Michigan lawmakers have introduced legislation to repeal the new 24% wholesale marijuana tax, arguing the added levy could hurt businesses, raise consumer costs and drive sales to the black market. (Shutterstock photo via Bridge Michigan)

(This story was originally published by Bridge Michigan, a nonprofit and nonpartisan news organization. Visit the newsroom online: bridgemi.com.)

Michigan is once again sending millions of dollars in marijuana tax revenue back to local communities — though this year’s payout is slightly smaller than last and spread across more governments.

Nearly $94 million will be distributed to 313 cities, villages, townships, counties and tribes under a formula in the recreational marijuana ballot proposal Michigan voters approved in 2018, according to the state Treasury.

The funding comes from the 10% excise tax included in the 2018 initiative. The new payments reflect revenue collected in the 2025 fiscal year.

The money will reach 114 cities, 39 villages, 81 townships, 75 counties and four federally recognized tribes, after a 2023 amendment to the state law recognized the tribes as eligible recipients. Each eligible municipality, county and tribe will receive about $54,000 for every licensed retail store and microbusiness operating within its borders.

The state law requires that 15% of marijuana revenue go to municipalities and tribes where marijuana retailers or microbusinesses are located and another 15% goes to the counties and tribes hosting those businesses.

The remaining 70% is split evenly between the state School Aid Fund and the Michigan Transportation Fund for road and bridge repairs.

Both the School Aid Fund and the Michigan Transportation Fund will receive more than $109 million each, on top of the distributions to local units of government, Ron Leix, spokesperson for the Michigan Department of Treasury, confirmed.

Slowing sales shrink distribution

The $93.7 million tax distribution announced Tuesday is down from $99.5 million last year. That revenue is also separate from a new 24% marijuana wholesale tax that took effect Jan. 1 as part of a new law designed to generate funding for road repairs across the state.

Local governments that allow marijuana sales can use the excise tax revenue payments for everything from public safety costs to infrastructure and community projects. Schools and road agencies receive their revenue from the state.

Ann Arbor is poised to receive about $1.2 million — roughly $200,000 less than it received last year — which the city will use to continue supporting affordable housing and a misdemeanor criminal charge diversion program aimed at college students, according to City Administrator Milton Dohoney Jr.

“We’re a little disappointed that we’re getting less money, but we’re not shocked by that,” Dohoney told Bridge Michigan. “We still want to use the money that we’re getting to the maximum extent possible for programs that this community has determined is important. That is not changing.”

Wayne County and Detroit will see the largest payments — more than $88 million combined — with other populous areas also receiving large sums. Berrien County, the state’s 16th-largest by population, will see the fourth-largest payment because of the 48 licensed businesses that operate in the county, which borders Indiana, where sales are illegal.

After several years of expansion, Michigan’s cannabis market has recently cooled, with slowing sales and falling prices driven by increased competition and excess supply.

In January, adult-use customers bought $226 million in recreational marijuana products, down $20 million from when sales topped $246 million the previous January, according to the Cannabis Regulatory Agency.

The downturn has been sharper in the medical marijuana market, which is exempt from the state’s 10% excise tax and 24% wholesale tax. Medical sales totaled $403,000 in January, compared with $710,000 during the same month last year.

“There’s every indication that marijuana sales will continue to be a regulated industry within the state,” Dohoney said. “There will be an expectation that some level of funding will be coming through every year. It might not always be the same but … we certainly want to get our fair share if that’s how the policy is going to be implemented.”

Lawmakers propose repealing new wholesale tax

The state’s new wholesale marijuana tax, which took effect in January after bipartisan approval late last year in the Legislature, is projected to generate more than $400 million a year for road repairs.

But it is facing some pushback, including an ongoing lawsuit from a cannabis industry association and a new bipartisan repeal effort.

“Michigan has a 10% excise tax and minimally a 6% sales tax. So when you put this on top, you in effect, are taxing cannabis at 40%,” said Adam Stettner, CEO of FundCanna, which provides funding to underserved business owners within the industry.

Stettner argued the new tax structure will raise prices and encourage consumers to go back to the so-called black market.

Late last month, a group of Republican and Democratic state senators introduced legislation aiming to repeal the tax.

“Lansing’s budget does not need to grow larger; we simply need better discipline,” co-sponsoring Sen. Jonathan Lindsey, R-Bronson, said in a statement. “This tax will also damage Michigan businesses and lead to widespread job losses across the state, which are already being reported.”

The legislation faces an unlikely future in Lansing, however. Both chambers approved the tax last year, and the bill has been referred to the Senate Government Operations Committee, where leaders often move measures they do not intend to take up.

“What we really need is stability in policy because capital funding and business operators can’t stand uncertainty,” said Stettner, the FundCanna executive.