LANSING, MI — Michigan’s largest marijuana lobbying group is making a last-ditch effort to block Michigan’s new 24% wholesale cannabis tax from taking effect Jan. 1, 2026.
A Court of Claims judge on Dec. 8 denied a previous request to stall the tax until a lawsuit filed by the Michigan Cannabis Industry Association and a Lansing-area marijuana company is resolved.
That ruling is now being challenged in the state Court of Appeals, where the Michigan Cannabis Industry Association has requested an expedited review.
“The 24% wholesale tax violates the will of the voters who approved the 2018 citizen ballot initiative on cannabis, and we will not back down from fighting for the will of the people in court.” said Michigan Cannabis Industry Association spokesperson Rose Tantraphol.
The tax gained bipartisan support in the state Legislature as a means to generate a projected $420 million in new tax revenue to support Gov. Gretchen Whitmer’s road repair plan and balance the state budget.
Opponents believe the tax unconstitutionally overrides the will of voters who passed the recreational marijuana law in 2018.
That law stipulated there would be a 10% excise tax on marijuana sales, in addition to the 6% sales tax. The excise tax revenue is split between local municipalities and counties that allow marijuana commerce, as well as state-level road and education funds.
In 2024, the marijuana excise tax generated nearly $331 million, including nearly $100 million for municipalities and $116 million apiece for education and roads.
While significant, the state wants more from the $3 billion-per-year industry that’s marked by high-volume sales, low prices and shrinking profit margins.
Because the current tax structure and distribution plan were decided by voters who passed a ballot initiative in 2018, opponents believe the new tax required a 3/4 super-majority vote from both branches of the Legislature, which it did not receive.
Tax supporters claim the recreational law doesn’t preclude new, separate taxes.
Marijuana is “not the first product or item or property in this state where it is taxed under multiple acts and you have to pay tax on the same thing in multiple ways,” Sen. Ed McBroom, who represents 15 counties in Michigan’s Upper Peninsula, previously said in support of the tax.
Industry insiders believe the burden of the new tax, which is paid initially by growers and processors, will be passed along to consumers.
Michigan’s historically low taxes have helped boost marijuana sales to out-of-state consumers, especially near border states where marijuana remains illegal or competing state taxes are high.
If the tax remains in place on Jan. 1, Michigan will have among one of the highest tax rates in the nation.
“I’ve been saying for the last few years that Michigan has the best cannabis reform law in the country; unfortunately, I can’t say that anymore,” said tax opponent Sen. Jeff Irwin, D-Ann Arbor.
He believes Michigan’s industry succeeded in largely eliminating black-market marijuana because it had some of the lowest prices in the nation.
The low prices are a result of low taxes and a decentralized licensing structure that allows local counties and municipalities to determine if and how many marijuana businesses operate within their borders. There are currently more than 800 active retail marijuana licenses statewide.
As of November, the average price per ounce of retail marijuana dipped below $60 per ounce, an all-time low.
The new tax effectively raises prices slightly more than the stated 24%, since the wholesale tax is applied prior to the retail sale, thereby also increasing the sales and excise taxes paid.
With the new tax, a $100 retail purchase that would traditionally cost consumers $116.60 will now cost nearly $145.
A state Fiscal Agency analysis predicts the increase could result in a 14.4% decline in total sales.
“I predict that we will lose a lot of customers in the legal market, and as a result, we’ll lose a lot of revenue,” Irwin said. “We’ll empower criminal organizations (and) we will hurt jobs and storefronts … ”
There is no date set for a Court of Appeals review.
I am an investigative and cannabis industry reporter. Please call me with any tips, leads or story ideas, 989-372-2495.
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