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MICHIGAN, USA — There’s a new law in effect that has the cannabis industry bracing for impact.
It’s a 24% wholesale tax on marijuana, paid by the retailer to the distributor.
The tax is intended to fund road repairs, but cannabis industry advocates say the tax could undermine the state’s marijuana market.
It comes at an inflection point for the recreational marijuana business in Michigan.
The average retail price of an ounce of recreational marijuana flower is $59.79, the lowest since legalization in 2018, according to the Michigan Cannabis Regulatory Agency.
That’s good for consumers, but bad for businesses, who may struggle to turn a profit on smaller margins in an oversaturated market amid a tightened economy.
“Some processors and growers are anticipating a downturn and a less profitable 2026,” said Joshua Covert, a cannabis attorney and CEO of Meds Cafe in Lowell. He spoke with 13 ON YOUR SIDE back in November.
“I’ve seen some layoffs and people getting reduced hours,” said Covert.
Industry advocates have been warning for months that this tax could increase dispensary prices, leading to consumers turning to the black market.
A “budtender” at a local marijuana business told 13 ON YOUR SIDE off-camera Thursday that there hasn’t been a change in pricing at his store just yet, but he expects the tax to eventually be passed along to the customer in some form.
The cannabis industry has tried to push back on the tax. Advocates have argued that the law violated the state’s constitution by changing the language of a ballot measure that legalized cannabis in 2018.
The tax is expected to bring in $420 million for road improvements, one of the signature campaign pledges made by Governor Gretchen Whitmer.
The bill passed by a simple majority vote in the legislature, but marijuana industry advocates argue that a supermajority is required to amend the original ballot initiative.
“The primary argument, from what I understand, is that it circumvents direct democracy,” said Covert. “This was a voter initiative. We put it together as the people of the state of Michigan, and they’re essentially circumventing that bill with a new tax.”
In December, Court of Claims Judge Sima G. Patel denied a request for a preliminary injunction.
The Michigan Cannabis Industry Association announced on Dec. 29 that it was appealing that decision.
The law is now just hours old, but it has already been blamed for the industry’s struggles. In December, C3 Industries — a Michigan marijuana company — blamed the looming tax as the reason for closing its cultivation facility in Webberville, just outside of Lansing.