Michigan Recreational Marijuana Industry Challenges State’s Wholesale Cannabis Tax
The recreational marijuana industry in Michigan has taken legal action by filing a second lawsuit to challenge the state’s new wholesale cannabis tax, which came into effect in January. The industry group argues that the 24% wholesale tax imposes a higher rate on marijuana sales compared to the 6% sales tax rate specified in the Michigan Constitution.
Rose Tantraphol from the Michigan Cannabis Industry Association highlighted the issue, stating, “So, what’s happening here is a tax levied on a tax which results in an unconstitutional over-taxation of Michiganders. It effectively functions as a sales tax, creating a situation where cannabis is taxed multiple times, resulting in something called tax pyramiding. That imposes a sales tax on consumers that’s higher than the legal rate of 6%.”
In addition to the wholesale tax, the industry is also contending with a 10% excise tax that was implemented as part of a roads-funding plan last year. Another lawsuit pending before the Michigan Court of Claims challenges the constitutionality of the tax, arguing that it was adopted by simple majorities of the Legislature instead of the supermajorities required to amend voter-initiated laws.
The marijuana legalization initiative, approved by Michigan voters in 2018, mandates three-fourths supermajorities in the House and Senate to make alterations. However, the state argues that the wholesale cannabis tax is part of a road-funding law that does not modify the language of the initiative.
The Michigan Department of Treasury, responsible for administering the tax and the defendant in the new lawsuit, has declined to comment on the matter.
