Michigan Judge Allows Lawsuit Challenging New Marijuana Tax To Proceed

“The court recognizes the serious questions about whether this discriminatory tax violates the intent of the cannabis legalization that Michigan voters approved in 2018.”

By Kyle Davidson, Michigan Advance

Court of Claims Judge Sima G. Patel on Monday denied the state of Michigan’s request to rehear a motion to toss a lawsuit filed by cannabis industry advocates against the 24 percent wholesale tax on marijuana which took effect on January 1.

In October the Michigan Cannabis Industry Association filed a lawsuit against the state, arguing that the Legislature’s decision to create a 24 percent tax on wholesale marijuana violates the state constitution by modifying the 2018 law established when Michigan voters approved a ballot proposal legalizing recreational marijuana.

Industry advocates have also warned that the tax would bring irreparable harm to Michigan’s marijuana industry, forcing small retailers out of business and pushing buyers into the black market.

In her early December ruling, Patel largely rebuffed arguments from industry advocates, denying the association’s request to block the wholesale tax from taking effect alongside its request to have the case resolved without a full trial.

However she did permit the case to move to trial, raising questions on whether the Legislature’s decision to create the tax violates the intent of the initiated law, partially denying a similar request from the state to resolve the matter without moving to trial.

While the state filed a motion to have their request reconsidered, Patel denied it on Monday, determining that there had been no palpable error in her previous ruling and reemphasizing that questions of fact remained around the new tax violates the purpose of the 2018 law.

“It is not certain on this record whether the 24 percent wholesale excise tax will impact prices to the extent purchasers will be driven to the illicit marijuana market,” Patel wrote. “Discovery is required to examine how the tax will impact the purposes of the [voter initiated law.]”

Rose Tantraphol, the Michigan Cannabis Industry Association’s spokesperson, called Monday’s decision a win for voters and the industry.

“In issuing this order, the court recognizes the serious questions about whether this discriminatory tax violates the intent of the cannabis legalization that Michigan voters approved in 2018,” Tantraphol said. “We’re looking forward to making our case that this tax will push Michiganders, who are already feeling stretched financially, into the illicit market.”

In a separate filing, the association has asked the Michigan Court of Appeals to hear the case, arguing it would allow them to pursue the full range of arguments they made in their initial lawsuit.

This story was first published by Michigan Advance.