A Michigan marijuana trade group has filed a lawsuit to challenge the state’s newly approved tax on wholesale cannabis sales. The legal complaint was submitted to the Michigan Court of Claims shortly after the measure became law.
According to the Michigan Cannabis Industry Association (MCIA), the new tax and the process behind its approval conflict with several parts of the state constitution. The association claims lawmakers failed to follow the proper procedure for changing the voter-approved cannabis law that established how the industry is taxed and regulated.
Michigan voters passed Proposal 1 in 2018, which created the state’s Regulation and Taxation of Marihuana Act. That ballot initiative legalized recreational marijuana for adults aged 21 and over and included a 10 percent excise tax on retail marijuana sales.
The trade association argues that the 2018 act is the only legal framework for taxing marijuana sales in the state. Under Michigan’s constitution, any modification to a voter-initiated law must either be approved by voters or gain a three-fourths majority vote in both chambers of the Legislature.
The recently enacted 24% wholesale tax was passed by the House in a 78-21 vote, with several members abstaining, and by the Senate with a narrow 19-17 margin. Those numbers fall short of the three-fourths threshold needed to alter a citizen-approved statute.
The MCIA further claims that lawmakers altered the bill’s purpose partway through the legislative process. Initially, the proposal focused on creating a fund for infrastructure and local government revenue without adding any new tax. Later, it was rewritten to include a 24 percent excise tax on wholesale cannabis sales. The group argues that this shift violates constitutional rules that prevent a bill’s purpose from being altered after introduction.
Additionally, the association contends that the new law breaks the state’s contracts clause, arguing it unfairly affects agreements and expectations among licensed cannabis businesses. The organization, which represents roughly 400 cannabis companies across Michigan, is asking the court to declare the tax invalid and block the state from enforcing it.
Ron Leix, the Michigan Treasury Department spokesperson, stated that the department had not yet received the lawsuit and therefore would not be commenting on the matter.
If the dispute advances, the case could eventually reach the state Supreme Court, where justices would decide whether the tax and the legislative process behind it are lawful. The outcome could also impact a broader budget agreement supported by both Republican and Democratic leaders.
The implementation of that tax hike would likely have adverse effects on the growth of the cannabis industry in the state, potentially preventing other ancillary companies within the ecosystem, such as those similar to Innovative Industrial Properties Inc. (NYSE: IIPR), from opening their doors and thriving.
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