Michigan communities that embraced recreational cannabis are collecting millions of dollars in taxes again this year, but the checks are shrinking as the legal market continues to stumble.
The state doled out about $93.8 million in cannabis tax revenue to municipalities, counties, and tribes based on sales from fiscal year 2025, down from nearly $100 million the previous year. It’s the first decline since recreational cannabis sales began in 2019, as the market faces oversupply and years of falling prices.
And the near future isn’t looking any brighter. In January, cannabis sales fell to their lowest level in three years after Gov. Gretchen Whitmer and lawmakers imposed a new 24% wholesale tax, despite industry-wide warnings that the increase would accelerate the decline and fuel the illicit market.
The drop in sales is bad news for cities, townships, villages, and counties that have come to rely on the revenue to help fund roads, education, parks, police, and firefighters.
This year, communities receive about $54,017 per dispensary, down from $58,228 last year.
The payments come from the 10% excise tax on recreational marijuana, which is separate from the state’s 6% sales tax. Each city, township, or village receives a fixed payment based on the number of licensed dispensaries or microbusinesses operating within its borders.
With 61 dispensaries, Detroit leads the state in excise tax revenue, with a $3.3 million payout this year. In 2023, Detroit had 33 dispensaries and received about $1.95 million in excise tax revenue.
Detroit has said it plans to use some cannabis tax revenue to help address the disproportionate impact of marijuana prohibition by providing programs that support social-equity entrepreneurs and business opportunities for Detroiters.
In metro Detroit, Hazel Park ranked second with about $594,000 in tax revenue from 11 dispensaries, but the city lost Clarity, a provisioning center that closed around Christmas.
Hazel Park was followed by Center Line with roughly $540,000 in revenue from 10 stores and Inkster with about $486,000 from nine retailers. Other communities with sizable payouts include Ferndale with about $324,000 from six dispensaries, while Berkley and River Rouge each collected about $270,000 from five provisioning centers.
Statewide, Grand Rapids ranked second, collecting $1.46 million from its 27 dispensaries, followed by Lansing with $1.4 million, Ann Arbor with $1.2 million, and Kalamazoo with $1.03 million.
Each county also collects revenue for each dispensary within its borders. With 98 dispensaries, Wayne County has the most in the state and is collecting $5.29 million. Oakland County, with 49 dispensaries, ranks second, receiving $2.65 million. And Washtenaw County ranks third with $2.38 million from its 44 dispensaries.
Macomb and Genesee counties are tied at fifth, each collecting $1.89 million from its 35 dispensaries.
The payments are part of a formula approved by voters when Michigan legalized recreational marijuana in 2018. Under the law, 35% of marijuana excise tax revenue goes to the School Aid Fund for K-12 education, 35% goes to the Michigan Transportation Fund for roads and bridges, and the remaining 30% is split among municipalities, counties, and tribes where cannabis businesses are located.
The payouts have grown dramatically since the early days of legalization. In the first year of distributions, communities received about $28,000 per dispensary. That climbed to about $56,000 in 2021, roughly $51,800 in 2022, and nearly $59,000 in 2023 before dipping again this year.
The irony of Michigan’s wholesale tax is hard to miss. Despite warnings from industry leaders, Whitmer and lawmakers approved a 24% wholesale tax that is projected to generate roughly $420 million annually for road repairs. But as sales continue to decline, the new tax is widely expected to weaken the state’s legal cannabis market and reduce the excise tax revenue.
The wholesale tax went into effect on Jan. 1.
The Michigan Cannabis Industry Association, which represents more than 400 businesses, sued the state in the Court of Claims in October, arguing the tax is unconstitutional because it amends a voter-approved cannabis law without the required approval from three-quarters of the Legislature. When voters legalized recreational marijuana in 2018, they approved a 10% excise tax and 6% sales tax on retail cannabis sales. Any new or higher tax, the MCIA contends, amounts to an amendment of the ballot measure and therefore needs a supermajority vote.
Unlike the 10% excise excise tax paid by consumers at checkout, the wholesale tax applies when cannabis is transferred from growers to dispensaries. Businesses say the added layer raises costs in a market already struggling and puts workers at risk of getting laid off.
The legal cannabis industry employs more than 41,000 people statewide.