Despite a lawsuit aiming to prevent Michigan’s new 24% cannabis wholesale tax from going into effect on Jan. 1, 2026, the state’s treasury department published information about its implementation.
The Michigan Cannabis Industry Association is attempting to stop the wholesale tax altogether, arguing in a lawsuit that the state Legislature needed to gain a three-fourths majority vote to make changes to the state’s citizen-initiated statute backed by 56% of voters in 2018.
Planning to move forward on imposing the new tax, the Michigan Department of Treasury published guidance on Nov. 4 that provides licensed businesses with details on filing requirements, calculation methods and payment procedures.
Under the law that Gov. Gretchen Whitmer signed on Oct. 7 as part of Michigan’s $81 billion state budget, the 24% tax will be applied to:
- the first sale or transfer of cannabis from a wholesaler to a retailer;
- cannabis cultivated and processed for retail sale by a cannabis retailer itself (e.g., microbusinesses); or
- sales or transfers of cannabis from medical provisioning centers to adult-use retailers.
An estimated $421 million in annual revenue generated by the new 24% wholesale cannabis will be deposited into a “neighborhood road fund” for infrastructure improvements, with $100 million going toward bridges, and the remaining revenue allocated to county road commissions, cities and villages.
Whitmer said the money will be used to fix “all those damn roads” after signing the budget.
The 24% wholesale tax will be in addition to the state’s 10% cannabis excise tax at retail and 6% sales tax.
While Michigan’s licensed cannabis dispensaries will remain responsible for remitting the 10% excise tax and 6% sales tax to the treasury department, the cannabis establishment that makes the “first sale or transfer” of cannabis to a retailer will be responsible for remitting the 24% wholesale tax.
Subsequent sales or transfers will not be responsible for remitting the new 24% tax rate, according to the treasury department.
“The imposition of the tax [is] on the ‘first sale or transfer’ to a retailer and precludes the possibility the same product will be taxed multiple times, at different points in the chain of production,” the department clarified in an FAQ section on the tax. “For example, the wholesale tax would not be imposed on a transfer of adult-use marihuana from a grower or cultivator to a processor, because that transaction does not represent the ‘first sale or transfer’ to an entity licensed to make retail sales of adult-use marihuana.”
So, what does this mean for Michigan cannabis prices?
Michigan’s adult-use cannabis shoppers currently have access to some of the cheapest regulated cannabis products in the nation. In September, the state’s average adult-use retail flower price was $63.16 per ounce, according to the Michigan Cannabis Regulatory Agency.
That average price will increase – at least in the immediate aftermath of the new tax’s implementation.
Under the new 24% tax, cannabis wholesalers can pass their increased costs along to retailers, who then can pass their increased costs to the end consumer.
“The wholesaler is permitted to recoup the tax due on a transaction by collecting it from the retailer, but the wholesaler remains legally liable for both the payment and remittance of the tax, even if it does not collect the tax from the retailer,” according to the treasury department. “This is like Michigan’s general sales tax, which is imposed upon sellers of tangible personal property. Sellers are legally liable for paying and remitting the sales tax even though they typically recoup the cost of the tax by passing it through to their customers.”
The department also addressed the wholesale price for seed-to-sale businesses, where no monetary transaction occurs for cannabis transferred to a retailer (e.g., a vertically integrated microbusiness). Under these circumstances, the treasury will calculate the average wholesale price “based on the best available information” to determine what amount will be taxed. For these seed-to-sale businesses, the new wholesale tax will be applied at the point that a cannabis product is packaged for retail sale.
The treasury also clarified that dual license holders – those who hold medical and adult-use licenses – cannot avoid the 24% wholesale by regularly transferring cannabis from their medical inventories to their adult-use inventories, all of which are required to be tracked in Metrc.
If a retailer returns a cannabis product to the wholesaler, then the wholesaler should return or credit the retail licensee’s entire purchase price, including the wholesale tax, according to the treasury department. If the wholesaler has already remitted the tax to the department, then it should deduct that amount to be refunded or credited on its next tax return.
The treasury department will require wholesalers to remit the new 24% tax every quarter, except for 2026, when they can remit and report the annual total of all taxes for the calendar year on their fourth quarter wholesale tax returns.
