Why Michigan Must Reject a Wholesale Cannabis Tax
A proposed wholesale tax would only deepen the challenges for Michigan’s cannabis industry, placing added financial pressure on compliant businesses.
What Is a Wholesale Tax?
In most industries, transactions between licensed businesses (e.g., wholesaler to retailer) are not taxed when a valid resale certificate is provided. Tax is collected only at the final point of sale to the consumer.
A wholesale cannabis tax would break from this norm by applying an additional tax mid-supply chain — when product moves between licensed growers, processors, and retailers. In some cases, it could even apply to internal transfers within vertically integrated companies.
This approach is not standard, and it’s not sustainable.
Why a Wholesale Tax Threatens Michigan’s Cannabis Operators
A wholesale tax imposes additional cost and complexity at a time when many licensed operators are already struggling to survive. Its impacts include:
Undermining Small Businesses
Most independent cultivators and processors operate at thin or negative margins. Adding another tax obligation pushes many closer to insolvency.
Promoting Consolidation
Large, vertically integrated companies may absorb the burden more easily. Smaller businesses, lacking access to capital or scale, are more likely to exit or be acquired.
Crushing Unprofitable Operators
With margins at or below zero for much of the supply chain, even a modest wholesale tax could be the tipping point for many licensees.
The Core Problem: Oversupply
Michigan’s cannabis market has too much production and not enough demand. The number of cultivation licenses has grown far beyond what the market can absorb, leading to:
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Massive oversupply of flower and biomass.
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Artificially depressed wholesale values.
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Financial strain on operators across the supply chain.
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Volatility that prevents long-term business planning or reinvestment.
Operators are not asking for protection — they’re asking for a rational, sustainable market that rewards compliance and quality.
A Smarter Path Forward: Fix the Market First
If the goal is to strengthen Michigan’s cannabis economy and increase tax revenue, the most effective solution is restoring balance between supply and demand.
Creating a fair, competitive market — where prices reflect sustainable costs — will naturally increase nominal tax collections through the existing structure:
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10% excise tax at retail
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6% Michigan sales tax
There’s no need to introduce a new wholesale tax. The solution is to stabilize the market and let the current tax system function as designed.
MCC’s Position: Keep Michigan Operators in the Game
The Michigan Cannabis Coalition supports a healthy, diverse, and sustainable regulated market. We advocate for:
Operational Viability
Businesses need a stable framework to reinvest, employ, and grow — not new midstream taxes that punish survival.
Market Diversity
Preserving access for small and independent licensees prevents monopolization and supports long-term economic resilience.
Sustainable Tax Policy
Restore market equilibrium to generate real, organic tax revenue growth through existing structures.
Administrative Simplicity
Regulations should support, not smother, compliant operators with unnecessary complexity and burdens.
Take Action to Protect Michigan’s Cannabis Future
A wholesale tax is the wrong approach at the wrong time. Michigan’s cannabis operators are working hard to stay compliant, provide jobs, and build lasting businesses. They need support — not another layer of financial and administrative strain.
For Operators & Stakeholders:
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Join MCC to help ensure that policy decisions support, not sabotage, Michigan’s legal cannabis economy.
For Policymakers:
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Say no to wholesale tax proposals. Focus on restoring market balance — and let Michigan’s existing tax framework work as intended.
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Learn more and get involved at joinmcc.org
