Michigan’s marijuana industry has filed a second lawsuit challenging the state’s new 24% wholesale marijuana tax, arguing that the way the levy is structured results in an unlawful tax on top of a tax.
The lawsuit was filed Friday in the Michigan Court of Claims by marijuana grower Mitten Distro X LLC, retailer Refine Michigan Co. and the Michigan Cannabis Industry Association. Unlike a previous lawsuit that focused on whether lawmakers needed a supermajority vote to approve the tax, this new case targets the tax structure itself.
Industry representatives argue the wholesale tax effectively inflates the state’s 6% sales tax by forcing it to be applied to a price that already includes the new 24% levy. They say that creates a pyramiding effect that pushes the effective sales tax above the 6% constitutional limit.
According to the lawsuit, a $100 marijuana sale from a processor to a retailer would rise to $124 once the wholesale tax is added. From there, the state’s 10% excise tax would add $12.40, and the 6% sales tax would add another $7.44. Without the wholesale tax, the 6% sales tax on a $100 sale would be capped at $6.
The suit argues that the wholesale tax closely resembles a sales tax because it is tied to the selling price and applies when ownership of a product is transferred in the ordinary course of business. The plaintiffs say that makes the tax structure unconstitutional.
The lawsuit also claims the tax violates equal protection guarantees by forcing marijuana businesses and consumers to shoulder an outsized share of road funding.
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