The Michigan State Senate recently passed a measure introducing a 24% tax on wholesale marijuana sales. The new levy will be used to fix and maintain the state’s roads. The Senate passed House Bill 4951 last Friday, following the state House’s approval on September 25.
Once signed into law, the 24% levy on wholesale transactions will be added to the existing 10% excise tax already applied to marijuana products. In addition, customers continue to pay a 6 percent sales tax when purchasing cannabis from licensed dispensaries.
According to a legislative analysis, the additional tax is projected to generate roughly $420 million annually for infrastructure improvements. However, the report also predicts a potential 14% drop in marijuana sales as higher prices could discourage consumers or drive them toward unregulated markets.
The bill’s passage in the House last month sparked protests from cannabis advocates, who gathered outside the Capitol to voice their frustration. Many industry leaders and small business owners argue that the additional tax will cripple local marijuana companies, threaten jobs, and push more consumers toward the illegal market where prices are lower and regulation is nonexistent.
“Our industry isn’t a solution for their budget problems,” said Mike DiLaura, House of Dank’s general counsel. “As citizens and business owners, we need to stand together and say we’ve had enough.”
Representative Timmy Beson also criticized the measure, saying that raising taxes on marijuana businesses to pay for road work would hurt small business owners statewide. “We should be encouraging Michigan entrepreneurs, not making it harder for them to survive,” Beson said.
Beson also emphasized the impact on cultivators, saying that small farmers can’t simply raise prices to cover higher costs. He suggested that any new tax should be applied at the retail level instead, where prices are actually determined, and that it should be consistent across all types of marijuana retailers.
Leaflink’s vice president, Rodney Holcombe, added that the move undermines the progress Michigan’s marijuana market has made since legalization. “This industry has created more than 47,000 jobs, contributed consistent tax revenue, and boosted consumer safety,” Holcombe said. “This tax could undo that success, leading to fewer legal sales and more activity in the illicit market. We’re committed to working with the industry to find a fair path forward.”
HB 4951 now awaits Governor Gretchen Whitmer’s signature. She is expected to approve it as part of a broader agreement on the state budget.
Canadian marijuana firms like SNDL Inc. (NASDAQ: SNDL) may be sympathizing with their U.S.-based counterparts that have to deal with a patchwork of regulatory systems and additional challenges arising from a heavy tax burden.
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