Michigan Monthly Puff: 24% Cannabis Tax Faces Second Lawsuit as $46M Flows to Cities

MICHIGAN CANNABIS RETAIL MARKET UPDATE – APRIL 2026

Michigan cannabis retail is under real financial stress heading into April 2026. The 24% wholesale tax that took effect January 1 has triggered two separate lawsuits, squeezed margins statewide, and contributed to the worst monthly sales figures since 2022. At the same time, $46.88 million in excise tax revenue flowed to 238 municipalities, Pontiac opened its first recreational cannabis store, and Grand Rapids dispensaries filed a fraud lawsuit alleging millions in social equity fees went missing. There is a lot moving at once.

Top Headlines This Month

• 📊 Michigan cannabis sales hit lowest point since 2022
• ⚖️ Second lawsuit filed against Michigan’s 24% wholesale cannabis tax
• 🌆 Grand Rapids dispensaries allege $3M+ in social equity funds unaccounted for
• 💰 $46.88M distributed to 238 Michigan municipalities hosting dispensaries
• 🏪 Pontiac opens its first recreational cannabis retail store

📊 STATEWIDE: MICHIGAN CANNABIS SALES HIT LOWEST POINT SINCE 2022

Michigan cannabis sales in February 2026 are projected at $206.18 million, the lowest monthly total since November 2022, following January 2026’s $226.8 million – itself down 8.3% year over year. The 24% wholesale tax, effective January 1, 2026, is the primary driver of the decline. Puff Cannabis co-owner Nick Hannawa described the tax as having “hurt us bad,” citing vendor confusion and direct financial strain. February sales did show some recovery from January’s sharper drop, but the overall trend for 2026 remains down. Statewide, 835 dispensaries held active adult-use retail licenses as of February 28, 2026, with 956 active cultivation licenses and 275 processors in operation.

The sales data reflects the compounding effect of the wholesale tax on the Michigan cannabis retail market. Price increases triggered by the tax pushed some consumers out of the legal market, and subsequent price deflation has compressed margins further. The February partial rebound suggests demand is still present, but the structural pressure from the tax is not resolved – especially while litigation over its legality remains pending through at least September 2026.

⚖️ STATEWIDE: SECOND LAWSUIT TARGETS MICHIGAN’S 24% WHOLESALE TAX

On March 28, 2026, the Michigan Cannabis Industry Association, along with marijuana grower Mitten Distro X LLC and retailer Refine Michigan Co., filed a second legal challenge to the state’s 24% wholesale cannabis tax in the Michigan Court of Claims. This follows the first MiCIA lawsuit – filed in 2025 – which is now heading to trial in September 2026 after the Court of Claims declined to block the tax. The tax remains in effect during litigation, with Q1 payment obligations due April 20, 2026. MiCIA stated: “The industry has an unwavering conviction that the 24% wholesale tax is fundamentally flawed or unlawfully imposed.”

This is now a two-front legal battle with the first lawsuit proceeding toward a September 2026 trial and the industry filing a new, structurally distinct challenge at the same time. The second lawsuit argues the 24% wholesale tax creates “tax pyramiding” – effectively imposing a sales tax on consumers higher than the 6% constitutional limit. For Michigan cannabis retail, the outcome determines whether the tax burden that has depressed sales since January continues, shrinks, or results in refunds. Every adult-use retailer in the state is affected because the tax applies on wholesale transfers to retail.

🌆 GRAND RAPIDS: CANNABIS COMPANIES ALLEGE $3M+ IN SOCIAL EQUITY FUNDS MISSING

Six Grand Rapids cannabis companies – including Fluresh LLC, Ascend Cannabis, High Profile, and Skymint Cannabis – filed an amended lawsuit on March 17, 2026, in Kent County Circuit Court alleging fraud and conspiracy tied to the city’s Cannabis Social Equity Voluntary Agreement (CISEVA). The companies paid nearly $2.3 million between 2022 and 2024 into a social equity fund administered through a nonprofit called Seeding Justice Grand Rapids. More than $3 million in earmarked funds are alleged to be missing or unaccounted for. Former City Commissioner Joe Jones and Seeding Justice Grand Rapids are named as defendants. The city declined to comment due to pending litigation.

This case carries implications well beyond Grand Rapids. The amended complaint argues the city “weaponized its social equity policies” to effectively impose an unlawful tax on cannabis licensees. If that legal theory holds, it could affect other Michigan municipalities running similar equity funding programs. Michigan cannabis retail companies operating in jurisdictions with mandatory or voluntary social equity fee structures are watching this case closely.

💰 STATEWIDE: $46.88M IN MARIJUANA TAX REVENUE DISTRIBUTED TO 238 MICHIGAN MUNICIPALITIES

The State of Michigan distributed $46.88 million in marijuana excise tax revenue to 238 municipalities that host licensed cannabis dispensaries, completing the distribution in March 2026. The payout is drawn from the 10% retail excise tax on cannabis sales from the prior fiscal year. Notable recipients include Isabella County ($810,256 from 15 dispensaries) and Mt. Pleasant ($756,239 from 14 dispensaries). Macomb County’s 32 retailers across eight municipalities collectively generated $1.89 million in distributions at a per-retailer rate of $54,017. However, some jurisdictions saw sharp declines – Oxford’s payout dropped more than 50%, from $349,771 to $162,051, after half of its six retailers closed.

The distribution data reveals where Michigan cannabis retail is thriving and where it is contracting. 2025 marked the first year of declining statewide cannabis sales since legalization, which will directly reduce future payouts for municipalities. Jurisdictions with fewer active licenses – such as Mecosta County and Big Rapids – received reduced funding this cycle, creating financial pressure that could prompt some to expand local licensing to rebuild that revenue stream.

🏪 PONTIAC: FIRST RECREATIONAL CANNABIS RETAIL STORE OPENS DOWNTOWN

Kulture 81, co-founded by David Parker, opened Pontiac’s first licensed recreational cannabis retail store on March 14, 2026, at 81 N. Saginaw St. in downtown Pontiac. A ribbon-cutting followed on March 17, with a grand opening scheduled for April 20, 2026. The store expects to hire 15 to 20 employees in roles including general manager and sales staff. Pontiac Council President Adrian Austin described the business as “a socially responsible retailer willing to contribute to the community.” Prior council approvals indicate additional cannabis retail entrants are expected in the city.

Pontiac is an Oakland County market that had been unlicensed for recreational cannabis retail until now. The downtown location on a main commercial corridor gives Kulture 81 high visibility and positions the city as an emerging Michigan cannabis retail destination. With the grand opening timed to April 20 and more licenses already approved, Pontiac is moving from zero retail presence to a competitive market within a single quarter.

The Bottom Line

Michigan cannabis retail in April 2026 is defined by tax pressure and legal uncertainty at the state level, a major fraud dispute reshaping how social equity programs are viewed in Grand Rapids, and new market openings in Pontiac signaling that some jurisdictions are still expanding. The 24% wholesale tax lawsuit outcome – expected by September 2026 at the earliest – is the single biggest variable hanging over the entire Michigan marijuana market right now.