GRAND RAPIDS, Mich. — A Michigan marijuana industry group is suing the state government over a new 24% wholesale tax in the new budget.

It claims the tax is unconstitutional and would hurt already struggling cannabis businesses. 

Casey Kornoelje is the founder and owner of Pharmhouse Wellness, a small Grand Rapids dispensary. He supports the lawsuit filed by the Michigan Cannabis Industry Association (MiCIA).

Kornoelje says the burden of increasing the current total tax of 16% would fall the most on consumers.

“That was originally approved by the 10% excise tax that people pay on the adult-use products. There’s 6% sales tax that’s just standard,” Kornoelje said. “So, all in at 16% at the retail counter right now, with the additional 24, you’d be more like an all-in rate of 40% you know, as a consumer, you spend 100 bucks. It’s $140 out the door. That’s a big difference from $116 out the door right now.”

The lawsuit was filed hours after Gov. Gretchen Whitmer signed the state budget. The new tax is estimated to generate more than $400 million in revenue to help rebuild Michigan roads.

The lawsuit argues lawmakers lacked the three-fourths supermajority constitutionally needed to change voter-approved laws.

“An additional 24% is only going to put additional pressure on the system, additional pressure on the industry, which unfortunately is currently on shaky ground,” Kornoelje adds. “There’s a lot of small growers and processors that are just barely hanging on.”

Kornoelje said that although he believes his business is okay in the short term due to its focus on medical cannabis, he’s worried about the future ramifications of the sales tax after it goes into effect in January. 

“I tend to believe that you can’t fight city hall, that’s my experience. So, if the state legislature and the state governor decided that this is the source that they want to pull from for revenue. It’s hard. It’s hard for sure, but I would anticipate there’s a fair chance that it will stay in the long term. Unfortunately.”

The MiCIA is also seeking an injunction to block the enforcement of the tax in January, as the case proceeds.