LANSING, Mich. — The Michigan Cannabis Industry Association has initiated a second lawsuit against the state’s 24% wholesale tax on marijuana, asserting that this levy increases prices for consumers.
Key Points of the Lawsuit
The new legal action seeks to invalidate the state’s wholesale tax, claiming it is unconstitutional and functions as an additional sales tax, ultimately raising the effective tax rate beyond Michigan’s constitutional 6% cap.
This lawsuit is distinct from the association’s first, which questioned the legislative process used to implement the tax. The current suit challenges the legality of the tax structure itself.
The association argues that the increased costs from this tax are being passed on to consumers, thus making products at licensed dispensaries less affordable at a time when financial pressures are already significant for many.
Tax Pyramiding Concerns
According to spokesperson Rose Tantraphol, the structure of the tax leads to “tax pyramiding,” where the additional wholesale cost contributes to the base for calculating the existing sales tax, thereby inflating the effective tax rate beyond what is permissible.
“What we have here is the state of Michigan labeling this a 24% wholesale tax, but it effectively acts as a sales tax on consumers,” Tantraphol said. “Cannabis customers are paying a sales tax rate that exceeds the legal 6% rate.”
Impact on Legal Dispensaries
The lawsuit argues that the financial burden placed on licensed dispensaries makes it difficult for them to compete against unregulated markets. Higher prices at legal shops could drive cost-conscious consumers to cheaper alternatives, jeopardizing a legal market that supports thousands of jobs throughout Michigan.
“Paying more at a time when affordability is already a huge issue for everyone across the state of Michigan,” Tantraphol added.
The lawsuit seeks to halt the tax as legal proceedings continue. The association also reported that its first lawsuit regarding the wholesale tax is now moving forward to trial.
For further details on cannabis regulations, visit the Michigan Cannabis Regulatory Agency.