(LANSING) - A big change is coming to Michigan's marijuana businesses.
A new 24% wholesale excise on adult use cannabis transactions officially goes into effect on January 1. This tax was approved as part of the Comprehensive Road Funding Tax Act, which was signed into law by Governor Gretchen Whitmer in October.
State officials estimate the measure will raise approximately $420 million each year to fund road and infrastructure repairs. The tax applies when marijuana products are sold from cultivators or processors to retailers. It will be assessed in addition to Michigan's existing 10% retail marijuana excise tax and the state's 6% sales tax. That makes Michigan one of the highest-taxed cannabis markets in the country.
The new excise has drawn some strong opposition from industry groups, including the Michigan Cannabis Industry Association. They argue that the new tax is in conflict with the voter-approved marijuana legalization initiative that intentionally kept taxes low to undercut the black market.
Legal challenges that tried to stop the tax from taking effect were not successful, that's after a Michigan Court of Claims judge declined to block its implementation.
Industry analysts and cannabis business owners say consumers may not feel the price impact immediately. Marijuana products that are already in retail inventory before the January 1 start date are going to be exempt from the new tax. That means higher prices are expected to gradually appear as newly taxed inventory becomes available in the stores.
Many critics are saying this tax increase could force many consumers back to using illegal marijuana sources, while those that support it are saying the tax is needed to address long-standing infrastructure needs across Michigan.