Michigan Cannabis Group Fights New Tax Hike in Appeals Court
A Michigan cannabis industry group is making a last-ditch legal effort. They aim to block a new 24% wholesale tax. This tax is set to take effect on January 1, 2026. The Michigan Cannabis Industry Association (MICIA) is spearheading the appeal. They filed their case with the Michigan Court of Appeals. This follows a setback in the Court of Claims. The stakes are incredibly high for the state’s cannabis businesses.
The New Wholesale Tax
Lawmakers approved the new tax as part of the state’s budget. This measure is officially known as the Comprehensive Road Funding Tax Act. Its primary goal is to fund road and bridge repairs. The state anticipates it will generate over $400 million annually. This tax applies to wholesale marijuana transactions. It is levied before products reach dispensary shelves. This is in addition to Michigan’s existing taxes. These include a 10% excise tax and a 6% sales tax on retail purchases.
Constitutional Challenge Launched
The MICIA argues the Legislature violated Michigan’s constitution. Their core claim is that the 2018 voter-approved Michigan Regulation and Taxation of Marihuana Act (MRTMA) cannot be amended without a supermajority vote. Voters approved this act, establishing a 10% retail excise tax. The association contends that HB 4951, which created the wholesale tax, did not receive the required three-fourths legislative majority. Lawmakers passed the bill with a simple majority. MICIA also alleges the Legislature unconstitutionally added the tax to a budget bill. This reportedly happened without public hearings.
Court of Claims Denies Initial Block
A Michigan Court of Claims judge previously ruled on the tax. Judge Sima Patel denied the MICIA’s request for a preliminary injunction. This decision, on December 8, allowed the wholesale tax to proceed as scheduled. The judge found the wholesale tax to be a new levy. She stated it did not directly amend the MRTMA. Patel noted the voter initiative allowed for taxes “in addition to all other taxes”. However, one aspect remains for the court to decide. This concerns whether the new tax undermines the original legalization measure’s intent.
Industry Warns of Severe Impact
Industry leaders express grave concerns. They warn that the added tax burden will hurt businesses operating on thin margins. C3 Industries, for example, is closing its grow facility. This closure will cut 62 jobs. Higher Love, a multi-dispensary operator, plans significant layoffs. Businesses argue the tax will increase prices for consumers. This could push them back to the illicit market. The MICIA predicts a 14% decrease in total sales due to market elasticity. This news impacts the entire trending cannabis sector.
The State’s Position
Michigan’s government argues the tax is legal. Their defense centers on the idea that the wholesale tax is new. They claim it is not a direct modification of the 2018 law. The state asserts its authority to create taxes for budget needs. The stated purpose is road infrastructure funding, not altering cannabis policy. The Michigan Department of Technology, Management and Budget, which will administer the tax, declined comment on the ongoing litigation.
Appeal for Expedited Ruling
Now, the fight moves to the Michigan Court of Appeals. The MICIA is urging the court for an expedited ruling. They want a decision before the January 1st effective date. Rose Tantraphol, MICIA spokesperson, stated the organization believes it has a strong case on the merits. The association emphasizes their commitment to upholding the will of Michigan voters. This trending news represents a significant moment for the cannabis industry.
Broader Implications
This legal battle has national significance. It could influence how other states approach cannabis taxes. It also tests the boundaries of voter-approved laws versus legislative action. The outcome will shape Michigan’s cannabis market. It may also set precedents for similar disputes across the country. The future of Michigan’s cannabis industry hangs in the balance. This news is critical for understanding the sector’s evolving landscape.
