Michigan Cannabis Wholesale Tax Falls Short of Early Expectations

LANSING – State officials hoped the 24% wholesale tax on adult-use Cannabis, which took effect January 1, would deliver steady money for road repairs. Initial collections tell a different story.

The tax generated nearly $34 million through the end of April, according to the Michigan Treasury Department’s monthly financial report. That figure covers the first four months of collections and falls well below the roughly $105 million per quarter that lawmakers anticipated when they passed the measure last year.

The nonpartisan House Fiscal Agency had projected the levy would bring in about $420 million annually. Those funds were earmarked mainly for the Neighborhood Road Fund to support local roads and bridges as part of a broader infrastructure package.

Sales data from the Cannabis Regulatory Agency offers some context. Recreational Cannabis sales in the first four months of 2026 trailed the same period in 2025. January sales, for instance, came in at $226.4 million this year compared with $246.6 million a year earlier. Similar gaps appeared in February, March, and April.

Industry representatives had warned that adding the wholesale tax on top of the existing 10% excise tax and 6% sales tax would squeeze margins, raise prices for consumers, and drive some buyers back to the unregulated market. Robin Schneider, executive director of the Michigan Cannabis Industry Association, said the early numbers confirm those concerns and have already contributed to business challenges.

The tax remains the subject of ongoing legal action. The industry group has challenged its constitutionality in court, arguing that lawmakers amended the voter-approved 2018 Cannabis Law without the required supermajority. A trial is pending. State forecasts have also adjusted. The January 2026 consensus revenue estimate lowered expectations for the current fiscal year to $315 million for the partial period after the tax’s start. Even so, current collections lag behind that revised outlook.

A fuller assessment will take more time. Quarterly filings continue, and any transition relief for businesses will eventually phase out. Broader market factors, including national trends of price compression and competition from other states or substitutes, could also play a role in Michigan’s performance.

This early shortfall highlights the delicate balance in tax design. Lawmakers sought a reliable revenue stream without derailing a maturing industry that has delivered billions in economic activity and supported local governments through prior distributions. It remains to be seen if collections will pick up as operators adjust pricing, supply chains stabilize, or enforcement against illicit sales strengthens. For now, the data underscores that projections built on pre-tax assumptions often require real-world recalibration once new costs hit the market. Michigan’s experience will likely influence debates in other states considering similar layered taxation approaches.