LANSING, Mich. (Michigan News Source) – Marijuana is a booming business in Michigan and most retailers are riding high. There’s even an organization called the “Michigan Cannabis Industry Association” that puts out a magazine for the cannabis industry and they had a trade conference in August of this year bringing together growers,
retailers, state legislators, bankers and more.

Now that Michigan allows both medical and adult-use marijuana (with restrictions), entrepreneurs all over the state are taking advantage of the opportunities.

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Michigan saw a record-breaking month of marijuana sales in September, reaching $212 million. The state reported $195,349,995 worth of adult-use marijuana purchases and an additional $16,629,957 in medical cannabis sales in September. Flower products and vape cartridges made up most of the marijuana purchases for both medical and recreational use. The sales trend right now is a dip in medical cannabis purchases and an increase in adult-use sales.

In March, the state of Michigan announced that they would be distributing nearly $150 million in marijuana tax revenue. That money was divided among localities, public schools and a transportation fund. Each eligible municipality and county will receive more than $56,400 for every licensed retail store and micro business located within its jurisdiction.

The Cannabis Regulatory Agency (CRA) also announced awarding $20 million in grants for a Veteran Marijuana Research (VMR) Grant Program to two universities.

In 2021, Michigan reported over $1.3 billion in marijuana sales for adult-use marijuana and over $481 million for medical cannabis. The CRA projects $2 billion in recreational marijuana sales in 2022.

There are currently 1,353 active licenses with the state and all the competition is driving down prices which is good for consumers but not so good for the retailers. Michigan News Source reported in September that the CRA said marijuana prices are down 40% to 50% and supply is far outpacing consumption. Growers in the Agency meet quarterly in Lansing and they have asked regulators to stop issuing new grow licenses amid increased market saturation and declining prices of cannabis flower.

And not all cannabis businesses are finding it easy to operate when the government is so heavy-handed. Jeffrey Hank, owner of Edgewood Cannabis in Lansing says, “The biggest obstacle facing cannabis businesses is over-regulation and over-taxation, particularly IRS section 280e, which is currently interpreted to not allow cannabis businesses to deduct most business expenses. This in effect punitively raises the tax burden on small cannabis businesses, and creates an unfair scenario that over-taxes licensed cannabis businesses, who have to compete with well-funded publicly traded companies and a still thriving underground market that does not pay taxes. Congress has failed to fix this and as a result, it is creating a situation where only large corporate players and unlicensed
cannabis businesses will control most of the market, to the detriment of mom-and-pop operators. This
is a serious problem and a missed window of time to create opportunity for smaller entrepreneurs and
generate wealth creation for poor, working and middle class Americans across the country who could
otherwise succeed and have a seat at the table in the modern cannabis industry.”

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As of July, only 125 of Michigan’s cities, villages and townships have opted to allow recreational marijuana sales even though the recreational sales are far outpacing the medical marijuana.

Some places are, however, changing their minds like the City of Traverse which recently voted in May to accept applications for adult-use marijuana retail shops within city limits. In September, the city received 16 applications for recreational marijuana licenses including 12 from applicants already licensed as medical cannabis provision centers and four that don’t have dispensaries in Traverse City.

The city expects to begin issuing licenses by March of 2023.

Overall, in the nation, marijuana is a multi-billion dollar industry with legal marijuana sales in the Unites States projected to exceed $33 billion this year according to Fortune. And that’s good for the tax base of municipalities all across the country.

The Michigan Cannabis Industry Association’s Magazine says that adult-use cannabis tax dollars make a big difference in Michigan communities due to the 10% excise tax on adult-use cannabis.

In Kalkaska, the tax money was used to help finance the purchase of abandoned property to address the area’s housing shortage. And the cannabis industry has created about 400 jobs in a town of about 2,100.

Kate Berens, Grand Rapids’ deputy city manager, told the magazine that the money has “helped us maintain services during and after the pandemic.” They received over $677K in the 2021 fiscal year from the excise tax proceeds which also paid for a city cannabis manager.

Hazel Park used their cannabis tax money to help fill in pension gaps for the city’s retirement costs. According to a report from the Federal Reserve Bank of Kansas City, state-level marijuana legalization has had “significant” economic impact – generating jobs, tax revenue and impacting real estate. The bank, which covers five full states and parts of two other states, expects key sectors of the economy to grow “as more states enact tax-and-regulate models.”
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Coming on Monday, October 31st – Part four of a four-part series, taking a look at the ups and downs of legalizing marijuana