Politics
Michigan Officials Defend New Marijuana Tax From Industry Lawsuit
“When the Legislature exercised its constitutional authority to impose a tax on the wholesale sale of marijuana, it did not place an ‘undue burden’ on the voters’ exercise of direct-democracy rights.”
By Jordyn Hermani, Bridge Michigan
This story was originally published by Bridge Michigan, a nonprofit and nonpartisan news organization. To get regular coverage from Bridge Michigan, sign up for a free Bridge Michigan newsletter here.
Michigan’s new wholesale marijuana tax law does not alter “in any way” the 2018 ballot proposal voters approved to legalize recreational sales, according to state attorneys urging a judge to toss a lawsuit that seeks to block the tax.
In early October, lawmakers gave final approval to a 24 percent wholesale tax on marijuana as part of a larger plan to raise $420 million annually for Michigan road repairs. That tax was quickly signed into law by Gov. Gretchen Whitmer (D) and is set to take effect January 1, 2026.
The Michigan Cannabis Industry Association filed suit in the Court of Claims not long after, arguing lawmakers illegally changed the voter-approved initiative, which would have required supermajority votes in both chambers of the Legislature.
But attorneys representing Michigan Treasurer Rachel Eubanks contend the new tax does not alter the text of the 2018 initiative—as the cannabis association claims—but instead builds upon its foundation.
“When the Legislature exercised its constitutional authority to impose a tax on the wholesale sale of marijuana, it did not place an ‘undue burden’ on the voters’ exercise of direct-democracy rights,” they said in a filing last week.
Instead, that 2018 voter-led initiative, “created a targeted tax on retail adult-use marijuana sales and specifically allowed that all other taxes would still apply,” the attorneys argued.
The cannabis industry lawsuit seeks to invalidate the law. Holistic Research Inc., a licensed cultivator and processor located in Harrison Township, filed a similar lawsuit and is seeking a preliminary injunction to block implementation of the tax while the legal case plays out.
Attorneys for Holistic claim the tax will force the company to either raise prices or “absorb the tax, destroying already narrow operating margins.”
“As a result, Holistic faces an imminent risk of losing customers, contracts, market share, and goodwill, and of being forced to reduce or cease operations entirely,” Holistic’s attorney Stephen Crane Jr. wrote, “injuries that cannot be adequately remedied by a later money judgment.”
Attorneys for Whitmer and the state treasury department have since sought to throw out Holistic’s complaint, arguing they are “immune from suit” under the 11th Amendment of the US Constitution.
A 1960s-era Michigan law, they state attorneys argue, renders a governmental agency unable to be sued if it is “engaged in the exercise or discharge of a governmental function.” In the case of the Department of Treasury, collecting taxes is part of its daily operations.
The Holistic and Michigan Cannabis Industry Association suits have been consolidated by Michigan Court of Claims Judge Sima Patel. She’s scheduled to hear arguments over the request for a preliminary injunction on November 25 in Detroit.
Under the Michigan Constitution, amending a voter-approved law requires support of three-fourths of the Legislature. The tax passed the Senate 19-17 and the House 78-21—both short of that threshold.
The new law creating the tax doesn’t directly amend the statute, though. Instead, it creates a new Comprehensive Road Funding Tax Act. The cannabis industry attorneys assert the new tax is an attempt to get around amending the original legalization statute.
This article first appeared on Bridge Michigan and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.
