By Nick Smith
Gongwer News Service
Attorneys in a pair of lawsuits against the legislatively passed cannabis wholesale tax on Tuesday called the Legislature’s actions an unconstitutional move to upend a voter-initiated law, saying it would unfairly target part of a growing industry if the state allows it to stand.
An attorney for the state countered that the Legislature’s move to add the wholesale tax as part of a plan to raise additional state road funding was legal and that the plaintiffs’ claims of irreparable harm to the industry were speculative.
These arguments dominated a Court of Claims hearing Tuesday for oral arguments before Judge Sima Patel in the cases of Holistic Research Group v. State of Michigan and Michigan Cannabis Industry Association v. State of Michigan.
“This case is not about a fight between Republicans and Democrats,” Kevin Blair, representing the Michigan Cannabis Industry Association, said. “It’s politicians of both parties that have unconstitutionally undermined the will of the voters.”
As passed in October, PA 23 of 2025 enacts a 24% wholesale tax on cannabis products in Michigan, which, if allowed to stand, will begin collecting January 1, 2026.
Cannabis was legalized in Michigan by a ballot proposal, and under Michigan law, a three-fourths majority is needed to amend an initiated act passed by voters.
The Comprehensive Road Funding Tax Act created under PA 23 of 2025 by the Legislature without the three-quarters majorities in both chambers is in violation of Article 2, Section 9 of the Michigan Constitution, lawyers argued on Tuesday. It passed the House 78-21, five votes shy of a three-quarters majority. The Senate vote was a narrow majority of 19-17.
The Michigan Cannabis Industry Association is asking for a declaratory judgment that PA 23 of 2025 is invalid and unenforceable. Holistic Research Group is also seeking a preliminary injunction against the law while the case makes its way through the courts.
Blair said that the Michigan Regulation and Taxation of Marihuana Act passed by voters in 2018 is the exclusive vehicle for imposing excise taxes on all sales and transfers of marijuana.
Blair used the example of PA 166 of 2023, which amended cannabis law to allow tribes to enter agreements with the state to gain access to the state’s regulated marijuana industry. The bills were passed with three-quarters majorities, he said, calling it “compelling evidence that the Legislature fully knew and understood that MRTMA is the exclusive mechanism to impose excise taxes on marijuana.”
“There’s an eight-year track record where the Legislature has consistently reaffirmed its understanding that voters intended MRTMA as the exclusive mechanism for regulating adult use businesses and imposing an excise tax on marijuana,” Blair said. “Every legislative act that was directed at adult use marijuana was done via a MRTMA amendment,
directly with the supermajority in both chambers.”
Wesley Margeson with the Department of Attorney General argued for the state on Tuesday. He said the harm being argued by the plaintiffs was speculative.
He also argued that the plaintiffs cannot carry the burden to overcome the presumption of constitutionality.
“There was no change to the MRTMA at all. It didn’t change any language,” Margeson said. “It didn’t take anything away from it, it didn’t add anything to it, and it didn’t change, didn’t do anything to its structure or purpose.”
Margeson said the 2018 law’s language focuses on a retail excise tax on marijuana, that that was what voters agreed to.
“That was the original intent of the voters, was only to impose a retail excise tax,” Margeson said. “Our response to that is: yeah, it imposes a retail excise tax, and that is it.”
Margeson also contested the arguments made by the plaintiffs that the new law violates Article 4, Section 24 of the Constitution, which states that no laws can contain more than one subject, nor can a bill be altered by the Legislature to change its original purpose as determined by its content and not alone by its title.
Margeson said germaneness is the key consideration.
“The Legislature has a lot of latitude there,” Margeson said. “As long as the substitute has the same basic purpose as the original, then the test for germaneness ... is met. ... As long as the original and the substitute have the same basic purpose, in this case, raising revenue for roads, that meets the germaneness test.”
Margeson also argued the argument of irreparable harm was speculative. He said the opponents were pointing to a Senate Fiscal Agency estimate that said there could potentially be a more than 14% reduction in sales with passage of the law.
“There may be or may not be a reduction in sales,” Margeson said. “We don’t know that’s going to happen.”
When pressed by Patel about an affidavit from a business owner who said the law would ruin their business, Margeson reiterated that there is no concrete proof of what may happen.
Attorney Stephan Crane Jr., representing Holistic Research Group, said the group is a wholesale-only licensee, with a unique irreparable harm pending with the imposition of the tax under PA 23.
“The irreparable harm is contract laws, loss of customers, loss of market position,” Crane said. “PA 23, its 24% wholesale tax falls on wholesale transactions. That’s Holistic, and what it does is, it artificially reallocates the tax through downstream retail profits.”
Crane explained groups like Holistic have no ability to absorb the 24% wholesale tax.
“No matter what, the outcome is not good, it’s irreparable,” Crane said. “There is going to be a loss of goodwill, there is going to be a loss of contract, there is going to be a loss of business. … Wholesalers like Holistic cannot absorb the tax internally. It forces them out of the market.”
In a rebuttal to Margeson, Crane said the germaneness argument is irrelevant, again citing the legislative requirement for a three-fourths vote of both legislative chambers regarding voter-initiated laws.
“The Legislature can’t bypass that requirement simply by claiming the amendment is germane,” Crane said. “Germane or not, the people placed a constitutional limit on the Legislature’s power. PA 23 passed with a simple majority. That really ends it right then and there.”
Patel did not rule from the bench on Tuesday, but said rulings on the motions for preliminary injunction in the cases will come as soon as practicable.
Gongwer News Service
Attorneys in a pair of lawsuits against the legislatively passed cannabis wholesale tax on Tuesday called the Legislature’s actions an unconstitutional move to upend a voter-initiated law, saying it would unfairly target part of a growing industry if the state allows it to stand.
An attorney for the state countered that the Legislature’s move to add the wholesale tax as part of a plan to raise additional state road funding was legal and that the plaintiffs’ claims of irreparable harm to the industry were speculative.
These arguments dominated a Court of Claims hearing Tuesday for oral arguments before Judge Sima Patel in the cases of Holistic Research Group v. State of Michigan and Michigan Cannabis Industry Association v. State of Michigan.
“This case is not about a fight between Republicans and Democrats,” Kevin Blair, representing the Michigan Cannabis Industry Association, said. “It’s politicians of both parties that have unconstitutionally undermined the will of the voters.”
As passed in October, PA 23 of 2025 enacts a 24% wholesale tax on cannabis products in Michigan, which, if allowed to stand, will begin collecting January 1, 2026.
Cannabis was legalized in Michigan by a ballot proposal, and under Michigan law, a three-fourths majority is needed to amend an initiated act passed by voters.
The Comprehensive Road Funding Tax Act created under PA 23 of 2025 by the Legislature without the three-quarters majorities in both chambers is in violation of Article 2, Section 9 of the Michigan Constitution, lawyers argued on Tuesday. It passed the House 78-21, five votes shy of a three-quarters majority. The Senate vote was a narrow majority of 19-17.
The Michigan Cannabis Industry Association is asking for a declaratory judgment that PA 23 of 2025 is invalid and unenforceable. Holistic Research Group is also seeking a preliminary injunction against the law while the case makes its way through the courts.
Blair said that the Michigan Regulation and Taxation of Marihuana Act passed by voters in 2018 is the exclusive vehicle for imposing excise taxes on all sales and transfers of marijuana.
Blair used the example of PA 166 of 2023, which amended cannabis law to allow tribes to enter agreements with the state to gain access to the state’s regulated marijuana industry. The bills were passed with three-quarters majorities, he said, calling it “compelling evidence that the Legislature fully knew and understood that MRTMA is the exclusive mechanism to impose excise taxes on marijuana.”
“There’s an eight-year track record where the Legislature has consistently reaffirmed its understanding that voters intended MRTMA as the exclusive mechanism for regulating adult use businesses and imposing an excise tax on marijuana,” Blair said. “Every legislative act that was directed at adult use marijuana was done via a MRTMA amendment,
directly with the supermajority in both chambers.”
Wesley Margeson with the Department of Attorney General argued for the state on Tuesday. He said the harm being argued by the plaintiffs was speculative.
He also argued that the plaintiffs cannot carry the burden to overcome the presumption of constitutionality.
“There was no change to the MRTMA at all. It didn’t change any language,” Margeson said. “It didn’t take anything away from it, it didn’t add anything to it, and it didn’t change, didn’t do anything to its structure or purpose.”
Margeson said the 2018 law’s language focuses on a retail excise tax on marijuana, that that was what voters agreed to.
“That was the original intent of the voters, was only to impose a retail excise tax,” Margeson said. “Our response to that is: yeah, it imposes a retail excise tax, and that is it.”
Margeson also contested the arguments made by the plaintiffs that the new law violates Article 4, Section 24 of the Constitution, which states that no laws can contain more than one subject, nor can a bill be altered by the Legislature to change its original purpose as determined by its content and not alone by its title.
Margeson said germaneness is the key consideration.
“The Legislature has a lot of latitude there,” Margeson said. “As long as the substitute has the same basic purpose as the original, then the test for germaneness ... is met. ... As long as the original and the substitute have the same basic purpose, in this case, raising revenue for roads, that meets the germaneness test.”
Margeson also argued the argument of irreparable harm was speculative. He said the opponents were pointing to a Senate Fiscal Agency estimate that said there could potentially be a more than 14% reduction in sales with passage of the law.
“There may be or may not be a reduction in sales,” Margeson said. “We don’t know that’s going to happen.”
When pressed by Patel about an affidavit from a business owner who said the law would ruin their business, Margeson reiterated that there is no concrete proof of what may happen.
Attorney Stephan Crane Jr., representing Holistic Research Group, said the group is a wholesale-only licensee, with a unique irreparable harm pending with the imposition of the tax under PA 23.
“The irreparable harm is contract laws, loss of customers, loss of market position,” Crane said. “PA 23, its 24% wholesale tax falls on wholesale transactions. That’s Holistic, and what it does is, it artificially reallocates the tax through downstream retail profits.”
Crane explained groups like Holistic have no ability to absorb the 24% wholesale tax.
“No matter what, the outcome is not good, it’s irreparable,” Crane said. “There is going to be a loss of goodwill, there is going to be a loss of contract, there is going to be a loss of business. … Wholesalers like Holistic cannot absorb the tax internally. It forces them out of the market.”
In a rebuttal to Margeson, Crane said the germaneness argument is irrelevant, again citing the legislative requirement for a three-fourths vote of both legislative chambers regarding voter-initiated laws.
“The Legislature can’t bypass that requirement simply by claiming the amendment is germane,” Crane said. “Germane or not, the people placed a constitutional limit on the Legislature’s power. PA 23 passed with a simple majority. That really ends it right then and there.”
Patel did not rule from the bench on Tuesday, but said rulings on the motions for preliminary injunction in the cases will come as soon as practicable.
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