Written By Lexx Thornton
On October 7, Michigan Governor Gretchen Whitmer signed an $81 billion budget that includes a new 24% wholesale tax on cannabis to fund her ambitious road improvement plan. This tax, levied on transfers between cannabis businesses, takes effect on January 1, 2026, and is projected to raise approximately $420.7 million annually.Â
The new wholesale tax is added atop the existing 10% cannabis excise tax and the 6% state sales tax, raising concerns that the total tax burden will significantly increase dispensary prices and drive consumers toward the unregulated market.Â
Governor Whitmer hailed the budget, which passed the state Senate by a narrow 19-17 margin, as a major win for infrastructure. “We signed my seventh balanced bipartisan budget… safer, smoother roads to drive on, thanks to the biggest roads deal in Michigan history,” Whitmer stated.Â
The revenue generated by the new tax will primarily fund the state’s infrastructure projects:Â
- The majority of the revenue will be allocated to the Neighborhood Road Fund to support county road commissions, cities, and villages.Â
- A portion of the fund is specifically earmarked for local bridges.Â
Despite the bill being signed, the new tax faces an immediate legal battle. The Michigan Cannabis Industry Association (MiCIA) filed a lawsuit in the Michigan Court of Claims on the same day the budget was signed.Â
MiCIA argues that the new tax is unconstitutional because the state legislature failed to secure the three-fourths voter requirement to amend a law originally passed by citizen initiative—the Michigan Regulation and Taxation of Marihuana Act (MRTMA) of 2018.Â
The lawsuit contends that the new 24% tax constitutes a second excise tax specific to the cannabis industry. Since the MRTMA sets the exclusive mechanism for cannabis excise taxes, the industry association argues that the legislature acted unconstitutionally by passing the new levy with only a simple majority vote. MiCIA is requesting the court to strike down the tax entirely.Â
