The Case of Cannarbor -v- The Michigan Department of Treasury

The Kingpin always collects

This case involves a dispute between Cannarbor, Inc., a medical marijuana provisioning center, and the Michigan Department of Treasury regarding the applicability of sales tax to medical marijuana sales. Cannarbor argued that it should not be required to collect sales tax, relying on a 2011 letter from a Deputy Treasurer that stated transactions between caregivers and patients were not taxable sales. The Department of Treasury, however, asserted that under the General Sales Tax Act (GSTA), Medical Marihuana Act (MMMA), and Medical Marihuana Facilities Licensing Act (MMFLA), retail sales of marijuana by provisioning centers are subject to sales tax, unlike the non-taxable services provided by primary caregivers.

The Court of Claims sided with the Department of Treasury, a decision which was upheld on appeal. The court found that the MMFLA, enacted after the 2011 letter, clearly distinguishes between primary caregivers, who provide non-taxable assistance to patients, and provisioning centers, which engage in taxable retail sales. The court emphasized that the Legislature intentionally omitted a sales-tax exemption for provisioning centers, unlike the exemption provided to primary caregivers for recouping costs. The court also rejected Cannarbor’s argument that it provided the same services as primary caregivers, noting that the Legislature defined these entities differently.

The court also dismissed Cannarbor’s claims of reliance on the 2011 letter and violations of equal protection and uniform taxation. The court found that the 2011 letter, written before the MMFLA, did not apply to provisioning centers. Additionally, the court determined that provisioning centers and primary caregivers are not similarly situated for tax purposes, as the Legislature has established a rational basis for treating them differently.

Read the COA 368901 CANNARBOR INC V DEPARTMENT OF TREASURY Opinion

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