LANSING, Mich. (WXYZ) — Michigan's 24% tax on marijuana will go into effect at the start of 2026 after a Court of Claims judge denied a request for an injunction.
Judge Sima Patel issued the ruling which reads in part, "The Court finds insupportable plaintiffs’ argument in 25-160 that the Michigan Regulation and Taxation of Marihuana Act (MRTMA) is the sole method by which to tax regulated marijuana in Michigan and that the 24% wholesale excise tax could only be enacted through an amendment to the MRTMA passed by a supermajority."
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The lawsuit came from the Michigan Cannabis Industry Association (MiCIA) and they argued their case last month in front of Patel.
“Michigan voters made their voices heard in 2018 when they passed a citizen ballot initiative legalizing cannabis,” MiCIA Spokeswoman Rose Tantraphol said in a press release back in November. “When the state Legislature passed this law imposing a 24% wholesale tax on cannabis, it did so in violation of provisions in the state’s constitution. Lawmakers used a trojan horse process during chaotic, middle-of-the-night actions to ram this legislation through. We’re fighting to protect the will of Michigan voters.”
Earlier this year, the Michigan legislature passed a law that put the 24% tax on marijuana products to create revenue to partially fund Gov. Gretchen Whitmer's plans to fix the roads.
“When I took office, I made a promise to fix the damn roads so Michiganders could get where they’re going faster and safer,” Whitmer said in a video after signing the bill in October.
Watch below: Questions surround marijuana tax hike to fund road repairs
The tax will be put on the sale of marijuana from growers and processors to retailers.
“It hurts the industry. It really does. And it's a shame to see this happening,” said Nick Hannawa, vice president and chief legal counsel for Puff Cannabis. "It's very disappointing to see the Legislature take a hit like this at the cannabis industry."
Adam Hoffer, director of excise tax policy at the Tax Foundation, said the new tax will almost certainly lead to an increase in retail prices and a decrease in sales. The Michigan Senate Fiscal Agency predicted a 14.4% sales decline. Shoppers will still also have to pay a 10% retail excise tax on marijuana, which has been in place since it was legalized in 2018, plus a 6% sales tax.
“It would be out of my budget, so definitely I would have to lower down my consumption of marijuana,” Puff customer Kevin Lara said.
Industry leaders have warned the extra tax would instead lead customers to purchase unregulated marijuana off the black market.
"People are going to be like why get taxed here when I can just go somewhere else and not get taxed,” Lara said.
“They might not see it on the receipt, but it'll be there in the form of a price increase,” Hannawa saidof the tax. "Customers lose, and the black market can win because they can still sell it cheaper than we can.”
While the ruling is a blow to the industry, it is not a final order resolving the case. The two parties are set for a scheduling conference Jan. 13.
“As a cannabis company, Puff is going to fight this fiercely with our partners and everyone who is going to step up and lobby against this,” Hannawa said.
