Michigan Cannabis Industry Lawsuit Over 24% Wholesale Tax Moves Toward Trial

6 January 2025

Michigan’s legal cannabis industry is heading toward a major court test over taxes, and for now, a new 24% wholesale marijuana tax is staying in place while the case moves forward.

The Michigan Cannabis Industry Association (MICIA) filed a lawsuit in October challenging the Legislature’s decision to impose a 24% excise tax at the wholesale level, a tax that took effect on January 1, 2026. The association argues the tax violates the state constitution because it modifies the 2018 voter-initiated law that legalized recreational marijuana. In other words, the industry’s case is not just about rates, it’s about whether lawmakers can rewrite the voter-approved framework in a way that changes its purpose.

Judge Sima G. Patel of the Michigan Court of Claims has now denied the state’s efforts to derail the lawsuit. In early December, Patel declined to grant the association a preliminary injunction, so the wholesale tax went live as scheduled. She also refused to end the case without a full trial, allowing it to proceed while acknowledging unresolved questions about how the tax affects the goals of the voter-approved law. The state later asked her to reconsider that decision, but on Monday she denied the request, saying there was no clear error and that questions of fact remain.

A key issue is what happens to prices and consumer behavior. Patel wrote that it is not certain, based on the current record, whether the wholesale tax will raise prices enough to push buyers back into the illicit market. She said discovery is needed to examine the tax’s real-world effects and whether it undermines the purposes of the 2018 initiated law.

The association and its supporters have warned that the tax could be especially hard on smaller businesses. They argue that adding a 24% wholesale tax on top of the existing 10% retail excise tax and the 6% sales tax could squeeze margins, raise prices at the register, and push customers toward illegal sellers. While the legal challenges continue, the ongoing wholesale tax revenue is being collected to fund road repairs, and the money is already being put to a public purpose.

The case is now moving toward a fuller trial record, and the association has also filed for review at the Michigan Court of Appeals. For Michigan residents, the outcome could shape what legal cannabis costs and how stable the regulated market feels in the year ahead. For cannabis businesses, the short-term reality is simpler: the tax is being collected now, and the court fight is just getting started.