Michigan Governor Gretchen Whitmer signed the state’s $81 billion budget on October 7, 2025, which includes a 24% wholesale tax on cannabis. The tax will apply to cannabis transferred from cultivators and manufacturers to retailers and is set to take effect on January 1, 2026, unless blocked by a court.
This new tax comes in addition to Michigan’s existing 10% retail cannabis excise tax and 6% sales tax, and is projected to generate roughly $420.7 million annually for the state. The revenue will fund Whitmer’s $1.8 billion annual infrastructure plan, focusing on roads, bridges, and other state and local projects.
“Big news, Michigan. I signed my seventh balanced bipartisan budget,” Whitmer said in a video statement. “Here’s what it means for you: safer, smoother roads to drive on, thanks to the biggest roads deal in Michigan history, so we can keep fixing all those damn roads, state and local, and keep your car in good shape, too.”
How the Tax Will Work
The law, named the Comprehensive Road Funding Tax Act (CRFTA), establishes a Comprehensive Road Funding Fund, allocating $3 million from the new tax in fiscal 2026 and $500,000 in each following year. The remainder will go to the Neighborhood Road Fund, with $100 million earmarked for local bridges and the rest distributed to county road commissions, cities, and villages.
Experts warn that higher cannabis taxes often increase dispensary prices, which can drive consumers to unregulated sources.
Industry Pushback: Lawsuit Filed
Despite the governor’s signature, the Michigan Cannabis Industry Association (MiCIA) filed a lawsuit on October 7 challenging the tax. The 22-page suit, filed in the Michigan Court of Claims, claims the new tax violates the state Constitution because the Legislature failed to secure a three-fourths vote, required to amend citizen-initiated laws like the Michigan Regulation and Taxation of Marihuana Act (MRTMA) approved by voters in 2018.
“The lawsuit details multiple ways in which the legislators acted unconstitutionally,” MiCIA said. “The last-minute, late-night process violated a range of constitutional provisions. We are asking the court to strike the tax in its entirety.”
MiCIA argues that MRTMA sets the excise tax at 10%, and the new 24% wholesale tax represents an unauthorized additional excise tax, which can only be enacted by directly amending MRTMA.
Governor’s Perspective and Historical Context
Whitmer, who voted in favor of MRTMA in 2018, said she intends to ensure the adult-use cannabis program is implemented correctly.
“Our leaders frequently ignore the will of the public,” she said. “That happened on medicinal marijuana; they never wanted to make it successful. When this passes, I will take it seriously and ensure it stays out of the hands of kids and that the dollars go where they’re supposed to — into infrastructure and schools.”
The 10% cannabis excise tax approved by voters in 2018 was originally dedicated to adult-use program implementation, clinical trials, schools, roads, and local municipalities where licensed businesses operate.