Tracking the state’s big increase in cannabis sales, last year brought a big leap in cannabis tax revenue for Michigan as excise tax revenues increased almost ten times between 2020 and 2021. Those tax revenues have become a boon to local governments, schools, and transportation, where they are divvied and distributed.
In 2021, the sales tax collected, which includes both the 6% charged for adult use and medical, totaled $115,462,347. Meanwhile, the adult-use’s additional 10% excise tax added up to $131,195,173 that same year. Bringing 2021’s total cannabis revenues to $246,657,520.
Legal cannabis operators in Michigan are required to pay two main taxes: a 6% sales tax for both medical and adult-use marijuana and a 10% excise tax for adult-use cannabis retailers and microbusinesses. In addition, municipalities hosting cannabis businesses can charge up to $5,000 in annual fees.
In comparison, Michigan brought in just $31 million in adult-use taxes in 2020, while Massachusetts reported a much-heralded $74.2 million in marijuana excise taxes in 2021.
And while a quarter-billion dollars might sound like a lot, Michigan’s governor approved a $70 billion budget in 2021. That means that cannabis tax revenue paid for a mere 0.35% of the total.
But how was that cannabis money spent?
The largest chunk – the 10% excise tax on adult-use marijuana – must be divided according to state law. Fifteen percent, or $19,679,275, went to municipalities where a marijuana retailer or microbusiness is located, allocated in proportion to the number of retailers and microbusinesses in the municipality. Another 15% went to counties with retailers and microbusinesses, as well. Thirty-five percent or $45,918,310 went to a school aid fund for K-12 education, and another 35% went to the Michigan transportation fund to be used to repair and maintain infrastructure.
In March 2021, the first adult-use marijuana payments were distributed to the state’s municipalities and counties, according to a press release. At the time, the Treasury doled out $10 million to more than 100 municipalities and counties, which included 38 cities, seven villages, 21 townships and 38 counties at the time. The largest chunk – $616,029 – went to Washtenaw County, which has 22 licenses.
“The revenue generated from marijuana taxes and fees is important to our local governments,” State Treasurer Rachael Eubanks said at the time. “In this extraordinary time, our staff is working to get those payments to impacted municipalities and counties. Every dollar helps right now.”
Some officials are urging their local government to opt-in and allow marijuana operators to set up shop within their zone boundaries, according to Big Rapid News. Councilmember for Reed City, Nate Bailey, said that “people will still buy those products, they just won’t buy them here.”
The excise tax is administered by the Department of Treasury and subject to administrative, audit, assessment, interest, penalty, and appeal procedures.
“The 10 percent excise tax is not owed on small amounts of adult-use marihuana taken from
inventory by a licensed marihuana retailer or licensed marihuana microbusiness for direct use in the business, such as for display or to provide samples to customers, because such use does not constitute a sale of adult-use marihuana,” according to a bulletin by the Department of Treasury.
The Michigan Regulation and Taxation of Marihuana Act says that adult-use marijuana cannot be sold in a “bundle” with other products and services where the cannabis and other products and services are distinct and identifiable, and are sold for one non-itemized price. A practice sometimes known as “gifting”.
“If property or services other than marihuana are bundled and sold in a single transaction despite the prohibition against such transactions set forth in MCL 333.27963(2), then the entire sales price of the transaction, including the property or services that do not constitute marihuana, is subject to the 10 percent excise tax,” according to the bulletin.
