Southwest Michigan dispensaries brace for 24 percent wholesale tax

BUCHANAN, Mich. — The new year is set to bring major changes to the local cannabis industry in Southwest Michigan, with a 24 percent wholesale tax on cannabis going into effect statewide on Jan. 1. State officials say it will bring in millions of dollars for road repairs, but dispensary owners are growing concerns.

After the COVID-19 pandemic, two local brothers opened a family- and veteran-owned cannabis microbusiness in Buchanan. Now, they are bracing for the wholesale tax without fully knowing what that will mean for their small business.

Michael Walpole, owner and head of cultivation at Lifted Microgrowery, walked ABC57 through the facility, where they grow all their own flower on-site.

Despite uncertainty and little communication from the state, Walpole says the business is opting to absorb the cost on their products and will not raise prices in the new year. However, it is still unclear what increases they may see from vendors.

Since this is not a retail tax, Walpole explained what customers at other dispensaries could be paying and clarified what they will see on receipts starting Jan. 1.

“I see a lot of confusion, I see a lot of articles or people talking in comments of being like 'oh it’s gonna be a 40 percent tax increase' and that’s not necessarily how it’s actually gonna be,” Walpole said. “There won’t be a 40 percent line item on the receipt. It’s at a wholesale rate, so basically anything that we purchase or bring in from the back of the house in the cultivation will be charged 24 percent on that cost. From the customer standpoint, it’ll pretty much just mean maybe at the most, if the company decides to push the entire amount onto the customer, it’ll be like a 12 percent increase on the cost, which will be prior to the receipt, and then you’ll see your normal 16 percent excise and sales tax.”

Industry groups, including the Michigan Cannabis Industry Association, are appealing a court decision on a lawsuit that initially argued the tax was slipped into a road-funding bill. As of now, the tax is set to take effect, with millions in revenue expected to go toward fixing roads.