Michigan's Cannabis Tax Faces Constitutional Scrutiny in Court of Claims
11/28/2025
Michigan’s legal cannabis industry is heading for a critical showdown in the Court of Claims over a new 24% wholesale tax on marijuana products. The levy, tucked into a recent state budget package and signed into law, is intended to generate hundreds of millions of dollars annually, primarily for road repairs and other infrastructure needs.
A coalition led by the Michigan Cannabis Industry Association and several licensed recreational operators has filed suit, arguing that the tax violates the state constitution. They contend that marijuana is already subject to a voter-approved 10% retail excise tax plus the standard 6% sales tax—taxes that were explicitly authorized by a 2018 ballot initiative.
Under the Michigan Constitution, any additional tax on the same substance requires a three-quarters supermajority vote in both legislative chambers. The challengers assert that the new wholesale tax was enacted through ordinary budget reconciliation, bypassing that higher threshold and effectively undermining the will of the voters who legalized adult-use cannabis.
Industry representatives warn that a 24% tax levied at the wholesale level—before retailers add their own markups—will crush already narrow profit margins. Small and mid-sized operators, which make up the majority of the market, could face closure, job losses, and consolidation into fewer, larger players. Critics say the move threatens to push consumers back toward the unregulated black market that the 2018 initiative was designed to eliminate.
State officials defend the tax as legally distinct from the voter-protected retail levies, describing it as a supply-chain revenue measure tied to general infrastructure funding rather than cannabis regulation. They argue that it does not trigger the supermajority requirement and represents a legitimate exercise of legislative budgeting authority.
The case now rests with the Court of Claims. A ruling striking down the tax would force lawmakers to find alternative revenue or seek the difficult three-quarters vote. Upholding it would solidify the state’s ability to impose new levies on legalized cannabis without returning to voters or securing broad bipartisan support. Either outcome will ripple beyond Michigan, offering other states a precedent as they balance budget demands against the promises made when voters first legalized marijuana. For now, licensed businesses operate in limbo, bracing for a decision that could reshape the industry’s future viability.
Reference
A coalition led by the Michigan Cannabis Industry Association and several licensed recreational operators has filed suit, arguing that the tax violates the state constitution. They contend that marijuana is already subject to a voter-approved 10% retail excise tax plus the standard 6% sales tax—taxes that were explicitly authorized by a 2018 ballot initiative.
Under the Michigan Constitution, any additional tax on the same substance requires a three-quarters supermajority vote in both legislative chambers. The challengers assert that the new wholesale tax was enacted through ordinary budget reconciliation, bypassing that higher threshold and effectively undermining the will of the voters who legalized adult-use cannabis.
Industry representatives warn that a 24% tax levied at the wholesale level—before retailers add their own markups—will crush already narrow profit margins. Small and mid-sized operators, which make up the majority of the market, could face closure, job losses, and consolidation into fewer, larger players. Critics say the move threatens to push consumers back toward the unregulated black market that the 2018 initiative was designed to eliminate.
State officials defend the tax as legally distinct from the voter-protected retail levies, describing it as a supply-chain revenue measure tied to general infrastructure funding rather than cannabis regulation. They argue that it does not trigger the supermajority requirement and represents a legitimate exercise of legislative budgeting authority.
The case now rests with the Court of Claims. A ruling striking down the tax would force lawmakers to find alternative revenue or seek the difficult three-quarters vote. Upholding it would solidify the state’s ability to impose new levies on legalized cannabis without returning to voters or securing broad bipartisan support. Either outcome will ripple beyond Michigan, offering other states a precedent as they balance budget demands against the promises made when voters first legalized marijuana. For now, licensed businesses operate in limbo, bracing for a decision that could reshape the industry’s future viability.
Reference
