Michigan’s legal cannabis industry entered 2026 in a fragile state. Now, a bipartisan group of lawmakers is moving to reverse the policy that many operators say pushed the market closer to the edge.
Senate Bill 810, introduced Feb. 26 by State Sen. Jonathan Lindsey, would repeal the 24% wholesale cannabis tax that took effect Jan. 1. The tax was adopted last fall as part of a broader road funding package and applies to the first transfer of cannabis from a grower or processor to a retailer. The new tax is layered on top of the 10% excise tax consumers already pay at the register, as well as the state’s 6% sales tax.
Lindsey, a Republican from Coldwater, framed the repeal as both an economic and constitutional issue.
“I opposed the new tax increase, first and foremost, because it represents an unnecessary growth of government. Lansing’s budget does not need to grow larger; we simply need better discipline. This tax will also damage Michigan businesses, and lead to widespread job losses across the state, which are already being reported,” Lindsey said when introducing the bill.
“I also don’t believe that in the long term this mechanism will generate the expected revenue, especially if sales go down as a result of the increased taxes or legal challenges against the tax prevail.”
Related: Michigan’s New Cannabis Tax Puts Marijuana Market in a Precarious Position
The legislation arrives at a moment when Michigan’s once-booming adult-use market is showing unmistakable signs of contraction. According to the Michigan Cannabis Regulatory Agency, adult-use dispensaries generated $3.17 billion in sales in 2025, down from $3.27 billion in 2024. A 3.1% year-over-year decline may appear modest on paper, but it marked the first annual drop since recreational sales launched in late 2019 and signaled a market shifting from expansion to survival.
Newer data has heightened industry concern. Based on figures released by the Cannabis Regulatory Agency, cannabis sales in Michigan fell 16% between December 2025 and January 2026. That drop was a steeper seasonal drop than in prior years and 8.3% lower than January 2025 sales.
Since voters legalized marijuana in 2018, Michigan’s regulated cannabis industry has generated more than $13 billion in total sales and approximately $2.2 billion in excise and sales tax revenue supporting schools, roads, and local governments. Industry leaders say the sector now employs roughly 47,000 Michiganders and contributes $331 million annually through the 10% excise tax, along with $188 million in annual sales tax revenue.
But those gains have come alongside mounting strain on the industry, as more than 550 dispensaries and cultivation facilities have closed over the past several years, and thousands of workers have lost jobs.
By the end of 2025, Michigan had 2,171 active cannabis licenses, a decline from the previous year and the first such drop since adult-use legalization began. Nearly half –1,000 licenses – are inactive. Growers have been hit especially hard, with nearly one-third of cultivation operations closing since the market opened.
Detroit has seen its own contraction, with at least 14 cannabis businesses closing since the city began issuing licenses in late 2022. Even so, the market remains saturated and even oversaturated, as new entrants continue to replace those that exit, keeping supply high and prices compressed.
That saturation has driven Michigan’s cannabis prices to historic lows. The average retail price for an ounce of recreational cannabis dropped to just over $58 in December 2025. A year earlier, it was more than $69. In late 2023, it exceeded $95. Michigan has become one of the most affordable legal cannabis markets in the country. That means there’s a clear benefit for consumers, but a serious challenge for operators trying to maintain margins. And with the recent legalization of recreational-use cannabis in Ohio, Michigan’s down-south neighbor, customers who normally drive to Michigan to purchase cannabis might stay in-state, which puts even more of a strain on cannabis shops near the state line.
“Michigan is a mature cannabis market, which is great for consumers but not always great for businesses,” a Michigan attorney who has spent nearly half of his 14-year legal career advising cannabis companies previously told the Michigan Chronicle. “It’s highly saturated. There’s significant price compression, and margins are already razor thin.”
With these already-present struggles, the 24% wholesale tax represents what many in the industry describe as a structural shift rather than a modest adjustment.
“This new tax is fundamentally different,” the attorney said. “It doesn’t happen at the retail level. It happens higher up the supply chain.”
While the tax is assessed on wholesalers, its financial impact moves quickly throughout the system. Growers and processors must decide whether to absorb the cost, renegotiate contracts, or raise wholesale prices. Retailers, already competing aggressively on price, face their own dilemma: pass higher costs to consumers, reduce promotions, or compress margins further.
“Taxes don’t disappear,” the attorney said. “They get pushed up or down the supply chain.”
For consumers accustomed to deep discounts and aggressive promotions, even modest price increases can alter purchasing behavior. “In a mature market, nobody has the luxury of simply raising prices,” the attorney said. “You raise prices, you lose customers.”
That risk is amplified by Michigan’s unique competitive landscape. The state maintains a long-standing caregiver market that predates legalization and operates outside the same tax and regulatory structure as licensed businesses. Ohio’s recent launch of legal sales has also introduced new cross-border competition.
“If prices rise too much, consumers will go back to the gray or illicit market,” the attorney said. “That’s just economic reality.”
Industry advocates argue that this dynamic undercuts the core goals voters approved in 2018, which was to displace the illicit market, to protect consumers through regulation and testing, and to generate stable public revenue. From their perspective, the wholesale tax disrupts a structure that voters deliberately designed.
“The voters who approved legalization in 2018 deliberately chose a tax structure designed to keep prices reasonable and eliminate the illicit market,” said Robin Schneider, executive director of the Michigan Cannabis Industry Association. “The Legislature ignored that wisdom, and now we’re seeing the consequences: business closures, job losses, and consumers being driven back to illegal purchases. We urge lawmakers to repeal this destructive and unconstitutional tax before more businesses close and more Michiganders lose their jobs.”
Schneider said the 24% wholesale tax is “destroying an industry that employed 47,000 Michiganders and generates hundreds of millions in annual tax revenue.” Multiple cannabis businesses have announced closures or significant layoffs since the tax took effect just two months ago, including a shutdown of a cannabis operation in Webberville. And a particular dispensary in the Upper Peninsula laid off 61 employees and closed permanently at the end of 2025 because forecasts projected that they wouldn’t be able to sustain as a profitable entity.
Critics of the wholesale tax have also objected to how it was enacted. Rather than advancing as standalone marijuana legislation, the tax was folded into a broader budget and infrastructure funding package during late-stage negotiations last October.
“This wasn’t a marijuana bill,” the attorney said. “Cannabis became the funding mechanism at the last minute.” He noted that the state projected roughly $420 million in additional revenue from the new tax — an ironic figure, given “420” is widely recognized in cannabis culture.
Earlier efforts to raise marijuana taxes had stalled, in part because the original adult-use law outlined a specific tax structure and required a supermajority vote in the Legislature to make changes. “Voters knew exactly what they were voting on,” the attorney said. “That structure was part of the deal.”
Lindsey’s bill would repeal the wholesale tax entirely, restoring the prior framework centered on the 10% excise tax at the point of sale. The measure has bipartisan co-sponsors, though its path forward remains uncertain. Repealing the tax would reopen questions about how to replace projected road funding revenue, a key justification offered when the policy was adopted.
From the industry’s standpoint, however, the immediate concern is stability. The tax took effect with limited implementation guidance, forcing businesses to adjust contracts, pricing models, and compliance systems in real time.
“The tax went into effect with essentially no runway,” the attorney said. “There are still dozens of unanswered questions about how the tax applies.”
A prior legal challenge seeking to block the tax did not secure a preliminary injunction, allowing it to remain in place while litigation continues. “Even if the industry wins, that’s a long and expensive battle,” the attorney said. “And the tax is real in the meantime.”
The battle remains personal for workers across retail, cultivation, processing, transportation, compliance, and security. As margins continue to tighten, staffing decisions grow more difficult. Municipalities that host cannabis businesses could also feel secondary effects if closures accelerate, potentially reducing local revenue distributions.
“This tax is forcing the industry into maturity whether it’s ready or not,” the attorney said. “And not the kind of maturity that I mentioned earlier. I mean the kind of maturity that demands a certain kind of operations savvy that a lot of current retailers are still learning.”
Whether Senate Bill 810 gains traction will signal how lawmakers assess the trade-offs between infrastructure funding and the long-term health of a regulated industry that has become a significant economic contributor in less than a decade.
For now, operators remain in what many describe as a holding pattern as they adjust month by month in a market defined by uncertainty.
“This is going to be a survival exercise,” the attorney said. “People were already hustling just to stay afloat. Now the rug’s been pulled out while they were still trying to find their footing.”
