On October 7, 2025, Michigan Governor Gretchen Whitmer signed into law the Comprehensive Road Funding Tax Act (House Bill 4951), which will impose a 24% excise tax on wholesale marijuana transactions beginning January 1, 2026. This new tax is in addition to the existing 10% excise tax and 6% sales tax on retail marijuana sales, marking a significant additional obstacle to positive margins in Michigan’s cannabis regulatory landscape.
How the Excise Tax Came to Be
House Bill 4951 was introduced in September 2025, and passed with notable support in both chambers. The stated legislative intent is to generate approximately $420 million annually to support road and bridge repairs through the newly established Neighborhood Road Fund. This approach echoes Michigan’s ongoing efforts to leverage cannabis tax revenue for infrastructure, a pillar of Governor Whitmer’s “Fix the Damn Roads” initiative.
When the Excise Tax Will Apply
The new 24% excise tax applies to the wholesale price of marijuana in three key scenarios:
- The first sale or transfer from a marijuana establishment to a retail licensee.
- Marijuana cultivated and processed for retail sale by the retail licensee.
- Sales or transfers from provisioning centers to retail licensees.
The wholesale price will be determined and published quarterly by the Michigan Department of Treasury. This broad definition means that the effective tax rate may exceed the statutory rate once all fees and charges are factored in — a nuance that has tripped up operators in other states.
Industry Response and Legal Challenges
Industry stakeholders warn that the additional tax burden could push consumers back to the illicit market and jeopardize the viability of smaller operators already struggling under Michigan’s competitive market conditions.
The Michigan Cannabis Industry Association has already filed a lawsuit in the Michigan Court of Claims, arguing that the new tax violates the Michigan Constitution by amending a voter-approved statute (the Michigan Regulation and Taxation of Marihuana Act, MCL 333.27951 et seq.) without a three-fourths legislative majority.
Treasury Compliance Considerations
Entities subject to the new excise tax will be required to file periodic returns with the Michigan Department of Treasury. Licensees should begin reviewing their compliance protocols now to prepare for heightened scrutiny and evolving reporting obligations.
What This Means for Michigan Cannabis Operators
Michigan’s new 24% wholesale excise tax marks a pivotal development for the state’s cannabis industry, with far-reaching implications for operators, consumers, and policymakers alike. As the legal and regulatory landscape continues to evolve, staying informed and proactive is essential. If your business needs guidance on cannabis taxation, regulatory compliance, or is facing legal challenges in Michigan or beyond, don’t hesitate to contact the Husch Blackwell Cannabis team, including Megan Beebe and Braden O’Brien, or our Taxation team, including Bill Schenkelberg, CPA, for sophisticated, practical legal counsel tailored to your needs.