Wholesale Price

Frequently Asked Questions

Non-Affiliated

What is the “wholesale price” for transactions between non-affiliated persons?

In short, between non-affiliated persons, the taxable wholesale price is the amount paid by a marijuana retailer to a wholesaler for marijuana without any discounts or reductions. More specifically, the statute defines “wholesale price” as the “actual price paid to a marijuana establishment by a marijuana retail licensee to acquire marijuana from the marijuana establishment”, and includes “any tax, fee, or other charge reflected on the invoice … or other document evidencing the sale or transfer of the marijuana”. The definition also prohibits reduction of the wholesale price due to any rebate, trade allowance, exclusivity agreement, or other discount or reduction given by the marijuana establishment.

The definition in the new law of “wholesale price” applicable to transactions between non-affiliated persons states the defined price “includes any tax, fee, or other charge reflected on the invoice … evidencing the sale or transfer of the marijuana.” Does “any tax” include the Wholesale Marijuana Tax itself, causing a spiraling effect and increasing the effective rate of the tax?

No, the new 24% Wholesale Marijuana Tax does not “tax itself”. The inclusion of other taxes and fees in the definition of “wholesale price” captures taxes and fees that are or may be imposed by other laws, including federal law. The provision mirrors a similar, long-standing definition in the Tobacco Products Tax Act (see MCL 205.422(ii)), and also prohibits reduction of the wholesale marijuana price due to any rebate, trade allowance, or similar discount.

Affiliated

What is the “wholesale price” for transactions or transfers between affiliated persons, (e.g., vertically integrated operations, microbusinesses, and transfers from medical provisioning centers to adult-use retailers) where no transaction between a wholesaler and retailer takes place?

For these situations the wholesale price is the “average wholesale price” which is the price of marijuana as “calculated and published by Treasury each quarter based on the best available information”.

Regarding the average wholesale price list, will there be different prices for indoor versus outdoor cultivations and different products (edibles, flower, pre-rolls, distillates, concentrates, rosin, resin, etc.)? How often will the average price list be updated?

Treasury publishes an “average wholesale price list” for various categories of marijuana product quarterly.

Both

Our cultivation and retail companies fit the definition of "affiliated entities". However, we also sell product from cultivation to non-affiliated retailers. When selling to non-affiliated retailers, do we base the tax on the average wholesale price list issued by Treasury or the sales price?

When selling or transferring marijuana at wholesale to an affiliated entity, calculate the tax using the average wholesale price as published by Treasury quarterly. When selling marijuana at wholesale to non-affiliated retailers, calculate the tax using the actual wholesale price charged as defined in the statute.