Michigan’s cannabis industry failed to secure an injunction against the new wholesale tax, but the judge left the door open for the underlying legal challenge to proceed as questions remain about voter intent and market impact.
DETROIT – Michigan’s legal cannabis industry took a major hit Monday after a judge refused to block a new 24% wholesale tax on marijuana. The ruling clears the way for the tax to take effect on Jan. 1.
1. Court’s Reasoning Behind Michigan Cannabis Wholesale Tax Ruling
Michigan Court of Claims Judge Sima Patel denied the Michigan Cannabis Industry Association’s request for an injunction, siding with the state’s argument that adding a tax does not change the state’s marijuana laws.
Patel rejected the industry’s central claim — that only the Michigan Regulation and Taxation of Marihuana Act (MRTMA) can authorize taxes on regulated cannabis and that any new tax would require a supermajority vote to amend that voter-approved law.
“The court finds insupportable plaintiffs’ argument … that the MRTMA is the sole method by which to tax regulated marijuana in Michigan,” Patel wrote. She added that nothing in the voter-approved statute requires all future marijuana-related taxes to be enacted through an MRTMA amendment. Instead, lawmakers imposed the new tax through separate road-funding legislation. “The two statutes can be read together,” she wrote.
2. Judge Allows Legal Challenge to Michigan Cannabis Wholesale Tax
Despite ruling against the injunction, Patel allowed the MICIA’s broader case to continue. She said the industry raised valid questions about whether the new wholesale tax undermines the intent of voters who legalized recreational marijuana in 2018.
“There remain questions of fact whether the 24% wholesale excise tax … interferes and conflicts with the purposes of the MRTMA,” Patel wrote. The industry argues voters deliberately chose a 10% retail excise tax to keep prices competitive and discourage illegal market activity. If taxes climb too high, they argue, consumers will return to illicit sources — undermining legalization itself.
Patel ruled that those concerns are factual issues that require further examination, not immediate legal conclusions. As a result, the case now moves into discovery, but the 24% tax will still take effect on Jan. 1. Read our full breakdown of how Michigan cannabis laws are challenged in court.
3. Cannabis Industry Plans Appeal Over Michigan Cannabis Wholesale Tax
The MICIA, which represents 400 cannabis businesses, argued the Legislature violated the state Constitution by passing the wholesale tax without voter approval or the supermajority required to amend MRTMA. House Bill 4951 passed 78–21 in the Michigan House and 19–17 in the Senate — both short of the three-quarters threshold.
“We don’t believe the Court of Claims made the right call,” said Rose Tantraphol, MICIA spokesperson. “The fight is far from over. We remain confident this move by the Legislature violated the will of the voters who approved the 2018 initiative. We plan a swift appeal.”
Because the case is still active, the MICIA cannot directly appeal the injunction decision. However, it can petition the Michigan Court of Appeals for an appeal on leave, which allows the higher court to intervene if it finds a significant legal error.
It remains unclear when the Court of Claims will resume the case. Until then, the cannabis industry must prepare for the new wholesale tax.
1. Michigan Will Become One of the Nation’s Highest-Taxed Markets
Once implemented, Michigan’s 24% wholesale tax — combined with the state’s existing retail excise tax — will create a total tax burden of roughly 40%. Only California would have a higher effective tax rate. Notably, California Gov. Gavin Newsom recently rolled back a 25% excise tax after the state’s market began collapsing under high taxes and oversupply.
Industry leaders expect similar pressures in Michigan, where prices are already the lowest in the nation. The average ounce of recreational flower costs just $63.16, about one-third the price of cannabis in Illinois.
Those low prices reflect massive oversupply. Michigan currently produces about two pounds of cannabis for every pound consumers buy, a dynamic that has pushed wholesale prices to record lows and forced many operators out of the market.
“Margins for cannabis businesses are already very thin, and there’s no room to absorb a 24% tax,” Tantraphol said. “Many cannabis businesses have already said they will go out of business if this tax goes into effect. This law will negatively impact 47,000 Michigan residents employed in the industry.”
Final Thoughts
Michigan’s 24% Cannabis Wholesale Tax Takes Effect at a critical moment for an already strained market. The ruling prioritizes legislative authority over economic reality. While the legal challenge continues, the immediate impact on pricing, jobs, and business survival is unavoidable. Ultimately, how courts interpret voter intent may determine the long-term stability of Michigan’s cannabis industry. Read more in-depth analysis on cannabis policy, taxation, and market trends.
FAQs
1. How will the tax affect cannabis businesses in Michigan?
Many operators say they cannot absorb the added cost, which may lead to closures, job losses, and reduced competition.
2. Why is the 24% wholesale tax controversial?
Industry groups argue the tax undermines the voter-approved marijuana framework and could push consumers back to the illegal market by raising prices.
3. What did the judge decide about Michigan’s cannabis tax?
The judge denied an injunction that would have blocked the 24% wholesale cannabis tax, allowing it to take effect on January 1.
4. Is the cannabis industry’s lawsuit over?
No. While the injunction was denied, the judge allowed the broader legal challenge to proceed, including questions about voter intent and market impact.
