Michigan’s 24% Cannabis Wholesale Tax

What Every Business Needs to Know

January 1, 2026 marks a pivotal moment for Michigan’s cannabis industry as the controversial 24% wholesale tax takes effect, fundamentally reshaping the economics of the state’s second-largest cannabis market in the nation.

The New Tax Landscape

Michigan cannabis businesses face a seismic shift in their operating environment with the implementation of the Comprehensive Road Funding Tax Act (CRFTA).

This new 24% wholesale excise tax applies to the transfer of adult-use cannabis from cultivators and processors to retailers, adding another layer to Michigan’s already complex tax structure.

The tax specifically targets three types of transactions:

First sales from marijuana establishments to retail licensees
Internal transfers within vertically integrated companies
Transfers from medical provisioning centers to adult-use retail systems

This wholesale tax sits on top of the existing 10% retail excise tax and 6% state sales tax that consumers already pay, creating one of the highest effective tax rates in the nation’s cannabis industry.

Court Challenges and Industry Response

Despite fierce opposition from the Michigan Cannabis Industry Association (MiCIA) and other industry groups, Court of Claims Judge Sima Patel denied a preliminary injunction request on December 9, 2024, allowing the tax to proceed as scheduled. The plaintiffs argued that the Legislature violated Michigan’s constitution by passing this tax without the three-fourths supermajority required to amend citizen-initiated statutes like the 2018 Michigan Regulation and Taxation of Marihuana Act (MRTMA).

MiCIA spokesperson Rose Tantraphol characterized the legislative process as using

“a trojan horse process during chaotic, middle-of-the-night actions to ram this legislation through.”

The association plans to continue its legal challenge, with the next hearing scheduled for January 13, 2026.

Real-World Impact on Cannabis Businesses

For Cultivators and Processors

The wholesale tax directly increases costs for cultivators and processors selling into the retail channel. In Michigan’s already competitive market with compressed wholesale prices, operators face difficult decisions: absorb the tax through reduced margins or pass costs forward through higher prices.

Andrew Sereno, President of Glacier Cannabis, expressed the stark reality facing wholesalers:

“With a 24% tax, if we had to assume that, let’s be honest, the margin’s nowhere near that. I think there’s only one option in the end, which is to raise prices.”

For Retailers

Retailers will experience higher inventory costs, forcing adjustments to:

Shelf prices to maintain margins
Operating expenses to offset increased costs
Supply contracts to renegotiate terms
Internal transfer pricing for vertically integrated operations

For Consumers

The cumulative tax burden will significantly impact the final retail price. With the 24% wholesale tax, 10% retail excise tax, and 6% sales tax, consumers will see substantially higher out-the-door prices starting in 2026. Industry analysts predict this could drive price-sensitive consumers back to the illicit market.

Compliance Requirements and Administrative Changes

The Michigan Department of Treasury has published detailed guidance for businesses preparing for the new tax regime:

Filing Requirements

Quarterly remittance of the 24% tax (except for 2026, which allows annual reporting)
Responsibility falls on establishments making the “first sale or transfer” to retailers
Subsequent transfers in the supply chain are exempt from additional wholesale taxation

Record Keeping

Businesses must maintain detailed transaction records including:

Wholesale price calculations
Transfer documentation for vertically integrated operations
Quarterly tax remittance records
Internal pricing methodologies for compliance verification

Market Predictions and Economic Impact

The Michigan Senate Fiscal Agency projects a 14.4% decline in legal market sales due to price increases. This aligns with warnings from industry economists and the Tax Foundation that higher tax burdens typically correlate with:

Reduced legal market capture rates
Increased illicit market activity
Business consolidation and closures
Decreased market competitiveness versus neighboring states

Senator Jeff Irwin (D-Ann Arbor), opposing the legislation, noted that Michigan currently captures three out of four cannabis sales in the legal market, compared to only one in three in high-tax states like California and Colorado.

Strategic Considerations for Business Owners

Immediate Actions

Review and adjust pricing strategies before January 1, 2026
Analyze current margins to determine absorption capacity
Update financial projections to reflect new tax burden
Establish compliance systems for quarterly reporting

Long-term Planning

Consider vertical integration to optimize tax efficiency
Evaluate market positioning to differentiate beyond price
Build cash reserves to weather transition period
Explore operational efficiencies to offset increased costs

The Broader Implications

While the tax is projected to generate $420.7 million annually for Michigan’s road and bridge infrastructure, industry stakeholders warn of unintended consequences:

Social Equity Impact: Smaller, social equity, and in-state cultivators may struggle to compete against better-capitalized operators
Market Consolidation: Marginal businesses may face insolvency, accelerating industry consolidation
Interstate Competition: Michigan’s price advantage over neighboring states will diminish
Illicit Market Growth: Higher legal prices create opportunities for unlicensed operators

Looking Ahead

The cannabis industry continues to evolve rapidly, and Michigan businesses must adapt to survive. While legal challenges continue, operators should prepare for the tax’s implementation while maintaining hope for legislative or judicial relief.

The January 13, 2026, scheduling conference could provide clarity on the lawsuit’s trajectory, but businesses cannot afford to wait. Proactive planning, strategic positioning, and operational excellence will separate successful operators from those unable to navigate this new landscape.

How CannaMapr Supports Michigan Cannabis Businesses

During this challenging transition, maintaining strong online visibility becomes even more critical. CannaMapr provides free cannabis business listings with valuable do-follow backlinks, helping Michigan operators:

Reduce marketing costs during margin compression
Maintain search engine visibility without expensive advertising
Connect with price-conscious consumers seeking alternatives
Build organic traffic as paid advertising budgets shrink

For Michigan cannabis businesses facing unprecedented tax burdens, every dollar saved on marketing matters. CannaMapr’s free listing service offers a cost-effective solution to maintain market presence while navigating these turbulent times.

Stay informed about Michigan cannabis industry developments and regulatory changes by following CannaMapr’s blog. List your Michigan cannabis business free today at cannamapr.com and join our growing directory of cannabis businesses committed to building a sustainable, accessible market.