Michigan Cannabis Industry Files Second Lawsuit Challenging 24% Marijuana Wholesale Tax
Michigan’s cannabis industry has filed a new lawsuit challenging a 24% wholesale tax on marijuana, arguing the state’s tax structure improperly layers taxes and pushes collections beyond a constitutional limit.
Filed March 28 in the Michigan Court of Claims, the case was brought by Michigan Cannabis Industry Association, along with grower Mitten Distro X LLC and retailer Refine Michigan Co. The challenge targets a law enacted in 2025 that imposed a 24% tax on wholesale marijuana transactions, a measure lawmakers said could generate about $420 million a year for road funding.
A separate legal challenge over the same law is already moving through the courts. In that case, the association argued the Legislature did not have enough votes to amend a 2018 voter-approved measure that legalized recreational marijuana and set a 10% excise tax on retail sales. The Michigan Court of Claims declined to block the law at that stage, with Judge Sima Patel finding that the ballot language allowed for “other taxes.” That case is now headed toward trial.
The lawsuit argues the 24% wholesale tax operates more like a sales tax than a traditional excise tax. According to the filing, it is calculated as a percentage of the selling price and applies to standard business transactions tied to consumer purchases, rather than a fixed amount per unit.
Under the current structure, the wholesale tax is added to the price of marijuana before the state applies its 6% sales tax. This raises the amount used to calculate that tax. The lawsuit argues this structure turns the wholesale tax into part of the price used to calculate the state’s capped sales tax.
The cannabis association describes the system as tax pyramiding, where one tax becomes part of the base used to calculate another. Michigan’s Constitution caps the sales tax at 6%, and the lawsuit claims that by increasing the base used to calculate that tax, the state is collecting more than the limit allows without changing the rate itself. The association says the added costs fall on businesses and are passed on to consumers.
Before the new law took effect in January, marijuana sales in Michigan were already subject to a 6% sales tax and a 10% excise tax at the retail level. The addition of the 24% wholesale tax increases the overall tax burden on cannabis products, according to the complaint.
The state has not yet responded to the new filing.
