Lawsuit challenges new Michigan marijuana tax, would upend roads deal

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October 08 2025

Overview

The Michigan Cannabis Industry Association filed a lawsuit on October 7, 2025, challenging a new 24% wholesale cannabis tax. Signed into law by Gov. Gretchen Whitmer on the same day, the tax aims to fund road improvements but is contested for bypassing constitutional requirements.

Key Details

• Tax Details: A 24% wholesale tax on cannabis, effective January 1, 2026, per the Comprehensive Road Funding Tax Act (CRFTA).

• Lawsuit: Filed in the Michigan Court of Claims, arguing the tax amends the 2018 voter-approved Michigan Regulation and Taxation of Marihuana Act (MRTMA) without the required three-fourths legislative vote.

• Plaintiff: Michigan Cannabis Industry Association, representing 400 licensed cannabis businesses.

• Legal Argument: The CRFTA depends on MRTMA, which set a 10% retail excise tax, and thus requires supermajority support to amend, per the state Constitution.

Background

• 2018 MRTMA: Legalized recreational cannabis with a 10% retail excise tax, approved by voters. It restricts sales to compliant cannabis and sets taxation rules.

• New Tax: Passed without three-fourths support (e.g., only 19 of 37 senators voted yes). Embedded in CRFTA, not directly amending MRTMA.

• Revenue: Expected to generate $420 million annually for roads, per the Michigan House Fiscal Agency.

Claims

• Association’s Stance: The tax violates constitutional safeguards for voter-initiated laws, per attorneys from Honigman and Dykema Gossett. They seek to strike it entirely.

• Legislative Defense: Rep. Alabas Farhat claims the tax, applied at wholesale, not retail, avoids amending MRTMA directly and is legally sound.

Implications

• Legal Path: The case may reach the Michigan Supreme Court, testing the budget deal’s validity.

• Industry Impact: Michigan’s recreational cannabis sales hit $3.2 billion in 2024, per the Cannabis Regulatory Agency. The tax could strain businesses.

• Political Context: Gov. Whitmer praised the tax as part of a bipartisan budget deal to fund jobs and infrastructure, despite national economic uncertainty.

Outlook

The lawsuit highlights tensions between voter-approved laws and legislative changes. Its outcome could reshape cannabis taxation and road funding in Michigan.