By Beth LeBlanc
The Detroit News
(TNS)
LANSING — Michigan’s marijuana industry has filed a second lawsuit challenging a 24% wholesale tax passed into law last year, arguing the taxing structure set up by the state compounds the levies on marijuana and overinflates a state sales tax constitutionally required to stay at or below 6%.
The lawsuit, filed by marijuana grower Mitten Distro X LLC, retailer Refine Michigan Co. and the Michigan Cannabis Industry Association, was filed Friday in the Michigan Court of Claims.
“When you do the math, the state’s 24% wholesale tax on cannabis simply doesn’t add up for the Michigan voters who made cannabis legal,” said Rose Tantraphol, a spokeswoman for the Michigan Cannabis Industry Association.
The lawsuit is the second filed by the Michigan Cannabis Industry Association in the wake of the Legislature’s vote last year to impose a 24% sales tax on marijuana, a fee lawmakers estimated would generate about $420 million for roads annually.
The first lawsuit focused on the allegation that the Legislature’s passage of the law in late 2025 lacked the supermajority in support needed to amend a ballot proposal. The 2018 ballot initiative legalizing recreational marijuana set a 10% excise tax at that time on retail sales.
That first lawsuit is headed to trial after the Court of Claims rejected efforts to block the law immediately. Judge Sima Patel last year said the ballot proposal recognized “other taxes” and that wording seemed to be consistent with the wholesale tax passed by lawmakers.
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The second lawsuit filed Friday is “significantly different” from that suit because it challenges the legality of the taxing structure set up by the state, which the cannabis association says will create a “pyramiding” tax structure in which the state’s 6% sales tax will be applied to the base sales price plus the wholesale tax, inflating the revenue the 6% sales tax will pull in.
“What has happened here is a tax levied on a tax, which results in an unconstitutional over-taxation of Michiganders,” Tantraphol said. “This type of tax pyramiding imposes an unlawful burden on consumers, and this lawsuit seeks to end that practice.”
The suit draws other parallels between the marijuana wholesale tax and the 6% sales tax—similarities that they argued supported the conclusion that the marijuana wholesale tax was alternatively acting as a stand-in and overinflating the constitutionally-capped sales tax.
Like a sales tax, the wholesale tax is based on the transfer of ownership in tangible property where the sale is “in the ordinary course of the seller’s business” and is made for the purpose of the buyer’s consumption, the suit argued.
Further, the lawsuit said, the wholesale tax is based on the selling price—similar to a sales tax—whereas excise taxes usually are applied on a per-unit basis.
Prior to the wholesale tax, which went into effect in January, the state already levied on marijuana the 6% sales tax on gross proceeds and the 10% excise tax on the sales price. The new tax adds a 24% tax on the wholesale price of marijuana, which would greatly expand the revenue the state pulls from the 6% sales tax.
For example, the lawsuit said, a $100 marijuana sale from a processor to a retailer would grow to $124 under the wholesale tax, then have $12.40 added on under the 10% excise tax and another $7.44 tacked on with the 6% sales tax. If the wholesale tax weren’t applied, the sales tax revenue would be limited to $6.
“On its face, the challenged tax structure authorizes and requires a tax-on-tax regime that results in an effective rate above 6%,” the lawsuit said.
The suit also alleges violations of the equal protection clauses of the state and U.S. constitutions because the wholesale tax requires marijuana sellers and purchasers to disproportionately contribute to road funding.
“The state has not demonstrated a need to treat taxpayers who sell and purchase marijuana differently from all other taxpayers,” the suit said.
Photo caption: Samantha Henry of Battle Creek, 27, holds a sign as a large crowd gathers outside of the Michigan State Capitol to protest against a potential tax increase on marijuana sales on Tuesday, Sept. 30, 2025, in Lansing. (Katy Kildee/The Detroit News/TNS)
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©2026 The Detroit News. Visit detroitnews.com. Distributed by Tribune Content Agency LLC.
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