“We’re doing everything we can to create the right regulatory framework so that the market can be properly served.”
By: Ben Solis, Michigan Advance
The Michigan Senate is retooling marijuana industry license cap legislation to include new barriers to obtaining a license for growers, processors or dispensary operators with significant industry-related tax debt. help boost the industry as it faces a new 24 percent wholesale tax.
The Michigan Senate Rules Committee on Wednesday heard second testimony on recent changes to Senate Bill 597, a bill that proposes new limits on the state’s marijuana industry licenses. The hearing comes almost a year after the bill was introduced and was the subject of the first hearing in October 2025.
Sponsored by Sen. Sam Singh (D-East Lansing), SB 597 would limit the licensing of marijuana dealers and wholesalers per 10,000 residents in a municipality starting Jan. 1, 2026. The move would be similar to how the state regulates liquor sales, Singh said last year.
SB 597 it is also part of a larger package. Senate bills 599–602 It aims to create a regulatory framework for consumer hemp products in Michigan. That portion was primarily sponsored by Sen. Dayna Polehanki (D-Livonia) and was introduced as a way to regulate intoxicating hemp products, including Delta-8 and other synthetic cannabinoids, sold at Michigan gas stations, convenience stores and online marketplaces.
Those pieces passed the Democratic-controlled Senate late last year and are now in the GOP-led House. The license cap piece is still being worked on in the Senate.
Singh’s testimony Wednesday served to refresh the committee’s memory on the legislation and examine the details of the newly adopted bill language.
One of the biggest changes is that licensees must pay all state taxes when seeking another license. It would require the potential licensee to refund the basic tax, fees and tax penalties owed. Singh said the change would align with the way the marijuana industry controls and regulates liquor licenses in Michigan.
The senator said a problem currently facing the Cannabis Regulatory Agency is that it does not have the ability to deny an applicant a new license if that applicant had a previous license, but closed it while owing various state industry taxes, including a required excise tax.
Under the current regulatory framework, a licensee could close their existing license and not have that tax debt continue while they seek a new license because the CRA lacks a mechanism to stop that process because of the tax owed.
Singh said that was more important than ever given how the Legislature added a new 24 percent wholesale tax in the 2025-26 budget deal. The Legislature appropriated $420 million annually in road funding. The the industry is currently fighting that tax in courtas its stakeholders argue, tax will A wholesale marijuana tax generating less revenue than anticipated.
Recent reports indicate that the industry’s struggles have intensified as tax revenues have fallen short of expectations, according to to The Gander.
“Now that we have a wholesale tax of 24 percent, I could see that becoming more and more of an issue,” Singh said. “If we want to make sure that the income is stable, and again, those incomes may be a little low to begin with, we have to make sure those protections are there.”
The updated language includes a provision to place a moratorium on new grower licenses, but allows current growers to obtain an additional license to build and expand. Singh said this was also done to stabilize the market.
Another change concerns the return of products.
“We heard from the Hazkai community that currently, within the law, there is no policy on how to return the product,” Singh said. “What we’ve heard from wholesalers is that some people are returning products weeks, even months, after they’ve received them. So they’ve asked us to find a way to deal with returned product. What our bill basically does is you have three days to return the product, and it has to be in the original packaging and in the original packaging.”
The committee took no further action on the bill.
After the hearing, the Michigan Advance asked Singh if changes to the state’s new wholesale tax did not generate the revenue the Senate and House had hoped to pass.
Singh said this was not a reaction to the problems with the tax.
“We’ve been working on this, these sets of issues, since April of last year. When you have an initiative approved by the voters, there are often things they’ve never thought about, especially on the regulatory side, on the enforcement side,” Singh said. “We are doing everything we can to create the right regulatory scheme to ensure that the market is properly filled, to ensure that the product is safe for those who will use the product, but at the same time to ensure that everyone pays their taxes.”
Whether the bill will help ensure more licensees pay the appropriate tax, Singh said the Legislature, the state and its marijuana industry peers will have to wait and see.
“I always share my personal concern that this tax was higher than it should have been. I think there could have been a combination, with a tax on special increases on the retail side, and maybe a lower wholesale tax,” Singh said. “But at this point, I think it’s too early to gauge where we’re going to be. I think after a couple of quarters, we’ll know what those revenues are going to look like as we go forward.”
This story was first published by the Michigan Advance.