Michigan’s booming cannabis industry is pushing back hard against a new 24% wholesale tax on marijuana set to start January 1, 2026. Operators filed a lawsuit claiming it’s unconstitutional and hurts businesses without proper voter input. This could shake up the state’s $3.2 billion market, but will the courts stop it in time? Details on the fight and what’s at stake ahead.
Cannabis businesses in Michigan took legal action on October 29, filing a complaint with the Court of Claims. They argue the 24% tax on wholesale marijuana sales violates the state constitution. The tax, tucked into the 2026 budget signed by Governor Gretchen Whitmer, aims to raise about $420 million yearly for road repairs.
The Michigan Cannabis Industry Association leads the charge, calling the tax a burden that could crush small operators. They say lawmakers bypassed rules needing a supermajority vote to change voter-approved laws from 2018 that legalized recreational marijuana.
This move comes as the industry faces other pressures, like proposals to cap licenses and tighten rules on hemp products. If the tax sticks, prices could jump, pushing buyers to the black market.
The case highlights tensions between state revenue needs and business growth.
Why Operators Say the Tax Breaks Rules
At the heart of the lawsuit is a claim that the tax ignores voter rights. Michigan’s 2018 ballot measure set a 10% excise tax on retail sales, but this new wholesale levy jumps to 24% without the required three-quarters legislative approval for changes.
Industry reps point out the tax was slipped into a massive $81 billion spending plan without full debate. “It’s like changing the rules mid-game,” one operator told us, fearing it sets a bad example for other states.
The filing asks for an injunction to pause the tax while the case plays out. Without it, businesses might have to rethink pricing or cut jobs right away.
Court hearings could start soon, with a decision possibly before the new year.
This isn’t just about money; it’s about protecting the will of the people who voted for legal weed.
Impact on Michigan’s Cannabis Market
Michigan’s cannabis sector hit $3.2 billion in sales last year, making it one of the top markets in the U.S. But the tax could slow that growth. Experts predict a 20-30% price increase at dispensaries, based on similar hikes in other states.
Small growers and sellers worry most. They already deal with tight margins and competition from unlicensed sellers.
- Higher costs might force some shops to close.
- Consumers could turn to cheaper, unregulated options.
- Jobs in the industry, which employs thousands, hang in the balance.
A recent study by the Anderson Economic Group, done in 2025, shows the tax might generate $420 million but at the cost of market stability. That’s money for potholes, but operators say it’s a short-term fix that kills long-term gains.
The black market thrived before legalization; this could bring it back strong.
Broader Effects on State Economy and Users
Beyond business, everyday users feel the pinch. Recreational buyers might pay more for products, while medical patients could see access issues if prices soar.
The tax aims to fund infrastructure, a hot topic in Michigan with its rough roads. State officials defend it as a fair way to tap a growing industry for public good.
Yet, critics argue it unfairly targets cannabis while other sectors get lighter treatment. “Why hit weed so hard when alcohol taxes are lower?” asks one advocate.
If the court blocks the tax, it could inspire similar challenges elsewhere. States like California and New York have faced their own tax battles, with mixed results.
This fight shows how legal cannabis still navigates shaky ground years after approval.
Legal Path Forward and Possible Outcomes
The Court of Claims will review the case soon. Plaintiffs want a quick ruling to avoid chaos on January 1.
If they win, the tax gets paused or tossed, forcing lawmakers back to the drawing board. A loss means businesses adapt fast, maybe by raising prices or lobbying for relief.
| Possible Court Outcomes | What It Means for Industry |
|---|---|
| Injunction Granted | Tax delayed; time to regroup and negotiate |
| Tax Upheld | Immediate hikes; potential market shrink |
| Full Invalidation | Back to old rates; big win for operators |
Experts say the constitutional angle gives the suit strong legs. Past cases in Michigan have struck down laws that ignored voter initiatives.
No matter the result, this spotlight on cannabis taxes could shape policy for years.
Michigan’s cannabis community stands at a crossroads, fighting a tax that could redefine their future. As roads get funding dreams and businesses brace for impact, this court battle reminds us how fragile progress can be in a young industry. It sparks hope for fair play but stirs fear of overreach.