Michigan’s marijuana tax has three main pieces: a 10% excise tax on adult-use retail sales, the standard 6% state sales tax at the register, and, beginning January 1, 2026, a 24% wholesale excise tax on certain transfers to retailers. Registered medical patients are exempt from the 10% excise tax.
What You Pay at the Register for Recreational Marijuana
Every retail sale of adult-use marijuana carries a 10% excise tax on the sales price, collected by the retailer at checkout. The tax applies to marijuana “sold or otherwise transferred to a person other than a marihuana establishment or tribal marihuana business,” so transfers between licensed businesses earlier in the supply chain do not trigger it.1Michigan Legislature. Michigan Compiled Laws 333.27963 – Imposition of Excise Tax
On top of the excise tax, adult-use purchases are subject to Michigan’s 6% state sales tax. The combined bite at the register is roughly 16%. A $100 purchase of recreational flower costs about $116 once both taxes are added.
The 24% Wholesale Tax That Started in 2026
As of January 1, 2026, Michigan imposes a 24% wholesale excise tax on certain business-to-business transfers of adult-use marijuana. Authorized by the Comprehensive Road Funding Tax Act, it sits separately from the 10% retail excise tax and lands at a different point in the supply chain.2Michigan Department of Treasury. Wholesale Marijuana Tax
The 24% applies in three situations:
- The first transfer of marijuana from a grower or processor to a retail licensee.
- A microbusiness cultivating and processing marijuana for its own retail sales (a vertically integrated operation).
- A medical provisioning center transferring product to an adult-use retailer.
Transfers earlier in the production cycle are not covered. A grower selling raw flower to a processor, for example, does not trigger the wholesale tax because that is not the first transfer to a retail licensee.3Michigan Department of Treasury. Revenue Administrative Bulletin 2026-3
Consumers do not pay the wholesale tax directly, but it works its way into retail pricing.
Medical Marijuana Is Exempt From the Excise Tax
Medical marijuana is explicitly exempt from the 10% retail excise tax. The statute carves out sales under both the Michigan Medical Marihuana Act and the Medical Marihuana Facilities Licensing Act, so registered patients pay neither the excise tax at a dispensary nor on caregiver transfers.1Michigan Legislature. Michigan Compiled Laws 333.27963 – Imposition of Excise Tax
To get that treatment at a licensed retailer, the patient has to present a valid registry card at the time of purchase. Without it, the sale is processed as adult-use and taxed accordingly.
Caregiver transfers work differently. The transaction itself is not subject to sales tax, but the patient owes a 6% use tax on the purchase price, reported once a year on the Michigan Individual Income Tax Return (Form MI-1040).4Michigan Department of Treasury. Revenue Administrative Bulletin 2018-2 – Marihuana Provisioning Center Tax and Sales and Use Tax Treatment
What Licensed Retailers Owe and How to File
Licensed retailers file the Marihuana Retailers Excise Tax Return (Form 5676) quarterly. The return reports total gross receipts from adult-use sales during the quarter and calculates the 10% excise tax owed.5Michigan Department of Treasury. Instructions for Form 5676 Marihuana Retailers Excise Tax Quarterly Return Returns and payments go through Michigan Treasury Online (MTO).6Michigan Department of Treasury. Marihuana Retailers Excise Tax Form 5677 is a separate voucher for submitting payments between quarterly filings; it does not replace the return.
Keep medical and adult-use sales on separate ledgers. Only adult-use transactions generate excise tax liability, and records that mix the two make it difficult to calculate what is actually owed.
Missing a filing deadline triggers a penalty of $10 or 5% of the unpaid tax, whichever is greater, with an additional 5% for each additional month the return remains unfiled.7Michigan Legislature. Michigan Compiled Laws 205.24 – Penalties for Noncompliance Interest accrues on top. A business that falls behind several quarters can end up owing far more than the original tax, and the Cannabis Regulatory Agency reviews tax compliance as part of licensing.
Federal Taxes Are a Separate Problem
Michigan’s taxes are only half the picture for a marijuana business. Section 280E of the Internal Revenue Code prohibits businesses trafficking in Schedule I or Schedule II controlled substances from deducting ordinary business expenses. As of 2026, marijuana remains Schedule I under federal law, and Section 280E still applies.
In practice, a marijuana retailer cannot deduct rent, payroll, utilities, or marketing the way other businesses can. The only deduction available is cost of goods sold. Effective federal tax rates of 70% or higher on net income are common.
The Department of Justice issued a proposed rulemaking in 2024 that would move marijuana to Schedule III, and the Treasury Department has outlined a transition rule that would allow deductions for the full taxable year that includes the effective date of any final rescheduling order.8U.S. Department of the Treasury. Treasury, IRS Announce Process for Tax Guidance Following DOJ Rescheduling The rescheduling process is not complete, and some legislative proposals in Congress would preserve 280E’s restrictions even after rescheduling.