C3 Industries to Close Webberville Grow, Lay Off 62 as Michigan Cannabis Prices and Taxes Squeeze Operators

ANN ARBOR — C3 Industries has filed a state Worker Adjustment and Retraining Notification, or WARN notice, announcing plans to close its 35,000-square-foot cannabis cultivation facility in Webberville on Feb. 14, eliminating 62 jobs as Michigan’s legal marijuana industry faces mounting financial pressure.

The Ann Arbor–based company said the closure is driven by the state’s new 24% wholesale cannabis tax, which takes effect Jan. 1 and applies to transactions between growers, processors and retailers. The tax is designed to fund road repairs but is hitting an industry already grappling with collapsing prices and oversupply.

“Unfortunately, we cannot operate the Michigan production facility profitably with the new wholesale tax going into effect,” said Ankur Rungta, C3’s co-founder and chief executive, in comments to Crain’s Detroit Business. “We warned many state legislators that this would be the likely impact if they passed the wholesale tax.”

MITechNews.com contacted Rungta multiple times through emails seeking verification of his remarks to Crain’s, but did not receive a response.

WARN Act Requires Advance Notice

The WARN Act is a federal law requiring companies with 100 or more employees to provide advance notice of large layoffs or plant closures. The intent is to give workers, local governments and workforce agencies time to prepare for job losses, retraining and economic disruption.

According to the filing with the state of Michigan, C3 Industries’ Webberville facility in Ingham County will close Feb. 14, affecting 62 employees. The notice lists the action as a full closure.

Wholesale Tax Hits as Prices Collapse

The closure comes as Michigan’s cannabis industry enters what many operators describe as a breaking point.

Wholesale and retail prices have plunged to historic lows, driven by years of unrestricted licensing and record harvests. The average retail price for an ounce of adult-use marijuana fell to $59.79 in November, down nearly 17% from a year earlier, according to the Michigan Cannabis Regulatory Agency.

The annual outdoor harvest — known in the industry as “Croptober” — has flooded the market with low-cost flower and fresh-frozen cannabis used in edibles and infused products. Inventory of fresh-frozen marijuana ballooned to 3 million pounds by Nov. 30, up from 1.1 million pounds just two months earlier.

With supply overwhelming demand, operators say they lack pricing power and cannot offset new taxes by raising prices.

Industry Layoffs Mount

C3 is not alone.

Marquette-based Higher Love, which operates 10 dispensaries along with cultivation and processing facilities in the Upper Peninsula, announced this week it is laying off nearly 30% of its workforce, citing the wholesale tax. The company employs more than 200 people statewide.

The layoffs mark a sharp reversal for an industry that had been a rare bright spot for job creation. From 2018 through 2024, legal cannabis accounted for roughly 52% of Michigan’s net private-sector job growth, according to a Crain’s analysis of state and federal data.

Sales have also peaked. Michigan cannabis revenue is projected to total $3.17 billion in 2025, down from $3.3 billion in 2024.

C3 Shifts Investment Out of State

Despite closing the Webberville grow, C3 Industries plans to continue operating its 10 High Profile retail stores in Michigan and open additional dispensaries. The company, however, is increasingly directing capital elsewhere.

C3 has expanded operations in Connecticut, Illinois, Massachusetts, Missouri and New Jersey and is set to open its first Kentucky dispensary in February.

“We continue to operate profitably overall in seven states and are growing year-over-year,” Rungta told Crain’s.

Federal Rescheduling Could Bring Relief

Relief may be coming from Washington.

President Donald Trump on Thursday signed an executive order directing federal agencies to move forward with reclassifying marijuana under the Controlled Substances Act. The order advances a review that could shift cannabis from Schedule I, alongside heroin, to Schedule III, a category that recognizes medical use and lower abuse potential.

The move would not legalize marijuana federally, but it would carry major financial implications for state-licensed cannabis businesses.

Why Schedule III Matters

For cannabis companies, the most immediate impact would be the elimination of IRS Code 280E, a decades-old provision that bars businesses trafficking in Schedule I or II substances from deducting ordinary operating expenses.

As a result, legal cannabis companies often face effective federal tax rates exceeding 70%, compared with the standard corporate rate of 21%.

If marijuana is moved to Schedule III, 280E would no longer apply, allowing companies to deduct payroll, rent, utilities and other basic expenses. Industry analysts say the change could deliver billions of dollars in tax savings nationwide and provide critical relief to Michigan operators struggling under the new wholesale tax.

Industry at a Crossroads

For now, Michigan’s cannabis market remains in a period of consolidation and contraction. Operators warn that without policy adjustments — either at the state or federal level — more closures and layoffs are likely.

“This is the bloodletting phase of a maturing market,” said one industry consultant. “The question is how many businesses survive long enough to benefit from federal reform.”