Michigan cannabis operators go to courts to block massive tax hike

Michigan cannabis operators are going to the courts to block a new 24% wholesale tax on marijuana.

In an Oct. 29 filing with the Court of Claims, industry advocates described the massive tax hike, set take effect Jan. 1, as an “unconstitutional statue adopted in derogation of the voters’ rights,” MichiganLive reported.

The biggest individual tax hike on cannabis in recent history is part of a budget package approved last month that Gov. Gretchen Whitmer says will raise $420 million in revenue to pay for infrastructure improvements.

But piled on top of an existing 10% excise tax and a 6% sales tax, the new tax will depress the $3.2 billion cannabis market further as consumers find cheaper alternatives, operators say.

Michigan marijuana could become among the country’s most-taxed

If implemented, the tax would make Michigan’s marijuana among the most heavily taxed in the country.

Michigan’s $3.2 billion annual cannabis market is the second largest in the U.S., trailing only California.

The Michigan Cannabis Industry Association, representing over 400 businesses, and PG Manufacturing, a Lansing-based marijuana company, filed a lawsuit against the tax, calling it “legislative gamesmanship.”

The main legal challenge to the tax centers on the Marijuana Regulation and Taxation of Marijuana Act (MRTMA), a voter-approved ballot initiative in 2018.

The law established the tax structure for marijuana sales, which began in December 2019.

Because the MRTMA originated as a voter initiative, the state Constitution requires a supermajority – three-fourths support in both the House and Senate – to amend it.

The state Senate, however, passed the new tax legislation by a narrow 19-17 margin.

Whitmer had initially proposed a 32% wholesale tax on marijuana, estimating it could generate $470 million for road repairs.

But industry insiders argue revenue projections are overly optimistic and fails to account for potential sales losses resulting from higher prices, particularly in border areas where out-of-state buyers are a significant customer base.