The 24% Wholesale Tax (Effective January 1, 2026)

Last verified: April 2026

The New Tax

Michigan’s new 24% wholesale excise tax took effect January 1, 2026. The tax was added by 2025 legislation on top of the existing MRTMA tax structure:

• 10% retail excise tax on adult-use sales (existing, MRTMA)
• 6% Michigan sales tax on adult-use sales (existing, MRTMA)
• 24% wholesale excise tax on wholesale transfers from cultivators / processors to retailers (new, January 1, 2026)

The combined effective tax rate at retail rises substantially. Industry expects a 14–16% market-wide sales decline in the months following the tax’s effective date.

Why the Tax

The 2025 legislation justifying the wholesale tax was driven by two pressures:

• State revenue needs — Michigan’s adult-use cannabis market has grown to $12.5B+ cumulative since 2019; legislators sought to capture more revenue from the maturing market
• Caregiver-market pressure — the unlicensed caregiver gray market has continued to compete with licensed operators on price; some legislators argued the wholesale tax would reduce the caregiver competitive advantage by capturing more revenue from licensed transactions

The legislative theory was that adult-use cannabis demand is relatively price-inelastic at modest tax increases, so the state would capture more revenue without proportionally reducing legal-market sales. Industry analysis disputes this theory and predicts substantial demand displacement to caregiver, gray-market, and adjacent-state sources.

Effects on Detroit Cannabis Operators

The wholesale tax falls hardest on:

• Retail-only operators who source product from licensed cultivators — the wholesale-tax markup compounds margin pressure
• Smaller operators with limited pricing power against larger statewide brands
• Detroit Legacy / social-equity operators who already carried higher real-estate and compliance costs — the tax shock can push marginal operators into unprofitability

The tax falls less hard on:

• Vertically integrated statewide brands (House of Dank, JARS, Lume, TerrAscend / Gage) that own grow, processing, and retail operations — the tax can be absorbed across the integrated chain
• Microbusinesses that are vertically integrated by design
• Caregiver gray-market operators who do not pay the wholesale tax at all

The structural asymmetry — wholesale tax falling on retail-only operators while sparing vertically-integrated brands and unlicensed caregivers — is a primary critique driving the MCIA lawsuit. See Tax Lawsuit.

Effects on Detroit Consumers

Detroit cannabis consumers are likely to see:

• Higher retail prices — the wholesale tax markup will be passed through to retail to varying degrees depending on operator competitive positioning
• Some price compression at the lower-quality end of the product spectrum, where caregiver-grown gray-market alternatives are most price-competitive
• Some product-mix shifts — consumers may shift toward concentrates and edibles (which deliver higher THC per dollar of taxable wholesale value) and away from flower
• Possible cross-border consumption shifts — though the federal-jurisdiction issue at Detroit-Windsor border crossings constrains this option

The 14–16% Sales Decline Projection

The 14–16% market-wide sales decline projection from industry analysts assumes:

• Substantial demand displacement to caregiver gray market
• Some demand displacement to adjacent-state purchases (though Indiana, Ohio, and adjacent jurisdictions are not adult-use legal at scale)
• Some demand reduction at the margin from price-sensitive consumers
• No federal SAFE Banking or Schedule III rescheduling that would offset operator costs

The actual sales decline through 2026 will depend on competitive dynamics, the MCIA lawsuit’s outcome, federal-policy developments, and consumer-behavior responses.

Detroit Tax Revenue

Detroit, as the state’s largest adult-use jurisdiction by license count, receives substantial revenue from MRTMA’s statutory revenue-sharing. Per Michigan Treasury data, Detroit received approximately $3.3 million in cannabis tax revenue sharing for FY2025. The 2026 wholesale tax adds a new revenue stream at the state level; the share allocated to Detroit through the existing revenue-sharing formula will be a 2026 fiscal-policy question.

The Schedule III Wildcard

The December 18, 2025 federal executive order directing the Attorney General to expedite cannabis’s move to Schedule III could partially offset the wholesale-tax effect on operators by:

• Removing the Internal Revenue Code § 280E tax-deduction restriction that currently prevents cannabis businesses from deducting normal business expenses
• Easing some federal banking-relationship friction
• Reducing federal research-and-development barriers

As of April 2026, cannabis remains Schedule I. The rescheduling timeline is uncertain.

What to Watch

• Q2 / Q3 2026 sales data — CRA monthly statistical reports will confirm or refute the 14–16% sales decline projection
• MCIA lawsuit outcome — if successful, the wholesale tax could be invalidated
• Federal Schedule III completion — would offset some operator costs
• Detroit operator survival rates — whether the Detroit Legacy / social-equity operators survive the combined pressure

Related on this site: Send a Message, Contact DetroitCannabis.org, About DetroitCannabis.org.