Politics
Michigan Lawmakers Take Up Bill To Cap Marijuana Business Licenses As Industry Reels From Tax Increase
“We are doing our best to create the right regulatory scheme to be able to adequately enforce the market.”
By Ben Solis, Michigan Advance
The Michigan Senate is refocusing its marijuana industry license cap legislation to include new barriers to obtaining a license for growers, processors or dispensary operators with outstanding industry-related tax debt—a move that would help shore up the industry as it deals with a new 24 percent wholesale tax.
The Michigan Senate Regulatory Affairs Committee on Wednesday heard a second round of testimony on recent changes to Senate Bill 597, a bill proposing new caps on state marijuana industry licenses. The hearing comes nearly a year after the bill was introduced and was the subject of a first hearing in October 2025.
Sponsored by Sen. Sam Singh (D-East Lansing), SB 597 would cap licenses for marijuana retailers and wholesalers to one license per 10,000 residents in a municipality beginning January 1, 2026. The move would be similar to how the state regulates liquor sales, Singh said last year.
SB 597 is also part of a larger package. Senate Bills 599–602 aim to create a regulatory framework for consumable hemp products in Michigan. That portion was mainly sponsored by Sen. Dayna Polehanki (D-Livonia), and was introduced as a way to regulate intoxicating products made from hemp, including Delta-8 and other synthesized cannabinoids, which are sold in Michigan gas stations, convenience stores and online marketplaces.
Those pieces were advanced out of the Democratic-controlled Senate late last year, and now sit in the GOP-led House. The license cap piece is still being worked out by the Senate.
Singh’s testimony on Wednesday served to refresh the committee’s memory on the legislation, and to go over the details of the newly adopted language of the bill.
One of the biggest changes requires licensees to have paid all state taxes when seeking another license. That would require a potential licensee to pay back the base tax owed, fees and tax penalties. Singh said the change would align the marijuana industry with the way liquor licenses are controlled and regulated in Michigan.
The senator said that one issue currently facing the Cannabis Regulatory Agency is that it has no ability to deny an applicant for a new license if that applicant held a previous license, but closed it while still owing various state industry taxes, including a required excise tax.
Under the current regulatory framework, a licensee could potentially close their existing license and that tax debt wouldn’t follow them as they seek a new license—with the CRA lacking a mechanism to halt that process due to the outstanding tax owed.
Singh said that was more important than ever considering how the Legislature added a new 24 percent wholesale tax into its 2025-26 budget deal. The Legislature implemented the tax with an estimated $420 million annually for road funding. The industry is currently fighting that tax in court, as its stakeholders argue the tax will generate less revenue than projected from the wholesale marijuana tax.
Recent reporting indicates the industry’s struggles have been further exacerbated with tax revenues falling short of expectations, according to The Gander.
“Now that we have a 24 percent wholesale tax, I could see this becoming more and more of an issue,” Singh said. “If we want to make sure that that is a stable revenue, which again, we might be a little bit low on that revenue to begin with, we need to make sure that these protections are there.”
The updated language has a provision to put a moratorium on new grower licenses, but allows current growers to build out and get an additional license to expand. Singh said this was also done for market stabilization.
Another change addresses product returns.
“We heard from the wholesale community that currently, right now, within law, there is not a policy on how you return product,” Singh said. “What we’ve been hearing from wholesalers is that some people are returning product weeks upon weeks, and even months, after they have received it. So they’ve asked us to find a way to sort of deal with the return product. What our bill basically does is that you have up to three days to return the product, and it has to be in its original wrappings and original containers.”
The committee did not take further action on the bill.
Following the hearing, Michigan Advance asked Singh if the changes were an admittance that the state’s new wholesale tax wasn’t creating the kind of revenue the Senate and House had hoped for.
Singh said it was not a reaction to the ongoing issues with the tax.
“We’ve been working on this, these sets of issues, since April of last year. When you have an initiative that is passed by the voters, there’s oftentimes things that they never thought about, especially on the regulatory side, the enforcement side,” Singh said. “We are doing our best to create the right regulatory scheme to be able to adequately enforce the market, ensure that the product is safe for those who are going to use the product, but at the same time make sure that everyone’s paying their taxes.”
As to whether the bill would help make sure more licensees are paying the appropriate tax, Singh said the Legislature, the state and its marijuana industry counterparts will have to wait and see.
“I always share my personal concerns that that tax was probably higher than it should have been. I think there could have been a combination, an increase on the retail side with the excise tax, and then maybe a smaller wholesale tax,” Singh said. “But at this point in time, I think it’s premature to gauge where we’re going to be at. I think after a couple more quarters, we’ll get a strong sense of what that revenue is going to look like as we go forward.”
This story was first published by Michigan Advance.
