Michigan’s legal cannabis sector has launched a second legal challenge against a recently implemented 24% wholesale tax. According to the lawsuit, the levy, which took effect at the start of the year, pushes the overall tax burden on marijuana beyond limits established in the state constitution.
Rose Tantraphol, speaking on behalf of the Michigan Cannabis Industry Association, said the system effectively layers one tax on top of another. She explained that the wholesale levy operates similarly to a sales tax, meaning it is applied before the standard 6% retail tax. As a result, customers end up paying tax on top of an already taxed product, a practice commonly referred to as tax pyramiding.
The contested levy also comes in addition to a separate 10% excise duty already applied to cannabis purchases. Industry representatives argue that the combined effect is beginning to weigh on sales figures.
Data released by the state Cannabis Regulatory Board suggests a noticeable decline in revenue following the tax’s introduction. Sales dropped from about $269 million in December last year to roughly $226 million in January, a decrease of nearly $43 million. While February figures showed a slight recovery to $234 million, the association maintains that the trend raises concerns about long-term stability.
Tantraphol warned that the financial pressure could threaten jobs across the sector. She noted that the cannabis industry currently supports around 47,000 positions statewide, adding that continued strain from taxation could put that workforce at risk.
The wholesale tax was approved last year as part of a broader plan to address infrastructure funding. However, a separate lawsuit, still under review by the state Court of Claims, challenges the legitimacy of the tax on procedural grounds.
That case argues the legislation should have required a supermajority vote in the state legislature because it effectively alters a voter-approved law. Michigan voters legalized recreational marijuana in 2018, and any changes to that initiative typically require approval from three-quarters of both legislative chambers.
State officials maintain that the tax does not modify the original legalization framework. Instead, they argue it is part of a separate funding mechanism for road improvements, and therefore does not trigger the higher voting threshold.
Meanwhile, State Representative Joe Aragona said that if the courts strike down the measure, funding for road projects would not disappear but would need to be sourced from other areas of the budget. He added that the governor’s administration remains confident in its legal position as the case moves forward.
Complaints about excessive taxes on legal marijuana in the U.S. aren’t new. Similar complaints have been raised in many jurisdictions where ancillary firms like Innovative Industrial Properties Inc. (NYSE: IIPR) have cannabis businesses as clients.
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