Michigan’s cannabis market is booming, so why is everyone going broke?

Michigan is selling more weed than ever but somehow small operators are going out of business at a rate that should alarm anyone who cares about what this industry was supposed to become.

Michigan had over $3 billion in cannabis sales last year. 

The dispensary on your corner is probably busier than it’s ever been. Prices have dropped to historic lows, which consumers love while operators quietly spiral down. Somewhere in the middle of all of it, the little guy — the craft grower, the independent retailer, the legacy caregiver who transitioned into the legal market with everything they had — is getting squeezed out of the industry they helped build.

Let’s start with the wholesale tax, because it is one of the most punishing structural problems facing small cannabis operators in Michigan right now and it does not get nearly enough attention outside of industry circles.

Michigan levies a 10% excise tax on cannabis at the point of sale, on top of the standard 6% sales tax. But last year the Michigan Legislature made it significantly worse.

In the fall of 2025, the Michigan Legislature passed HB 4951 — the Comprehensive Road Funding Tax Act — which imposed a new 24% wholesale excise tax on cannabis. The stated purpose was to generate approximately $420 million annually for road and bridge repair.

The tax is applied when cultivators sell flower to dispensaries. In theory, it does not hit the consumer directly. In practice, most dispensaries pass that cost to the customer. Customers are paying it without knowing it is there.

The Michigan Cannabis Industry Association filed a lawsuit almost immediately and a bipartisan group of lawmakers has since introduced SB 810 to repeal it but neither effort has resolved the situation. In the meantime, the tax is having the effects the industry warned it would have: layoffs, closures and a more-squeezed market.

The new tax this year came on top of the existing 16% consumer tax and the federal 280E tax code, which remains in place because cannabis is still a Schedule I controlled substance at the federal level. Under 280E, cannabis businesses cannot deduct ordinary business expenses the way any other business can. Rent, payroll, marketing or utilities — none of it is deductible for a cannabis business. 

It is a tax structure designed to punish an industry that the overwhelming majority of Michiganders voted to legalize.

For large multistate operators with sophisticated tax planning and access to capital, all of this is painful but manageable. But for small independent cultivators or retailers, it is existential. A single-location craft grower may have nowhere to absorb a 24% tax.

The race to the bottom

Oversaturation has driven wholesale flower prices in Michigan to levels that were unimaginable three years ago. Pound prices, once at $1,500 to $2,000, have crashed to $400 or less. Large commercial grows can pump out hundreds of pounds per week. The consumer wins on price but the small grower loses on everything.

The operators closing right now are not failing because they grew bad cannabis or ran their businesses poorly. Many of them are closing because they cannot compete on price with vertically integrated giants with enough capital to absorb losses for long-term market share.

Who is still standing and why

The operators surviving, and in some cases thriving, right now tend to be differentiated and have a reason to exist beyond being a place to buy cheap weed. They have loyal customers who come back not because of price but because of experience, relationship and trust.

Craft cultivators who can demonstrate quality through verified lab results are finding buyers who will pay a fair price for a superior product. Independent retailers who have invested in their loyalty programs, their budtender training, their in-store experience, and their community relationships are holding on. The ones who tried to compete with Lume and JARS on price alone largely did not make it.

This is not a coincidence. It is a market telling you something important: if you do not have a reason to exist beyond being cheap, you will eventually be out-cheaped.

How to support the small guy

If you are a Michigan cannabis consumer and you care about having a diverse, independent, locally-rooted industry five years from now, your purchasing decisions matter more than you probably realize.

Buy local when you can. Find out who grew the flower you are buying and where. Ask your budtender if the store carries any Michigan-grown, independently-produced product and buy it when the answer is yes. Seek out craft cultivators and pay the extra five dollars. That five dollars is the difference between a small grower making it to the next harvest and not.

Support independent dispensaries. The multistate chains will survive this consolidation wave regardless of what you do. The independent retailer in your neighborhood might not. 

Leave Google reviews. Tell your friends. Show up. Small steps are exactly what can save small businesses.

Michigan’s cannabis industry is at an inflection point. The boom is real. The pain is also real. What comes out the other side depends in no small part on whether consumers, policymakers, and the industry itself decide that craft, independence, and community are worth fighting for.

They are. But that fight starts now.