Michigan Senate Advances Bill to Cap Marijuana Licenses and Tighten Tax Compliance

Michigan lawmakers are intensifying efforts to stabilize the state’s marijuana industry by advancing a bill that would cap the number of business licenses and add new hurdles for applicants with unpaid cannabis-related taxes. The Senate Regulatory Affairs Committee recently heard testimony on Senate Bill 597, which aims to limit licenses for marijuana retailers and wholesalers to one per 10,000 residents in each municipality starting January 1, 2026. This approach mirrors Michigan’s existing system for regulating liquor licenses, according to bill sponsor Sen. Sam Singh (D-East Lansing)

The legislative push comes as the industry grapples with a newly imposed 24 percent wholesale tax, which was included in the 2025-26 state budget with the goal of generating $420 million annually for road funding. However, the tax has become a point of contention, with stakeholders challenging it in court and recent reports indicating that actual tax revenues are lagging behind projections. "Now that we have a 24 percent wholesale tax, I could see this becoming more and more of an issue," Singh told the committee, emphasizing the importance of ensuring stable revenue and robust enforcement mechanisms

A significant update to SB 597 would require marijuana business applicants to settle all outstanding state taxes, including base taxes, fees, and penalties, before obtaining new licenses. Singh explained that under current rules, licensees can close businesses and reapply without paying their tax debts, a loophole the new bill seeks to close. "We are doing our best to create the right regulatory scheme to be able to adequately enforce the market, ensure that the product is safe for those who are going to use the product, but at the same time make sure that everyone’s paying their taxes," Singh stated

In addition to the license cap and tax compliance provisions, the legislation introduces a moratorium on issuing new grower licenses, while allowing existing growers to expand through additional licenses. The bill also addresses complaints from wholesalers about product returns, establishing a three-day window for returning products in original packaging. These measures are designed to stabilize the market and respond to industry feedback regarding operational challenges

SB 597 is part of a broader legislative package that includes Senate Bills 599–602, which target the regulation of consumable hemp products such as Delta-8 and other synthesized cannabinoids. While the hemp regulation bills have already passed the Senate and await action in the House, the marijuana license cap bill is still under Senate consideration. Singh noted that these changes are not a direct response to the wholesale tax’s underperformance but are instead part of ongoing efforts to refine Michigan’s cannabis regulatory framework since voter legalization

OG Lab notes that Michigan’s evolving regulatory landscape reflects the balancing act lawmakers face as they try to ensure both industry growth and fiscal responsibility. The effectiveness of these new measures will become clearer in the coming quarters, especially as tax revenue trends and market stability are closely monitored by both officials and cannabis businesses