Michigan Cannabis Industry Challenges New 24% Wholesale Tax in Court
Michigan's cannabis industry is challenging a new 24% wholesale tax in court, arguing it could destabilize the state's market and violate constitutional provisions
Key Points
- 1Michigan Court of Claims hears case on new 24% cannabis wholesale tax
- 2Tax aims to raise $420 million for infrastructure but faces industry opposition
- 3Michigan Cannabis Industry Association claims tax violates state constitution
- 4The case may proceed to the Michigan Supreme Court
- 5Reflects broader U.S. trend of cannabis industry challenging high taxes
The Michigan Court of Claims recently deliberated on the legality of a new 24% wholesale tax on cannabis products, a measure that has stirred significant opposition from the state's burgeoning marijuana industry. This tax, slated to take effect on January 1, is part of the state's fiscal 2026 budget plan aimed at generating $420 million for infrastructure improvements, including road repairs. However, industry leaders argue that the tax could destabilize Michigan's cannabis market, which is currently the second-largest in the U.S
The legal challenge was spearheaded by the Michigan Cannabis Industry Association (MCIA), which contends that the new tax contravenes the state's constitution. The association argues that the tax effectively amends the 2018 Michigan Regulation and Taxation of Marihuana Act, which initially set a 10% excise tax on recreational cannabis sales. According to the MCIA, any amendment to this law requires a supermajority vote, a threshold that the new tax legislation did not meet
Rose Tantraphol, a spokesperson for the MCIA, emphasized the potential repercussions of the tax, stating that it threatens approximately 47,000 jobs and could drive consumers back to the illicit market. In contrast, the Michigan attorney general's office defended the tax as a separate measure that does not modify the original law. The outcome of this case is anticipated to escalate to the Michigan Supreme Court, regardless of the initial ruling by Judge Sima Patel
This legal battle reflects a broader national trend where cannabis businesses are increasingly challenging state-imposed tax burdens. Across the United States, operators argue that high taxes hinder industry growth and inadvertently support the unregulated market. Similar protests have occurred in Los Angeles, where cannabis retailers have refused to pay local taxes in response to high rates and insufficient action against illegal operators
The Michigan case also highlights ongoing issues with federal tax policies, such as the non-deductibility of standard business expenses under Section 280E of the tax code, which further strains the financial viability of legal cannabis businesses. States like New York and Illinois have faced similar criticisms for imposing steep cannabis taxes, with industry leaders cautioning that such policies undermine efforts to transition consumers from illegal to regulated markets