Collecting and Applying Tax

Frequently Asked Questions

Can a wholesaler reimburse itself the incidence of the tax from the retailer?

Yes, the wholesaler is permitted to recoup the tax due on a transaction by collecting it from the retailer, but the wholesaler remains legally liable for both the payment and remittance of the tax even if it does not collect the tax from the retailer. This is like Michigan’s general sales tax, which is imposed upon sellers of tangible personal property. Sellers are legally liable for paying and remitting the sales tax even though they typically recoup the cost of the tax by passing it through to their customers. 

Are wholesalers allowed to collect the 24% Wholesale Marijuana Tax from retailers? For example, if wholesale marijuana product is sold for $1,000, the tax due is $240. Can the wholesaler invoice the retailer $1,240?

As the wholesaler, you would owe $240 Wholesale Marijuana Tax on this transaction, assuming no other costs are included on the invoice. The wholesaler is allowed to collect the tax from the retailer.

The statute states retail licensees under MRTMA that operate “seed-to-sale” businesses (e.g., microbusinesses) will be taxed “at the rate of 24% of the wholesale price on the aggregate amount or quantity of marijuana that is cultivated or processed for retail sale by that marijuana retail licensee”. At what point in the production process does the “seed-to-sale” retail licensee apply the tax?

For retail licensees under MRTMA that cultivate, process, and package their own product for retail sale, as well as sell marijuana products at retail (“seed-to-sale” businesses), the new wholesale tax will be applied at the point that marijuana product is packaged for retail sale.

Microbusinesses: is the entity itself liable for the tax and will it be self-assessed (like use tax on purchases) based on the average wholesale price? Can the cost of the tax be passed on to the consumer - there is nowhere to apply the tax on an invoice to the customer.

Yes, the microbusiness itself will be liable for the tax, and it is imposed at the point that the microbusiness packages marijuana product for retail sale. The cost of the wholesale tax can be passed on to the individual purchaser, if the microbusiness chooses to do so. Note that the wholesale tax is part of the taxable sales price for the Marihuana Retailers Excise Tax and Michigan sales tax purposes, even if it is separately stated on the receipt given to the retail customer. See MCL 205.51(1)(d)(ii).

Will wholesalers only be required to report and pay the Wholesale Marijuana Tax to Treasury only on the tax collected and invoices paid by their retailer customers?

The wholesale tax is imposed upon the wholesale entity, not the retailer. The wholesaler may choose to pass the cost of the tax through to the retailer, but the wholesaler is the entity obligated to report and remit the tax. Therefore, the tax on any given transaction is due in the quarter that the product is sold to the retailer, regardless of when the retailer may pay its invoice. Wholesalers may choose to adjust contract terms with retailers to reflect this.