Michigan Cannabis Association Challenges New 24% Tax

News Summary

The Michigan Cannabis Industry Association has filed a lawsuit against the state over a newly enacted 24% wholesale tax on cannabis that is set to take effect in 2026. The MiCIA argues this tax violates constitutional provisions and is an unlawful increase on the already imposed cannabis taxes. The association contends that this new tax could lead to increased prices for consumers and threaten the viability of cannabis businesses in Michigan’s competitive market.

Lansing, Michigan – The Michigan Cannabis Industry Association (MiCIA) has initiated legal action against the state following the passage of a new 24% wholesale tax on cannabis. This tax is set to come into effect on January 1, 2026, unless a court injunction prevents its enforcement.

This 24% wholesale tax is an addition to the already imposed 10% cannabis excise tax on retail sales and a 6% sales tax. Governor Gretchen Whitmer’s proposed budget for the state, amounting to $81 billion, relies on this new tax to generate approximately $420.7 million annually, with the funds primarily earmarked for road improvements.

The Michigan Senate narrowly passed the 24% wholesale tax with a 19-17 vote on October 3, 2023, a decision that MiCIA argues contravenes a voter-approved provision in Michigan’s constitution, specifically Article 2, Section 9. This constitutional provision requires a three-fourths legislative vote to amend laws established through public referenda.

The lawsuit asserts that the wholesale tax constitutes a new excise tax that can only be enacted by modifying the Michigan Regulation and Taxation of Marihuana Act (MRTMA) through public vote or legislative supermajority. The MRTMA was initially passed in the 2018 election, legalizing adult-use cannabis in Michigan with a 56% majority and instituting a 10% excise tax on retail sales. MiCIA contends that the original legislative intent, which focused on road funding, was distorted when the bill was amended to incorporate the wholesale tax.

In addition, the new law specifies that $3 million of the tax revenue generated must be directed to a “Comprehensive Road Funding Fund” for the fiscal year 2026, alongside projected contributions to local infrastructure efforts. MiCIA argues that the changes made during the legislative process compromised the transparency of the proceedings and contravened constitutional requirements.

The association’s lawsuit seeks a declaratory judgment to deem the new tax invalid and requests an injunction halting its enforcement. MiCIA has expressed concerns that the 24% wholesale tax, by ignoring established supplier-retailer agreements and their corresponding discounts, could force substantial operational changes for cannabis businesses.

The anticipated impact of this new tax could further complicate the existing challenges for dispensaries, which are already navigating a highly competitive market with slim profit margins. Critics within the cannabis industry have raised alarm over the heightened tax burden leading to increased prices for consumers, potentially prompting them to revert to unregulated sources for their cannabis needs.

Moreover, the revenue generated from the wholesale tax is a crucial element of a broader strategy aimed at enhancing Michigan’s infrastructure, which carries an estimated cost of $1.8 billion annually. In response to the backlash, some Republican lawmakers, including House Speaker Matt Hall, have defended the legality of the tax structure, asserting that it does not disrupt the existing framework established under the MRTMA.

MiCIA represents a wide range of cannabis growers and retailers in Michigan and has indicated that the new tax poses a significant threat to the developing industry. As the legal battle unfolds, stakeholders in both the cannabis market and the state’s financial sectors will closely monitor its implications and outcomes.

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GRAND RAPIDS STAFF WRITER The GRAND RAPIDS STAFF WRITER represents the experienced team at HEREGrandRapids.com, your go-to source for actionable local news and information in Grand Rapids, Kent County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as ArtPrize, Festival of the Arts, and World of Winter. Our coverage extends to key organizations like the Grand Rapids Chamber of Commerce and Grand Rapids Community Foundation, plus leading businesses in furniture, healthcare, and technology that power the local economy such as Steelcase, Spectrum Health, and Meijer. As part of the broader HERE network, including HEREDetroitMI.com, HERENorthville.com, HERENovi.com, and HEREPlymouth.com, we provide comprehensive, credible insights into Michigan's dynamic landscape.

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