The 24% on wholesale transactions will be added to the current 10% cannabis excise tax. Cannabis consumers also pay 6% sales tax when they buy weed from regulated dispensaries.
The new tax will be used to finance road repairs and construction throughout Michigan. A legislative analysis of the bill projects the 24% tax on wholesale cannabis will raise about $420 million for the state’s roadways each year. The projection includes an estimated 14.4% reduction in consumption caused by the tax increase.
Cannabis Advocates And Lawmakers React To Steep New Pot Tax
Approval of House Bill 4951 in the House prompted cannabis advocates to protest the measure on the steps of the Michigan Capitol in Lansing last week. Business leaders and lawmakers say the new tax will result in failed businesses and lost jobs while pushing more cannabis consumers to purchase goods from the unregulated market.
“Our industry is not their piggy bank. Our wallets are not their budget overruns,” said Mike DiLaura, chief of corporate operations and general counsel for Michigan licensed cannabis operator House of Dank, according to a report from Michigan Advance. “It is our time, not just as an industry, but as citizens of this great state, to put our feet down and say, ‘enough is enough.’”
Republican state Rep. Timmy Beson issued a statement about the legislation, saying that “this specific tax increase to help fund roads is detrimental to many small businesses in the district I represent and across the state. We should be seeking to grow independent businesses in Michigan, not destroy them.”
“Farmers are price takers, not price setters. Forcing them to absorb this tax will destroy small growers,” Beson added. “If there is going to be a tax at all, we should apply it at the retail level where prices are set and apply any tax equally to all marijuana retail licenses, instead of creating carveouts that will provide unfair advantages for companies that control every step of their supply chain.”
Rodney Holcombe, vice president for public policy at cannabis wholesale platform LeafLink, said that the “new 24% wholesale tax on Michigan’s cannabis industry undermines the significant progress made in one of the nation’s strongest cannabis markets.”
“The industry has delivered 47,000+ jobs, increased consumer safety, and generated reliable tax revenue for the state,” Holcombe wrote in an emailed statement from LeafLink. “This new tax reverses this and may actually lead to less tax revenue collection due to fewer legal sales and an uptick in illicit market transactions. We stand side-by-side with industry as we evaluate a path forward here that protects the viability of the Michigan market.”
House Bill 4951 now heads to the desk of Democratic Gov. Gretchen Whitmer for her consideration. The governor is expected to sign the bill as part of a budget deal with the state legislature.
