The Michigan Marijuana Tax Battle

The Detroit Pot Party

There is a fight going on against the new taxes and here’s where it’s at.

Michigan Judge Weighs Whether to Halt New 24% Marijuana Wholesale Tax

A Michigan Court of Claims judge is taking additional time to decide whether the state’s new 24% wholesale marijuana tax should be temporarily blocked before it takes effect on January 1. Judge Sima Patel heard arguments from both the cannabis industry and the state, promising a ruling “as soon as practical.”

The tax—projected to generate roughly $420 million annually—forms a major funding pillar of a $1.8 billion road improvement package signed by the governor in October. Under the plan, 80% of the new revenue would flow to municipal and county road agencies. A preliminary injunction could disrupt that deal.

The Lawsuits

Two separate lawsuits, filed by the Michigan Cannabis Industry Association (MCIA) and Holistic Research Group Inc., argue that the tax violates the Michigan Regulation and Taxation of Marihuana Act (MRTMA), the 2018 voter‑approved initiative that legalized adult‑use cannabis and set a 10% excise tax. Plaintiffs contend that raising the tax to 24% through ordinary legislation unlawfully amends a voter initiative without the required three‑fourths supermajority in both chambers.

MCIA attorney Kevin Blair compared the Legislature’s approach to the controversial 2018 “adopt‑and‑amend” maneuver involving minimum wage and paid sick leave laws—an approach later ruled unconstitutional by the Michigan Supreme Court. Blair argued that the new tax is even more problematic, affecting the will of 2.5 million voters who approved MRTMA.

Blair emphasized that MRTMA’s 10% tax rate was intentionally chosen to keep legal cannabis competitive with the illicit market, and that every prior legislative change to adult‑use cannabis had been enacted through formal MRTMA amendments with supermajority support. He also noted that lawmakers previously granted tribal cannabis businesses exemptions from the 10% tax using the proper supermajority process.

Not a very inclusive tax

Holistic Research Group’s attorney, Stephen Crane Jr., argued that the wholesale‑only structure of the new tax disproportionately harms growers and processors who cannot pass costs directly to consumers. He warned that the tax would distort the market and threaten the viability of non‑retail operators.

Because the 24% tax falls on wholesale transactions, Crane described a direct negative effect on Holistic, a grower and processor.

“It artificially reallocates the tax through downstream retail profits. That’s the vertical integration distortion,” Crane said, clarifying that Holistic does not deal with individual retail customers, but wholesale customers working under operational budgets. “(Holistic) could increase their prices, but then it’s going to be the destruction of their business. They’re not a retailer,” he said.

Crane also wanted to emphasize what they pointed out in their initial motion for the preliminary injunction: “What happened to tobacco? What happened to agriculture? Why just marijuana?”

“Why aren’t they getting taxed? Why am I getting singled out? They use the roads,” Crane said. “Why doesn’t everybody who uses the roads that’s a wholesaler (get) taxed?”

He’s right…but so wrong

The state, represented by Assistant Attorney General Wes Margeson, countered that the new tax does not amend MRTMA at all. Margeson argued that MRTMA’s 10% tax applies specifically to retail sales and explicitly allows for additional taxes. He maintained that the plaintiffs failed to meet the high legal standard required for a preliminary injunction, calling such relief “an extraordinary remedy.”