Michigan’s Cannabis Tax Controversy: Industry Group Files Lawsuit
In a move that has reignited debate over marijuana taxation in Michigan, the state’s recreational cannabis sector has launched another legal challenge against the newly implemented wholesale cannabis tax. The 24% tax, which became effective in January, is argued to disproportionately exceed the 6% sales tax cap outlined 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.”
The group claims the tax operates similarly to a sales tax, thereby causing “tax pyramiding,” which ultimately imposes a tax burden on consumers above the constitutionally permitted rate. This tax is layered on top of an existing 10% excise tax introduced as part of a legislative initiative to fund state roads.
This excise tax was approved by the Michigan Legislature last year under the endorsement of Governor Gretchen Whitmer, as detailed in a road-funding initiative. However, the cannabis industry maintains in a related lawsuit that the tax breaches constitutional protocols, having been passed by simple legislative majorities rather than the required supermajorities to amend voter-approved measures.
Originating from the 2018 voter-backed marijuana legalization proposal, any changes to such initiatives necessitate a three-fourths majority in both legislative chambers, as stipulated by Michigan law. Nevertheless, state officials contend that the wholesale tax is an element of a separate road-funding statute, not directly amending the original initiative’s provisions.
As the legal proceedings unfold, the Michigan Department of Treasury, tasked with the tax’s administration and named in the lawsuit, has refrained from commenting on the ongoing litigation.
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