Michigan Cannabis Accounting & 280E Tax Strategy
Michigan operators now carry three stacked cannabis taxes plus Section 280E. The new 24% wholesale excise tax also breaks the transfer pricing strategy most vertically integrated operators relied on. We rebuild the position.
In Short
Michigan cannabis accounting changed materially on January 1, 2026. House Bill 4951, the Comprehensive Road Funding Tax Act, imposed a 24% excise tax on wholesale transfers of adult-use cannabis to retailers. It stacks on top of the existing 10% MRTMA retail excise tax and the 6% state sales tax. Neither one was replaced. The new tax does not apply to Michigan's medical market. For vertically integrated operators it also collides directly with Section 280E planning, because the transfer pricing strategy that reduced federal tax exposure now increases state tax exposure. GreenGrowth CPAs has served cannabis operators since 2016.
What Changed
Michigan Cannabis Accounting: The Three-Layer Tax Stack
The headline number is 24%. The number that hits your margin is not. Each layer applies to a base that already includes the layer beneath it, which is the first thing Michigan cannabis accounting has to get right.
| Layer | Rate | Who Pays | Applies To |
|---|---|---|---|
| CRFTA wholesale excise | 24% | The licensee making the first sale or transfer to a retailer | Adult-use only. Medical is excluded |
| MRTMA retail excise | 10% | The retailer, at the point of sale | Adult-use only. Medical is excluded |
| Michigan sales tax | 6% | The consumer, collected by the retailer | Adult-use retail sales |
| Section 280E | Federal | The operator, on the federal return | Adult-use activity. Medical moved to Schedule III in April 2026 |
Worth Knowing
The statutory definition of wholesale price includes any tax, fee, or other charge shown on the invoice or bill of sale. So the 24% is not calculated on a clean product price. Industry analyses have put the combined effective burden well above the headline rate once all layers compound. Model your own numbers rather than working from 24%. The tax is also under active legal challenge, so preserving refund rights is a live question.
The 280E Strategy Michigan Just Broke
This is the part most Michigan operators have not modeled. It is also the reason the new tax costs more than the rate suggests.
Vertically integrated operators have long priced internal transfers as high as defensible. That pushes revenue into the cultivation entity, where cost of goods sold is deductible. It also reduces the income exposed to Section 280E at the retail entity. For years it was the standard federal play, and it worked.
The CRFTA taxes that same internal transfer. So every dollar pushed upstream to reduce federal 280E exposure now generates 24% of state wholesale tax. The two strategies pull in opposite directions. Optimizing for one worsens the other.
The statute contemplates valuing vertically integrated transfers at an average wholesale price rather than accepting your internal figure. So a low transfer price does not reliably reduce the state tax either. That combination makes this an accounting problem rather than a pricing decision.
The Question to Model
There is a transfer price at which your combined state and federal burden is lowest. It is almost certainly not the price you used in 2025. Finding it means modeling both taxes together, across your actual entity structure and volumes. Very few Michigan operators have run that calculation.
Still using your 2025 transfer pricing?
We model the CRFTA wholesale tax and Section 280E together, and tell you where the combined burden actually bottoms out.
The Opening Nobody Is Talking About
Michigan Medical Now Carries Two Advantages
Two separate changes landed within months of each other. Together they reverse a decade of drift away from the medical market, and they change what Michigan cannabis accounting should optimize for.
No CRFTA Wholesale Tax
The Comprehensive Road Funding Tax Act applies to adult-use transfers only. Michigan medical product moves through the supply chain without the 24% layer.
No Section 280E
The April 2026 rescheduling order moved state-licensed medical cannabis to Schedule III. Ordinary business deductions return for that activity, while adult-use stays in Schedule I.
No Retail Excise
The 10% MRTMA excise tax has never applied to medical sales, which was already an incentive for patients to keep a registration current.
Before You Restructure
Michigan's registered patient count has fallen sharply from its peak. So the medical market is smaller than it was, and demand is the real constraint. This is a modeling exercise rather than an obvious move. What it does mean is that any Michigan operator holding both licence types should run a genuine allocation analysis, rather than treating medical as a legacy line. Read our guide to 280E expense allocation for dual-licence operators.
What We Do
Michigan Cannabis Accounting Services
Six areas of Michigan cannabis accounting where operators need work a generalist cannot deliver.
New for 2026
CRFTA Wholesale Tax Modeling
The 24% wholesale excise tax reshapes pricing, cash flow, and entity strategy at once. It is now the biggest single variable in Michigan cannabis accounting. Most operators absorbed it in January without modeling the full-year effect.
- Combined modeling of the CRFTA tax and Section 280E across your entity structure
- Transfer pricing analysis for vertically integrated operations
- Cash flow impact, since the tax lands before retail revenue arrives
- Documentation supporting your position while the statute is under challenge
Litigation is active and repeal efforts have been filed. So discuss preserving refund rights with counsel now, rather than after an outcome.
Post-Rescheduling
280E Expense Allocation
Since April 2026 a Michigan operator holding both licence types runs two federal tax regimes at once. Medical sits outside Section 280E. Adult-use remains inside it. Every shared cost has to be split, and the IRS has published no default method for doing it.
- Structural review of whether you have one trade or business or two
- Allocation methodology selected and documented, with the reasoning dated
- Transaction-level evidence captured monthly rather than reconstructed later
- Return disclosure appropriate to a position with no published guidance
Still the Main Lever
COGS and Inventory Costing
For adult-use activity, cost of goods sold remains the only deduction Section 280E permits. So what lands in COGS, and how defensibly, still drives the federal position.
- Costing methodology selected and applied consistently across periods
- Absorption of direct and indirect production costs where permitted
- Inventory valuation, reserves, and shrinkage documented
- Reconciliation between Metrc, the point of sale, and the general ledger
Ongoing
Cannabis CFO Services
Michigan margins were already thin before January. With three tax layers plus 280E, Michigan cannabis accounting has to run weekly rather than at year end.
- Rolling thirteen-week cash forecast built around excise payment timing
- Unit economics by product category after real cost allocation
- Monthly close with financials out by roughly day ten
- Lender and investor reporting that survives outside scrutiny
See our outsourced CFO services for how these engagements run.
Compliance
CRA and Metrc Reconciliation
Michigan's Cannabis Regulatory Agency oversees licensing and enforcement. The state's seed-to-sale system holds the compliance record. Most operators never reconcile it against the books, which is where audit and examination problems begin.
- Monthly reconciliation between Metrc, the point of sale, and the ledger
- Variance investigation before a discrepancy becomes a finding
- Reporting packages aligned to CRA expectations
- Documentation supporting inventory positions at period end
PCAOB Registered
Audit and Assurance
Michigan operators raising capital, refinancing, or preparing a transaction need financial statements that hold up under outside review. We hold PCAOB registration and AICPA membership.
- Financial statement audits, reviews, and compilations
- Audit readiness for operators facing a first independent audit
- Due diligence support on the buy side and the sell side
- PCAOB-standard audits for operators pursuing a public listing
Operators considering an exchange listing should read our guide to cannabis uplisting and deconsolidation.
Operating in Michigan and unsure where the exposure sits?
A free review covers your tax stack, your allocation position, and what the CRFTA change did to your margin.
Who We Work With
Michigan Cannabis Accounting Clients We Support
Why Michigan Cannabis Accounting Clients Choose Us
We have worked alongside cannabis operators since 2016, through the Harborside line of cases, the April 2026 rescheduling order, and now Michigan's wholesale tax. That history matters. The CRFTA question is not a Michigan tax question in isolation. It is a Michigan tax question tangled with a federal one.
GreenGrowth CPAs holds PCAOB registration and AICPA membership. Most cannabis accounting firms never registered with the PCAOB. Most PCAOB-registered firms have limited cannabis experience. That combination matters when an operator raises capital or approaches a listing.
We work with operators across thirteen state cannabis markets, so we see how rules travel and where they do not. Michigan's wholesale tax has no direct analogue elsewhere. Understanding that is what stops a multi-state operator applying the wrong playbook. See our cannabis accounting services.
The First Conversation
We review your Michigan tax stack, your current transfer pricing, and your allocation position. Then we tell you plainly where the exposure sits and what is fixable this year. No cost, under an hour.
Common Questions
Michigan Cannabis Accounting and Tax FAQs
The New Wholesale Tax
What is Michigan's 24% wholesale cannabis tax?
House Bill 4951, the Comprehensive Road Funding Tax Act, imposed a 24% excise tax on wholesale transfers of adult-use cannabis to retailers, effective January 1, 2026. The licensee making the first sale or transfer to a retail licensee pays it. It does not replace the existing 10% MRTMA retail excise tax or the 6% state sales tax. It stacks on top of both.
Does the wholesale tax apply to Michigan medical cannabis?
No. The Comprehensive Road Funding Tax Act applies to adult-use cannabis only. Michigan medical product moves through the supply chain without the 24% layer, and medical sales have never carried the 10% MRTMA retail excise tax either.
Is the effective tax burden really 24%?
No, and this is where operators get caught. The statutory definition of wholesale price includes any tax, fee, or other charge shown on the invoice or bill of sale, so the calculation does not start from a clean product price. Industry analyses have placed the combined effective burden well above the headline rate once every layer compounds. Model your own structure rather than working from 24%.
Who actually remits the wholesale tax?
The licensee making the first sale or transfer of cannabis to a retail licensee. For a vertically integrated operator that means the internal transfer from cultivation or processing to the retail entity triggers it, and the statute contemplates valuing those transfers at an average wholesale price rather than accepting the internal figure.
Section 280E and Michigan
How does the wholesale tax interact with Section 280E?
Badly, for vertically integrated operators. The standard 280E strategy priced internal transfers high, pushing revenue into cultivation where cost of goods sold is deductible and reducing the income exposed at retail. The CRFTA now taxes that same transfer at 24%. Optimizing for the federal position worsens the state position, so both have to be modeled together.
Did the April 2026 rescheduling order change anything in Michigan?
Yes, for medical activity. State-licensed medical cannabis moved to Schedule III, so ordinary business deductions returned for that activity and Section 280E no longer applies to it. Adult-use marijuana remains in Schedule I and stays fully within 280E. Michigan's own regulatory framework operates independently of federal scheduling, and the Cannabis Regulatory Agency has confirmed state compliance expectations are unchanged.
Should Michigan operators shift toward the medical market?
It deserves modeling rather than an assumption. Medical carries three advantages now: no CRFTA wholesale tax, no MRTMA retail excise, and no Section 280E after rescheduling. Against that, Michigan's registered patient count has fallen sharply from its peak, so demand is the constraint. Any operator holding both licence types should run the analysis rather than treating medical as a legacy line.
Working With GreenGrowth CPAs
What does GreenGrowth CPAs do for Michigan cannabis operators?
Michigan cannabis accounting covers CRFTA wholesale tax modeling, 280E expense allocation for dual-licence operators, cost of goods sold and inventory costing, cannabis CFO services, reconciliation between Metrc and the general ledger, and audit and assurance work. GreenGrowth CPAs is PCAOB registered, an AICPA member firm, and has served cannabis operators since 2016.
Do you work with operators outside Michigan?
Yes. We work with operators across thirteen state cannabis markets, which matters for multi-state operators because Michigan's wholesale tax has no direct analogue elsewhere. Applying another state's playbook to Michigan produces the wrong answer, and applying Michigan's to another state does the same.
Is the Michigan wholesale tax being challenged?
Yes. Litigation is active across multiple courts and repeal efforts have been filed. Because the outcome is unresolved, operators should discuss preserving refund rights with tax counsel now rather than waiting, and should keep documentation supporting every payment made under the current statute.
Michigan Changed. Your Tax Position Should Too.
We review your tax stack, your transfer pricing, and your allocation position, then tell you plainly where the exposure sits and what is still fixable this year.
