TRAVERSE CITY— Michigan’s recreational marijuana industry is adjusting to a wholesale tax increase now in effect, raising concerns about prices for consumers and the future of dispensaries across the state.
The new 24% wholesale marijuana tax is applied earlier in the supply chain and comes on top of the 10% excise tax and 6% sales tax already collected on recreational marijuana purchases. The tax is expected to generate more than $400 million for road repair projects statewide.
Dispensary owners say customers should not expect dramatic price increases at checkout, emphasizing that the wholesale tax is not directly added to receipts and that Michigan remains one of the lowest-priced cannabis markets in the country.
“For the most part, Michigan is the lowest price market in the entire country,” said Rivak Hanna, director of operations for Green Pharm Cannabis. “I don’t think that’s going to change.”
Hanna said some customers have expressed concern that prices will rise sharply, but retailers are working to prevent a 24% increase from being passed on to consumers. He said many dispensaries are cutting internal costs and working with cannabis brands willing to share part of the pain.
“We’re trying to be more efficient, cut down costs, and take some of that burden so the price is not actually increasing 24% to the customer,” Hanna said.
Despite those efforts, industry leaders warn the tax is squeezing profit margins that were already thin.
Luke Whitney, owner of Boss Cannabis Co. in Traverse City, said wholesale marijuana prices have been declining for years, leaving businesses with little room to absorb new costs.
“Margins are the smallest they’ve been year over year,” Whitney said. “Applying a 24% tax on top of that is going to make things very difficult for most operators.”
Whitney said the combined tax burden places Michigan among the highest-taxed cannabis markets in the country and could force some dispensaries to close.
“I unfortunately do think that some people will end up going out of business because of this,” he said. “If they’re already struggling to survive now, that will obviously impact it.”
Whitney said vertically integrated companies may have more flexibility to manage pricing, but the wholesale tax affects businesses at every level of the supply chain.
Industry groups are challenging the wholesale tax in court in an effort to have it repealed. In the meantime, dispensary owners say competition remains strong, and many are focused on keeping prices low while absorbing part of the financial impact themselves.