The state of Michigan is standing by its newly approved wholesale cannabis tax, stating that the measure complies with the state constitution and does not violate the 2018 ballot initiative that legalized recreational marijuana.
The legal defense comes in response to a lawsuit filed by the Michigan Cannabis Industry Association, which is challenging a 24% wholesale tax on cannabis slated to take effect at the start of 2026. The tax would be added to the existing excise tax already applied to retail sales under the voter-approved legalization measure.
Industry representatives argue that the new levy is unconstitutional as it was not passed with the supermajority vote required to alter a voter-initiated measure. The tax cleared the House by a 78-21 vote and the Senate by 19-17, both falling short of the three-fourths margin required by the state constitution for such changes.
A separate lawsuit filed by Holistic Research Inc., a licensed marijuana cultivator based in Harrison Township, is also seeking to block the tax while litigation proceeds temporarily. The company has requested a preliminary injunction that would prevent the state from implementing the tax on January 1.
In its court filings, the state maintains that the new tax is a separate measure and does not amend the 2018 legalization law. State attorneys argue that lawmakers created a distinct revenue mechanism intended to work alongside Michigan’s broader marijuana regulatory framework, which is governed by multiple overlapping statutes.
According to the state’s brief, the goal of the new tax is to generate additional funding for road improvements, not to alter or regulate the marijuana market itself. Officials say the tax will contribute roughly $420 million to a $2 billion infrastructure plan designed to improve state and local roads.
Critics, however, warn that the added cost will likely raise prices for consumers, push some businesses to the brink, and encourage more buyers to return to the illegal market, undermining the state’s goal of supporting a regulated industry.
The state also rejected claims that lawmakers improperly changed the intent of an unrelated bill to push the tax through.
Attorneys for the Michigan Cannabis Industry Association have not yet formally responded to the state’s arguments, but a spokesperson said the group intends to press for a temporary injunction. Judge Sima Patel of the Court of Claims is scheduled to consider that request on November 25 in Detroit.
The wider cannabis industry, including companies like Canopy Growth Corp. (NASDAQ: CGC) (TSX: WEED) will be hoping that a workable compromise is attained to increase tax revenue without unduly burdening marijuana companies in Michigan.
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