensure public safety".