Trade Association Sues Over Michigan’s New Cannabis Wholesale Tax

A cannabis industry trade association in Michigan is suing the state over the newly approved wholesale cannabis tax, Michigan Advance reports. In the complaint, the Michigan Cannabis Industry Association argues that the tax violates the voter-approved adult cannabis use legalization law and that the 2018 law – which only imposed a 10% excise tax on retail sales – can only be modified by voters or a supermajority vote by lawmakers. 

The law was approved earlier this month by a 78-21 vote in the House, with 11 members not voting, and a 19-17 vote in the Senate.  

The group also contends that the tax violates the state Constitution’s contracts clause. 

The law imposes a 24% wholesale tax on cannabis products, which is expected to generate $420 million annually for the state, and be used primarily for road construction and repairs. In the complaint, the trade association contends that lawmakers “jammed” the proposal through both chambers “without a single committee hearing to discuss the substance of the bill” by disguising its provisions behind an original title that only mentioned creating a fund for road funding and revenue replacement, not establishing a new tax.

Following the passage of the bill, Al Williams, president of the Detroit Cannabis Industry Association, called the tax “a gut punch to the industry.” 

Gov. Gretchen Whitmer (D) contended that the tax is “not out of line,” and “not even close to the tobacco tax on tobacco products or taxes on alcohol.” 

The Michigan Cannabis Industry Association has requested a declaratory judgment deeming the new tax law invalid and unenforceable and injunctive relief preventing the state government from enforcing the act.