Michigan Governor Signs 24% Cannabis Wholesale Tax Into Law as Industry Group Files Lawsuit

Michigan Governor Gretchen Whitmer has signed the state’s $81 billion budget into law, finalizing a 24 percent cannabis wholesale tax that takes effect January 1, 2026 – a move that quickly sparked the Michigan cannabis tax lawsuit now challenging its legality. The measure, part of the new Comprehensive Road Funding Tax Act, is projected to raise more than $420 million annually for infrastructure – but the cannabis industry is already fighting back in court.

The Michigan Cannabis Industry Association (MiCIA) filed a lawsuit hours after the bill was signed, arguing the new tax violates the state constitution and the will of voters who legalized cannabis in 2018.

Key Takeaways

• Gov. Gretchen Whitmer signed Michigan’s 2026 budget on October 7, 2025, including a 24% cannabis wholesale tax.
• The tax applies to transfers from cultivators and processors to retailers.
• Industry leaders warn it could increase consumer prices and fuel the illicit market.
• The Michigan Cannabis Industry Association filed a lawsuit claiming the tax violates the voter-approved marijuana law.
• The case could determine how far lawmakers can go in changing citizen-initiated cannabis statutes.

Michigan’s New Cannabis Tax

The 24 percent wholesale cannabis tax will be imposed on product transfers between licensed cultivators, manufacturers, and retailers. It comes in addition to Michigan’s existing 10 percent excise tax at retail and 6 percent sales tax, pushing total cannabis taxation above 40 percent in some cases.

Supporters, including Governor Whitmer, frame the new levy as part of the state’s broader $1.8 billion infrastructure investment plan.

“This budget delivers the biggest roads deal in Michigan history,” Whitmer said in a video announcement. “We’re fixing the damn roads and protecting thousands of jobs in the process.”

Funds from the new tax will go to two state accounts: the Comprehensive Road Funding Fund, which will receive an initial $3 million in 2026, and the Neighborhood Road Fund, which will allocate $100 million for bridge repairs and distribute the remainder to counties, cities, and villages.

Michigan Cannabis Tax Lawsuit Filed

While the ink on the governor’s signature was barely dry, the MiCIA filed a 22-page complaint in the Michigan Court of Claims, arguing that lawmakers acted unconstitutionally by passing the tax with a simple majority vote.

The group points to Article 2, Section 9 of the Michigan Constitution, which requires a three-quarters vote to amend a law enacted by citizen initiative. In this case, the Michigan Regulation and Taxation of Marihuana Act (MRTMA) approved by voters in 2018.

“Legislative authority over marijuana excise taxes is exclusive to MRTMA,” the suit states. “Any additional excise taxes require a direct amendment to that act itself.”

MiCIA also argues that lawmakers improperly borrowed statutory language from MRTMA to define terms used in the new legislation, effectively tying the enforcement of the tax to the voter-approved act.

The association is asking the court to strike down the wholesale tax in its entirety.

Industry Reaction

The Michigan cannabis tax lawsuit has amplified the concerns of many business owners who fear the new tax will undo years of growth, highlighting how additional taxation could drive more consumers toward unregulated products. The state recorded roughly $3.3 billion in legal cannabis sales in 2024, with average flower prices hovering around $82 per ounce, some of the lowest in the nation.

Industry advocates warn the increase could push consumers back toward unregulated sellers, echoing challenges seen in states like California, where high tax burdens have fueled persistent illicit markets.

“We built a functioning, compliant cannabis market that works,” one MiCIA representative said. “This tax punishes the businesses that played by the rules.”

The Road Ahead

Lawsuits like these generally take months to resolve, and unless a judge issues an injunction, the 24 percent wholesale tax will begin in 2026 as planned. If the Michigan Court of Claims sides with MiCIA, lawmakers may be forced to revisit the tax structure or seek voter approval for future cannabis tax changes.

For now, Michigan’s cannabis businesses face a period of uncertainty, balancing regulatory compliance with the financial strain of one of the highest tax rates in the nation.

Conclusion

The Michigan cannabis tax lawsuit marks a turning point for both the state’s infrastructure plan and its legal marijuana market, testing how far lawmakers can go in changing voter-approved cannabis laws. The coming court battle will test the limits of legislative authority over voter-approved cannabis laws, and determine whether the industry’s strongest market model can survive another round of taxation.