Michigan’s recreational marijuana industry has filed a second lawsuit that challenges the state’s wholesale cannabis tax that took effect in January. The industry group argues the new 24% wholesale tax effectively sets a higher rate on marijuana sales than the 6% sales tax rate set in the Michigan Constitution.
“So, what’s happening here is a tax levied on a tax which results in an unconstitutional over-taxation of Michiganders,” said Rose Tantraphol with the Michigan Cannabis Industry Association.
“It effectively functions as a sales tax, creating a situation where cannabis is taxed multiple times, resulting in something called tax pyramiding,” she told Michigan Public Radio. “That imposes a sales tax on consumers that’s higher than the legal rate of 6%.”
That is also on top of the 10% excise tax enacted under the initiative, says the lawsuit.
The excise tax was adopted last year by the Legislature and signed by Governor Gretchen Whitmer as part of a roads-funding plan. In a separate lawsuit pending before the Michigan Court of Claims, the cannabis industry also argues the tax is unconstitutional because it was adopted by simple majorities of the Legislature and not supermajorities required to amend voter-initiated laws.
The marijuana legalization initiative was adopted by voters in 2018. It takes three-fourths supermajorities in the House and the Senate to alter a voter-approved initiative. But the state argues the wholesale cannabis tax is part of a road-funding law that does not touch the language of the initiative.
The Michigan Department of Treasury, which administers the tax and is named as the defendant in the new lawsuit, declined to comment.
