Michigan cannabis operators are now navigating a major financial shift. Effective January 1, 2026 , the Comprehensive Road Funding Tax Act introduced a 24% wholesale excise tax on adult-use cannabis. This new levy stacks on top of the existing retail excise tax and state sales tax, creating a complex liability for cultivators, processors, and retailers.
If you are a vertically integrated operator or an independent cultivator, understanding how to calculate this tax based on “actual price” versus “average wholesale price” is critical to protecting your margins.
How the Comprehensive Road Funding Tax Act Impacts Operators
The new tax burden that took effect earlier this month is already hitting bottom lines hard. Unlike previous taxes that replaced others, this is an additive tax.
For cannabis tax compliance in Michigan, the most immediate challenge is cash flow. If you are a non-affiliated cultivator or processor, you are legally on the hook for collecting and remitting this tax even if your retail customers are slow to pay. For retailers, a sudden 24% jump in the cost of goods raises a difficult question: can your local market absorb price increases without losing customers to the illicit market?
Calculating the Tax: Affiliated vs. Unaffiliated Transactions
The most confusing aspect of the new law is that the Michigan cannabis wholesale tax applies differently depending on your business structure.
Arms-Length Transactions (Unaffiliated)
For standard transactions between unrelated parties, the calculation is straightforward. You will calculate the 24% wholesale excise tax based on the actual wholesale price paid.
Average Wholesale Price (Vertically Integrated/Affiliated)
If you are a vertically integrated cannabis operation transferring product between related entities (e.g., moving inventory from your processing center to your own retail store), you cannot use your internal cost. Instead, you must use the Michigan Treasury’s “average wholesale price” methodology.
Current Michigan Average Wholesale Price Cannabis (Q1 2026)
The Treasury has published the pricing guidance for the first quarter. You must review your internal transfer structures against these figures:
- Flower: $656.96 per pound
- Concentrate: $2,140.61 per pound
- Infused Liquids: $0.33 per fluid ounce
This quarterly calculation could make or break your margin strategy. You need to determine every quarter whether internal transfers or direct third-party purchases are more cost-effective.
Compliance Strategy: How to Prepare Your Business
The time is now to adjust your business for this new reality. Surviving this tax regime requires more than just raising prices; it requires a deep dive into your operations:
- Review Transaction Flows: Analyze if your current supply chain structure triggers higher taxes than necessary.
- Model Cash Flow: Ensure you have the liquidity to remit taxes even if receivables are slow.
- Update Contracts: Revisit pricing agreements with partners to account for the new tax burden.
High Rock Accounting specializes in helping cannabis operators navigate these exact challenges. From optimizing your business structure to minimize tax liability to developing financial strategies that protect your profitability, we help you stay compliant without sacrificing growth.
Don’t let the new Michigan cannabis wholesale tax erode your profits. Contact us today to position your operation for success under the new regime.
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