Michigan Implements 24% Wholesale Tax on Marijuana Sales

News Summary

Michigan Governor Gretchen Whitmer has signed a controversial bill imposing a 24% wholesale tax on marijuana sales, aimed at generating revenue for road repairs. While the new tax could yield $420 million annually, concerns arise over potential price hikes and decreased sales, which may hurt the legal cannabis industry. Critics argue it could drive consumers back to the illicit market, while industry representatives call the tax detrimental to small businesses. Legal challenges are anticipated as the Michigan Cannabis Industry Association disputes the tax’s constitutionality.

Lansing, Michigan – Michigan Governor Gretchen Whitmer has signed a contentious bill that imposes a 24% wholesale tax on marijuana sales between producers and dispensaries. The primary objective of this tax is to generate significant revenue aimed at funding road repairs, a pressing priority for Whitmer as the state approaches 2025. Estimates suggest that the new tax could rake in approximately $420 million annually, contributing to Michigan’s overall $1.8 billion funding plan for road infrastructure.

The tax comes in addition to the existing 10% retail excise tax and 6% sales tax that marijuana shoppers have been paying since the legalization of cannabis in the state in 2018. Industry experts predict that the new tax will further increase retail prices and potentially decrease sales, forecasting a 14.4% reduction in marijuana sales. Critics of the tax believe that these high rates could drive consumers back to the illicit market, consequently harming the burgeoning legal cannabis industry in Michigan.

Industry representatives have demonstrated strong opposition to the tax, viewing it as a detrimental move for small businesses in the state. Opinions voiced include concerns about the sustainability of small dispensaries, which may struggle to survive under increased financial burdens. The tax was introduced as part of budget negotiations aimed at securing funding for necessary road improvements, specifically highlighting Michigan’s continuous road maintenance challenges attributed to its climate conditions.

Since Whitmer took office, she has emphasized her commitment to tackling the issue of road repairs with great urgency. Current assessments rank Michigan’s road conditions at 40th in the nation, with the state holding 28th in funding allocated for improvements, according to the Citizens Research Council of Michigan. Whitmer previously pitched a 45 cent gas tax increase back in 2019 to help fund roads, but this proposal was rejected, and a bonding program was subsequently implemented for highway and bridge rebuilding.

As part of the state budget for fiscal year 2026, which totals $81 billion, around $1 billion is earmarked for local road and bridge projects. The cannabis tax and the redirection of gasoline taxes to road funding played a crucial role in budget negotiations that ultimately averted a government shutdown.

In light of the new tax law, the Michigan Cannabis Industry Association has filed a lawsuit, asserting that the wholesale tax is unconstitutional as it alters a voter-approved law from 2018 without the mandated supermajority legislative approval. Furthermore, cannabis industry experts warn that the tax may lead to a decline in employment opportunities within the sector and could raise costs for consumers, as dispensaries may need to increase prices to counteract the new tax burden.

The debate surrounding the passage of this tax was marked by intense lobbying from cannabis industry representatives and was driven by a bipartisan discourse, narrowly passing in the Senate with a 19-17 vote. It was noted by Senate Majority Leader Winnie Brinks that the political negotiations were significant, with the introduction of the marijuana tax being pivotal in generating the necessary revenue for road work and in preventing a potential government shutdown.

As several other states, including Minnesota, Maryland, and Maine, increase taxes on marijuana products this year, this new legislation raises questions about its impact on the market and Michigan’s cannabis landscape, complicating national comparisons of cannabis taxation.

Deeper Dive: News & Info About This Topic

• CBS News
• Wikipedia: Taxation of Cannabis in the United States
• Fox 17 Online
• Google Search: Michigan marijuana tax
• Michigan Advance
• Google Scholar: Michigan marijuana tax
• Bridge Michigan
• Encyclopedia Britannica: Tax
• Crain’s Detroit
• Google News: Michigan marijuana tax law