Michigan cannabis businesses tell House panel proposed wholesale tax and strict enforcement could cripple industry and local revenue

At a Thursday morning hearing of the Michigan House Appropriations Committee subcommittee on License and Regulatory Affairs and Insurance and Financial Services, township officials, cannabis attorneys and business owners told lawmakers a proposed wholesale tax, continued heavy enforcement and other regulatory costs threaten the state’s licensed marijuana industry and the local revenue it provides.

The witnesses said the industry has delivered jobs, repurposed blighted buildings and supplied substantial local revenue, but that oversupply, aggressive fines, limited banking and federal tax rules leave businesses financially fragile. They urged lawmakers to avoid additional taxes or burdens that could push commerce back to the illicit market.

Glenn Rowley, supervisor of Bangor Township, told the panel his community embraced licensed cannabis after voters approved medical marijuana, and that the local tax and permit revenue helped stabilize a township perilously close to state receivership. “These are business professionals. Now is not the time to impose new taxes or fees on them,” Rowley said, adding his township received $886,295 in one year and $756,972 the prior year from marijuana-related revenue. Rowley said Bangor has about 13 retail cannabis facilities serving a population of roughly 14,000.

Denise Policella, a Michigan cannabis attorney who said she helped draft and lobby for the Medical Marihuana Facilities Licensing Act, described structural barriers that drive up costs for licensed operators. Policella said cannabis businesses face higher effective taxes because federal law prevents ordinary business deductions under Internal Revenue Code section 280E, and she criticized a state requirement that licensees obtain an annual treasury tax clearance before renewing a license. “Their default position is that everyone is a criminal, and we are going to catch and punish every one of you,” Policella said of the Cannabis Regulatory Agency (CRA). She urged ending annual treasury clearance requirements and lengthening license renewal periods as examples of regulatory relief.

Owners and managers from WoJo, a vertically integrated cannabis company, said a proposed wholesale tax — reported in testimony as roughly 32% — would be “absolutely detrimental” to small operators. Tyler, WoJo’s CEO and owner, said the tax structure as described would advantage large, vertically integrated firms and could cause smaller businesses to fail or revert to illicit sales. John Wagoner, WoJo’s compliance manager, said the company employs 57 people and described high annual costs for testing and licensing.

Lawmakers questioned witnesses about where excise-tax revenue currently flows and how a wholesale tax would be structured. Representative Steele noted about $175 million in excise tax revenue and said 35% of that money goes to the Michigan trunkline (roads) and 35% to the School Aid Fund; representatives also asked whether a wholesale tax burden would be passed to consumers and how it would affect cross-border sales in border towns such as New Buffalo and Monroe.

Witnesses and legislators also raised other regulatory problems: inconsistent private lab testing and sampling methods, high fines for clerical or self-reported errors, limited banking and insurance options for cannabis businesses, and the continued presence of an illicit market that undermines licensed sellers. Policella said the CRA’s enforcement posture focuses on licensed operators while not sufficiently confronting illicit producers and sellers.

Several witnesses urged municipalities to use local zoning and licensing caps to protect community character while avoiding state-level measures that would “strangle” the industry. Testimony included examples of converted vacant buildings and local sponsorships by licensed operators, and warnings that higher taxes or stricter rules could reverse gains.

No formal votes were taken during the subcommittee hearing. Lawmakers asked follow-up questions and indicated the proposed wholesale tax and regulatory items would require further study and drafting before any legislative action.

The committee heard additional questions about hemp-derived vape products and underage access, and business witnesses urged more resources for enforcement against illegal sellers. Several lawmakers asked for further detail on the proposed wholesale tax’s mechanics and the status of federal developments that could affect banking and tax treatment.

The hearing record shows extensive discussion but no committee action on the proposals discussed.