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UNDATED, Mich. -- Michigan is sending nearly $94 million in marijuana tax revenue to local governments across the state — but this year's payout is smaller than last year's, and it's being split among more communities than ever before.
The state will distribute $93.7 million to 313 local governments and tribes for the 2025 fiscal year, down from $99.5 million the year before. The money flows from a 10% excise tax on recreational marijuana sales that Michigan voters approved in 2018.
The funds will reach 114 cities, 39 villages, 81 townships, 75 counties, and four federally recognized tribes. Each eligible municipality, county, or tribe receives about $54,000 for every licensed retail store and microbusiness operating within its borders. Since last year's distribution, one county and 10 additional municipalities or townships have allowed retail marijuana sales, and the state added 14 new retail licenses, bringing the total to 868.
State law sets aside 15% of marijuana revenue for municipalities and tribes where retailers or microbusinesses are located, and another 15% for the counties and tribes that host those businesses. The remaining 70% is split evenly between the state School Aid Fund and the Michigan Transportation Fund. Both funds will each receive more than $109 million.
The drop in local payouts reflects a cooling cannabis market. In January, adult-use customers spent $226 million on recreational marijuana — down $20 million from the same month a year ago, according to Michigan's Cannabis Regulatory Agency (CRA). The CRA also noted that January 2026 saw the largest month-over-month sales decline since adult-use marijuana was legalized. Increased competition and excess supply are driving down both sales and prices statewide.
Wayne County and Detroit are set to receive the largest payments — more than $88 million combined. Berrien County, which borders Indiana where marijuana sales remain illegal, will see the fourth-largest payment despite being the state's 16th largest county by population, thanks to 48 licensed businesses operating there.
In Ann Arbor, City Administrator Milton Dohoney Jr. said the city will receive about $1.2 million — roughly $200,000 less than last year. Ann Arbor plans to use the funds to support affordable housing and a misdemeanor diversion program for college students.
Local governments are already worried about further declines in marijuana tax revenue next year. A new 24% wholesale marijuana tax took effect on Wednesday (January 1), applied when cannabis moves from growers and processors to retailers. Combined with the existing 10% excise tax and 6% state sales tax, some industry observers say the total tax burden on cannabis now approaches 40%.
A bipartisan group of state senators recently introduced legislation to repeal the 24% wholesale tax. Cosponsoring Sen. Jonathan Lindsey, a Republican from Bronson, said in a statement, "Lansing's budget does not need to grow larger; we simply need better discipline. This tax will also damage Michigan businesses and lead to widespread job losses across the state, which are already being reported."
The repeal effort faces long odds, however. Both chambers of the Legislature approved the tax last year, and the bill has been referred to the Senate Government Operations Committee — where leaders often send measures they don't intend to bring up for a vote. A separate legal challenge from a cannabis industry association also remains active in the courts. The wholesale tax is projected to generate more than $400 million annually for road repairs statewide.