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State of Michigan to Rake In At Least 80 Million Dollars Yearly From Medical Marihuana

Dec 9th, 2016 Criminal Penalties Marijuana Laws

On September 21, 2016 Governor Snyder signed into law a series of new bills that amended Michigan’s Medical Marihuana Act, as set forth in Michigan Compiled Laws, sec. 333.26424, et. seq.  This series of bills is called the “Medical Marihuana Facilities Licensing Act,” and the effective date of this package of bills was December 20, 2016.  Among the many changes, these bills include the provisioning of new taxes.  For example, after December 20, 2016 there will be a new 3% tax imposed on the gross retail income of each provisioning center (retail seller/dispensary).

According to the law, i.e., the Medical Marihuana Facilities Licensing Act, found at Michigan Compiled Laws, sec. Sec. 102(r):

(r) “Provisioning center” means a licensee that is a commercial entity located in this state that purchases marihuana from a grower or processor and sells, supplies, or provides marihuana to registered qualifying patients, directly or through the patients’ registered primary caregivers. Provisioning center includes any commercial property where marihuana is sold at retail to registered qualifying patients or registered primary caregivers. A noncommercial location used by a primary caregiver to assist a qualifying patient connected to the caregiver through the department’s marihuana registration process in accordance with the Michigan medical marihuana act is not a provisioning center for purposes of this act.

In addition to this new tax, a retail sales tax of 6% will also be collected by the medical marijuana seller.  It should be noted that neither of these taxes currently apply to licensed medical marijuana patients or primary caregivers.  It’s not 100% clear if medical marijuana will be exempt from sales tax as are other prescription drugs in Michigan.  Also, there are additional application fees and the regulatory assessment fees that will also raise money for the State.

No one really knows how much money Michigan will collect in taxes from medical marijuana. When this was studied, the state used Colorado as a model, but acknowledged that they do not believe Michigan’s sales will be close to Colorado’s sales. Based on these estimates it is believed that the new 3% on the gross retail sales of medical marijuana will bring in about $24,000,000.00.  (Twenty-Four Million Dollars). The 6% sales tax will bring in another nearly $50,000,000.00. (Fifty Million Dollars).  These estimates are likely on the low side, and will undoubtedly increase over time.

There are, of course, expenses involved in the administration of these new laws as well.  For example, ongoing costs are likely to be close to $20,000,000.00.  (Twenty Million Dollars).  There is also a one-time technology fee of about $800,000.00 (Eight Hundred Thousand Dollars). These taxes and expenses are by and for the state of Michigan.  However, the new Medical Marijuana Act is likely to have a significant but currently undetermined and unknown fiscal impact on local units of government.  This impact will be based on the creation of new taxes and fees on medical marihuana facilities.

The taxes raised by the State of Michigan from application fees and the regulatory assessment will be deposited into the Marihuana Regulatory Fund.  This money can be spent only on the implementation, enforcement, and administration of the Medical Marihuana Act.

The 3% tax dollars will be deposited into the Medical Marihuana Excise Fund. Money from this fund will be allocated as follows:

  • 30% to counties in which a medical marihuana facility is located.
  • 30% to the State – prior to September 30, 2017, for deposit into the General Fund; after October 1, 2017, for deposit info the First Responder Presumed Coverage Fund.
  • 25% to municipalities in which a medical marihuana facility is located.
  • 5% to county sheriffs in counties in which a medical marihuana facility is located.
  • 5% to MCOLES for local law enforcement training.
  • 5% to the Department of State Police.

This means it will “pay” for a city or township to have medical marijuana facilities located within their borders. The Michigan State Police and local police will also get a piece of the new largesse.  Overall, even with the additional expenses to the State for law enforcement and the various administrative expenses, the State of Michigan stands to rake in a huge sum of money from the business of Medical Marijuana.