From High Times to Bad Times: Cannabis Tax Affects Locally-Owned Dispensaries

Michigan’s marijuana market weathers existential threats

By Craig Manning | April 18, 2026

Still green, or running out of steam? It’s a question worth asking about the cannabis market in Michigan in 2026. 

On the one hand, Michigan retailers sold more marijuana than ever last year—a combined 7.4 million pounds of flower, edibles, and vapes, according to reports from the state’s Cannabis Regulatory Agency (CRA). December 2025 alone saw retailers move nearly 682,000 pounds of those products, more than any other single month since recreational weed sales became legal in December 2018. If these numbers indicate anything, it’s that consumer demand for cannabis products is still growing.

But all is not well. Despite record demand, 2025 was the first year since recreational weed sales began where revenues actually declined in Michigan. Also on the downward slide is the state’s number of licensed marijuana dispensaries, a clear indicator of industry consolidation. Add a new statewide excise tax many retailers view as an existential threat, and it’s possible the high times are over for Michigan’s marijuana market.

The Math

While 2025 brought record cannabis sales in terms of volume, it was a different story in revenue. Statewide sales last year worked out to $3.17 billion, down a whopping $100 million (3.1 percent) from 2024’s $3.27 billion. It was the first time since adult-use was legalized that marijuana revenues in Michigan went down instead of up.

The number of active cannabis licenses in Michigan is also down. According to the Michigan Cannabis Industry Association (MICIA), there were 2,171 dispensaries in Michigan by the end of last year, a drop of 85 from the year before and “the first year-over-year decrease in active licenses since adult-use sales began.”

These industry declines have been widely credited to nosediving cannabis prices. Based on CRA reports, the average retail price for an ounce of marijuana flower in Michigan dipped nearly 40 percent over a two-year period, from $95.08 in December 2023 to $58.20 in December 2025.

Local sellers don’t see a reversal coming any time soon.

“There’s just a ton of product out there on the market,” says Steve Ezell of Interlochen Alternative Health. “That’s what’s driven the prices down to these exceptionally low levels.”

“There’s a reason a lot of cannabis operators can’t pay their bills,” adds Kelly Young, CEO of the Central Lake-based Torch Cannabis Co. “When the prices of the commodity itself have continued to go down, it only stands to reason that the profits for retailers have gone down, too. Nobody’s making any money at this. Nobody’s been making any money in Michigan for four years.”

The Communities

Dwindling dispensaries and declining revenues aren’t only impacting the people in the cannabis business. 

Michigan communities have benefitted from adult-use cannabis thanks to the cut they receive from the state’s 10 percent marijuana excise tax. Each spring, counties and municipalities receive payments based on statewide revenues and how many licensed dispensaries operated within their borders the prior year. 

Those numbers are going down as Michigan’s market declines. Case in point: Grand Traverse County will receive a tax revenue payout of $756,239.40 for the 14 active dispensaries it had last year. While still a sizable sum, it’s down 18.8 percent from 2024, when the county pocketed $931,658.56 in marijuana money. 

Grand Traverse County has used the cannabis funds to support nonprofits doing work around conservation, housing, disaster relief, and more.

The (New) Tax

When it was passed in 2018, the Michigan Regulation and Taxation of Marihuana Act carved out both a 6 percent sales tax and the aforementioned 10 percent excise tax for all adult-use cannabis sales in the state. Last year, though, the Michigan Legislature approved an additional 24 percent wholesale tax on marijuana, projected to generate $420 million for the state’s $1.8 billion road improvement plan. The tax went into effect on January 1.

Daniel Caudill, owner of Olean’s Northport—the lone cannabis dispensary in Leelanau County—was vocal from the start that the new tax could spell the end of the industry in Michigan. 

Speaking to Northern Express sister publication The Leelanau Ticker last fall, Caudill said the tax would force him to pay an extra 24 cents for every dollar of product he purchases to stock his store. Only the largest operators in the state, he argued, would be able to absorb that increase. Smaller businesses like his would need to pass the extra cost on to customers, likely driving some of them away.

Fast-forward to April, and Caudill says his fears were justified. “We are definitely down this year from previous years,” he tells the Express.

“I would say the month of January was the slowest month we’ve had since we’ve been open,” Ezell concurs—a notable statement, given that Interlochen Alternative Health is the rare pre-recreational dispensary and has been operating since 2013. “Probably 80-90 percent of the people who came in were complaining about the new taxes. And I don’t blame them. 24 percent, on top of the existing 16 percent taxes, puts us at 40 percent on every product that we sell. The state is trying to drain every dollar they can out of this industry, and in my opinion, it’s just going to encourage the black market [trade of cannabis] again.”

Caudill and Ezell aren’t the only ones seeing tax impacts. Statewide, marijuana sales dipped 16 percent in January compared to December, the largest month-over-month decline since adult-use legalization.

“When you continue to tax one specific area just because it’s a convenient category to tax, eventually it’ll either hurt or kill the business,” Caudill says of that decline.

The Future

Despite these woes, local retailers are optimistically watching a pair of major industry conversations that could change their fortunes.

The first is the rash of legal challenges Michigan’s marijuana sector, led by the MICIA, has brought against the state. The MICIA holds that the new 24 percent wholesale tax is unconstitutional because it was not written into the ballot initiative Michigan residents approved in 2018 to legalize adult-use cannabis. The association’s primary lawsuit is currently scheduled to go to trial in September, and the verdict has potential to overturn the tax for good.

Dispensaries are also watching the possibility for federal reform, which could reshape the market in profound and transformative ways. 

While much of the United States has now legalized cannabis in some fashion—40 states allow medical marijuana, and 24 (plus the District of Columbia) have adult-use laws—it is still technically illegal at the federal level. 

In December, though, President Donald Trump signed an executive order directing the Attorney General to “take all necessary steps to complete the rulemaking process related to rescheduling marijuana to Schedule III of the Controlled Substances Act in the most expeditious manner in accordance with Federal law.” 

Marijuana is currently considered a Schedule I substance alongside the likes of heroin, LSD, and ecstasy, denoting “no currently accepted medical use and a high potential for abuse.” Schedule III, meanwhile, indicates significantly lower “potential for physical and psychological dependence” and includes substances like ketamine and testosterone.

For her part, Young thinks federal rescheduling of cannabis would be an even bigger win for Michigan’s dispensaries than a reversal of the state’s 24 percent wholesale tax.

“Any kind of reclassification and movement towards federal reform gives us retailers the ability to do tax write-offs,” Young explains. “Right now, if you own a marijuana dispensary, you can't write off your labor, or your lights, or anything. What rescheduling does is it puts us in the kind of medical category where it’s like we’re selling ketamine. You still have to have your license and your proper approval through the state, but as long as you have that, you are able to move about freely and operate like every other business in this country.”