The fear that a new 24% cannabis wholesale tax in Michigan would cause retail prices to spike and demand to plummet has yet to ring true through the first two months of 2026.
The state’s licensed dispensaries reported more than $234.5 million in sales in February, marking a 3% decrease over February 2025, according to the Michigan Cannabis Regulatory Agency (CRA). But that slight dip in sales is a result of lower prices, not lower demand.
The average cost for 1 ounce of cannabis flower at an adult-use dispensary was $59.85 in February 2026, representing an 8.2% decrease from the $65.21 average ounce price in February 2025, according to the CRA.
Also, Michiganders purchased 104,716 pounds of adult-use cannabis flower in February 2026, or 3.2% more than the 101,443 pounds they purchased in February 2025, according to the CRA. Cannabis flower made up 42% of all product sales last month.
While many media outlets were quick to claim that the state’s 24% wholesale tax that went into effect in January was the culprit for lower sales figures that month, the true culprit – at least so far – has been low prices caused by oversupply in Michigan’s unlimited license market.
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The 24% cannabis wholesale tax, which Gov. Gretchen Whitmer signed into law in October as part of the state’s $81 billion budget, is in addition to a 10% excise tax on dispensary sales and a 6% state sales tax.
Whitmer, who pushed for the new tax, hopes it’ll generate an additional $421 million in annual revenue to help fund her $1.8 billion infrastructure improvement plan, “so we can keep fixing all those damn roads,” she said in October.
It remains to be seen whether the brunt of the new tax will be loaded on the backs of cannabis businesses or cannabis consumers. Oftentimes, when a state’s cannabis market is overtaxed, demand suffers because consumers seek cheaper alternatives from unregulated sources. But that doesn’t seem to be the case so far in 2026 for Michiganders.
In addition to flower products, demand was up in February 2026 for most other leading product categories compared to February 2025, including shake/trim (14.7%), concentrates (23.2%), inhalable compound concentrates (32.5%) and vape cartridges (18%), according to the CRA. Infused edibles, meanwhile, experienced a 5% decrease.
This indicates that licensed cannabis businesses are, thus far, absorbing the costs of the new 24% wholesale tax in Michigan’s oversupplied marketplace, which has no shortage of competition, including 956 active cultivation licensees, 275 processors and 835 dispensaries.
As of Feb. 28, 2026, the state’s inventory included nearly 240,000 pounds of cannabis flower at retailers (up 58% from a year ago), more than 788,000 pounds of flower at processors (up 140%) and nearly 251,000 pounds of test-passed flower at growers (up 31%), according to the CRA. That alone is enough to supply the marketplace for roughly 10 months.
But that inventory is in addition to the 1.45 million pounds of fresh-frozen cannabis flower at processor and cultivation sites as of Feb. 28, according to the CRA.
Combined, Michigan has enough cannabis flower in inventory to supply the licensed marketplace for nearly two years – perhaps one major reason dispensary prices have yet to shift upward despite the 24% tax going into effect.
But continuing to absorb the tax increase costs is not sustainable for many of the state’s licensed businesses.
Under the law that Whitmer signed in October, the cannabis establishment that makes the “first sale or transfer” of cannabis to a retailer is responsible for remitting the 24% wholesale tax; however, negotiated deals throughout the supply chain can impact any business, or, ultimately, 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 Michigan Treasury Department.
Judging by cannabis flower prices remaining near all-time lows at dispensaries in January and February, retailers hold the upper hand. But this could shift if sales figures continue to dip, regardless of demand.
In January 2026, Michigan’s licensed dispensaries reported $226.8 million in sales, an 8.3% decrease from the previous January, and their smallest total for that calendar month since 2023, according to the CRA. Some attributed the sales plunge, in part, to a cold and snowy month.
Whatever the cause, it was enough for a bipartisan group of eight state senators to take notice and file legislation in late February to eliminate the newly implemented tax.
Sen. Jonathan Lindsey, R-Coldwater, who sponsors the legislation, said the wholesale tax represents “an unnecessary growth of government.” He also said its impact on businesses will be devastating on the regulated market, including widespread job losses.
“This is about reining in the government’s constant attempt to get just a little bit more out of people,” Lindsey said. “Lansing must realize that growing government by taxing businesses into oblivion has never been, and will never be, a way to encourage a healthy Michigan economy.”
