LANSING, Mich. (WILX) – C3 Industries will shut down its cannabis cultivation site in Webberville on February 14, laying off 62 workers. The company claims this is a result of Michigan’s new 24% Wholesale tax on Marijuana.
“Unfortunately, we cannot operate the Michigan production facility profitably with the new wholesale tax going into effect. We warned many state legislators that this would be the likely impact if they passed the wholesale tax,” C3 Industries CEO Ankur Rungta told Crains Detroit Business.
The wholesale tax takes effect January 1 and was part of a state budget deal designed to generate $420 million to help repair Michigan’s infrastructure.
Managers at two local cannabis shops said they expect the closure trend to continue once the tax officially takes effect.
Evie Hernandez, general manager at The Cake House, claims the tax will do the exact opposite of what it was intended to do and could lead to less revenue for the state.
“I think they will realize soon that the up-on-tax isn’t going to actually bring them more money like they’re expecting. It can reduce it by pushing out a lot of the operations and growers, thus shrinking the local market as a whole,” said Hernandez.
She says if customers can no longer afford dispensary products, then they may turn back to the black market.
“History shows that when cost rises in a regulated industry, people don’t just stop buying. They just look elsewhere for it. The goal of legalization was safety and transparency. So, this will kind of go directly against that,” said Hernandez.
Tyler Yurk, manager at House of Dank, said the tax puts many small shops at risk.
“It’s going to hit the small guys the hardest,” said Yurk. “What’s great about [House of Dank] is that we have a larger range of products. So, it makes it easier for us to leeway the taxes on a broader aspect. We have so much product, we could just slightly increase each product, rather than it being a giant jump. Also, the tax isn’t directly to customers during sales, so it leaves us with more wiggle room.”
He says all companies can do now is brace for impact.
“What everyone is doing industry-wide is ordering a bunch of product. That way we can beat the sales tax on that and at least have a nice comfortable seat to sit on before all this stuff hits us pricewise,” said Yurk.
Crain’s also reports that Higher Love Cannabis, a company with 10 facilities in the Upper Peninsula, announced last Friday that it has to lay off 30% of its employees due to the wholesale tax.
The cannabis companies emphasized they do not plan on raising prices for customers.
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