Michigan’s New 24% Wholesale Cannabis Tax: What It Means for the Industry and Consumers

MICHIGAN | Michigan’s cannabis landscape is facing a major shift with the implementation of a new 24% wholesale excise tax on adult-use marijuana, set to take effect on January 1, 2026. This tax, enacted as part of the state’s 2025-2026 budget, adds to the existing tax structure and has sparked intense debate, legal challenges, and concerns about the future of the regulated market.

Background on Michigan’s Cannabis Taxation

Michigan legalized recreational cannabis in 2018 through voter-approved Proposal 1 (the Michigan Regulation and Taxation of Marihuana Act, or MRTMA). The original framework imposed a 10% retail excise tax on adult-use sales, plus the standard 6% state sales tax, for a total of 16% at retail.

Revenue from these taxes has supported schools, roads, municipalities, and regulatory costs, generating hundreds of millions annually. Michigan’s market has thrived under relatively low taxation, becoming the second-largest in the U.S. with low prices and high licensed sales penetration.

The New Tax: Details and Implementation

The Comprehensive Road Funding Tax Act (House Bill 4951), signed by Governor Gretchen Whitmer in October 2025, introduces a 24% excise tax on the wholesale price of adult-use cannabis. This applies to:

• The first sale or transfer from a wholesaler to a retailer.
• Vertically integrated operations (e.g., microbusinesses cultivating for their own retail).
• Transfers from medical provisioning centers to adult-use retailers.

The tax base includes the “wholesale price,” defined broadly to encompass fees and charges, potentially creating a compounding effect. It does not apply to medical marijuana.

Combined with existing taxes, the effective burden could approach 40% or more when passed to consumers, making Michigan one of the highest-taxed cannabis states.

Revenue is projected at $420 million annually, primarily funding local road repairs via the Neighborhood Road Fund—aligning with Whitmer’s “Fix the Damn Roads” initiative.

Industry Reaction and Legal Challenges

The Michigan Cannabis Industry Association (MiCIA) and operators argue the tax undermines MRTMA’s goals of competitive pricing to combat the illicit market. They filed lawsuits claiming it illegally amends a voter-initiated law without the required three-fourths legislative supermajority.

In December 2025, the Michigan Court of Claims rejected injunction requests, allowing the tax to proceed. Judge Sima Patel ruled it does not directly alter MRTMA and serves infrastructure funding, not regulation. Appeals are ongoing, with potential escalation to higher courts.

Critics warn of business closures, job losses, price hikes, and a resurgence of black-market sales in an already oversupplied market with low margins.

Potential Impacts

• Consumers: Expect significant price increases, potentially reducing demand and pushing buyers to unregulated sources.
• Businesses: Smaller operators and vertically integrated models face the heaviest burden; some predict consolidations or closures.
• State Revenue: Short-term gains for infrastructure, but long-term risks if licensed sales decline.
• Market Dynamics: Michigan’s low-price advantage (e.g., attracting border shoppers) may erode.

As of late December 2025, the tax remains on track for January 1, 2026. Stakeholders should monitor legal developments and prepare for adjustments. For official guidance, visit the Michigan Department of Treasury’s wholesale marihuana tax page.