A Michigan Court of Claims judge has declined to block a new 24 percent wholesale tax on legal marijuana sales from taking effect in 2026. The ruling is a setback for cannabis industry groups that argued the tax violates the state Constitution and would cause serious financial harm.
Judge Sima Patel issued her decision Monday after hearing arguments in November. She ruled that the plaintiffs, including Holistic Research Group and the Michigan Cannabis Industry Association, failed to show that they were likely to succeed on their constitutional challenge. As a result, their request for a preliminary injunction was denied.
The industry argued that the 2018 voter approved Michigan Regulation and Taxation of Marijuana Act is the only law allowed to impose marijuana specific taxes. They claimed lawmakers needed a three fourths majority to add any new marijuana tax. Patel rejected that interpretation and pointed to the ballot language that set a 10% retail excise tax in addition to all other taxes. She wrote that the wording is broad, and nothing in the voter passed measure prohibits lawmakers from imposing additional taxes on marijuana.
Patel said the Legislature did not amend the existing regulatory tax structure. Instead it created a new tax within separate road funding legislation. She ruled that the two laws can be read together and are not in conflict. The court dismissed the claim that lawmakers used an unconstitutional process to enact the wholesale tax.
However, the case is not over. Patel allowed one remaining issue to continue. She said the court must still decide whether the new tax undermines the purpose of the legalization measure. Supporters of the lawsuit argue that the 24% wholesale tax combined with the 10% retail excise tax and the 6% sales tax would create one of the highest marijuana tax rates in the country. They say the higher costs could push consumers back to the illegal market which would weaken the goals of legalization.
An evidentiary hearing has been set for January 13. The judge said more information is needed before ruling on whether the higher tax interferes with the intent of the voter initiative. The state expects the new wholesale tax to generate about $420 million dollars toward the nearly $1.8 billion dollar road funding plan approved earlier this year.
The Michigan Cannabis Industry Association has not said whether it plans to appeal the ruling.
