Cannabis plants are grown in a downstate Jackson, facility on March 2, 2022. (AP file photo)

MARQUETTE — On Oct. 7, the Comprehensive Road Funding Tax Act was passed through the Michigan State Legislature, and went into effect on Jan. 1. This new law uses an additional tax on wholesale recreational marijuana to fund road repairs.

“Specifically, CRFTA imposes an excise tax at the rate of 24 percent on sales of adult-use marihuana at the wholesale level,” says the Notice to Taxpayers Regarding the Wholesale Tax on Adult-Use Marihuana released by the Michigan Department of Treasury in November. “The new 24 percent excise tax is levied in addition to other applicable state taxes, including the current 10 percent excise tax on retail sales of adult-use marihuana imposed pursuant to MRTMA, as well as Michigan’s existing 6 percent sales tax.”

In Michigan state laws, the word “marijuana” is spelled “marihuana” to keep consistent with older laws.

The cannabis industry has exploded in the Upper Peninsula since recreational use was legalized state-wide in 2018. Marquette County alone is home to over 10 dispensaries, many of them are locally owned. This new tax, though, which when combined with the old excise and sales taxes, means that cannabis is being taxed at 40%. That’s putting a strain on those businesses.

“We’ve been affected just like all other operators in Michigan due to the triple tax burden of the new 24% wholesale tax, 10% excise tax and 6% sales tax,” said Logan Stauber, co-owner and CEO of the Fire Station Cannabis Co. “The extra 24% at the wholesale level makes profit margins very thin.”

Stauber reported that many customers stocked up in December, before the tax went into effect.

“We’re seeing it firsthand, and it’s making it incredibly difficult,” said Stauber. “It’s just one other thing for operators. We have a processing license, so there are additional requirements for tracking products we have to pay the wholesale tax on.”

The increase in cost for retailers has meant having to adapt, and adapt quickly.

“The main thing we decided when we were sure that this was imminent and that this was really going to happen was doing everything we could to not pass the 24% on to the customers,” said Joni Moore, president of Higher Love Cannabis Dispensary. “We’ve had to tighten up things internally, and lay off some people right before Christmas. That was a horrible decision to have to make. We’ve also looked at other internal processes to try and be economical in our spending.”

Moore reports that Higher Love laid off 50-60 employees at the end of last year after the new tax was announced.

“Ultimately yes, prices have gone up,” said Stauber. “Adjustment has meant making difficult decisions. Initially, we tried to absorb as much as possible. Our customers are price sensitive, they’re looking for the highest quality products at the lowest price. Operationally we’ve been making huge strives in optimizing the supply chain, looking at hours and payroll, and doing all the things necessary.”

“The other thing that we’re doing is watching Senate Bill 810,” said Stauber.

Senate Bill 810 was introduced on Feb. 26 by state Sens. Lindsey (R), Irwin (D), Bumstead (R), Hauck (R), Bellino (R), Runestad (R), Bayer (D) and Santana (D), and aims to repeal the Comprehensive Road Funding Tax Act. The bill has since been referred to the Committee on Government Operations.

“Bill 810 is a bipartisan initiative; Lansing’s way of recognizing that overtaxing our industry to fund roads could result in less revenue if businesses are forced to close doors over this,” said Stauber.

“We’re now one of the highest taxed states in the nation when it comes to cannabis,” said Stauber. “We’re a border market, so people come for cannabis tourism. Long-term, the tax threatens our competitive advantage in the U.P. because if another state legalizes cannabis and their taxes are lower than ours, that disincentivizes people traveling and purchasing cannabis here.”

Minnesota and Illinois have both recently legalized recreational marijuana; in 2023 and 2020, respectively. Their tax rates on recreational cannabis were higher than Michigan’s before the 24% wholesale tax, but are now lower, according to the Marijuana Policy Project. Illinois taxes different cannabis products at different rates; its rate for products over 35% potency is comparable to Michigan’s tax rate.

Stauber predicts “significant long-term effects” on the U.P.’s cannabis industry, especially for local businesses.

Moore believes that the new tax will have a negative effect on the U.P.’s overall economy.

“It definitely impacts the economics if prices are raised,” said Moore. “Some of those customers are going to stay home and not travel to U.P. That affects all other tourism industries in the U.P., like restaurants, gas stations and hotels.”

The Michigan Department of Licensing and Regulatory Affairs put out a press release on March 3 announcing that nearly $94 million in recreational marijuana payments for the year 2025 would be distributed to Michigan municipalities, counties and tribes.

Annie Lippert can be reached at 906-228-2500, ext. 550. Her email address is alippert@miningjournal.net.