Michigan's 24% wholesale marijuana tax: book it in cost, never on the receipt

Not tax advice. The CRA bulletin and a CPA analysis are linked; confirm treatment with your accountant. The post explains the operational handling so the question doesn't arrive at month-end.

What the tax is

From January 1, 2026, Michigan levies a 24% tax on wholesale marijuana transfers to retailers, on top of the existing 10% adult-use excise and 6% sales tax at retail. The wholesaler is the taxpayer; the invoice usually shows the tax passed through as a line. The CRA's advisory bulletin covers how the transfer is reported in Metrc.

It arrived into a market whose revenue was already falling faster than units (−5.3% revenue vs −2.1% units in 2025). Most operators have absorbed part of it and passed part of it on.

The mistake

The invoice shows "$3,678.00 goods + $882.72 wholesale tax (24%) = $4,560.72". A bookkeeper sees "tax" and posts $882.72 to a tax-payable or tax-expense account. A POS admin sees "tax" and adds a "wholesale tax 24%" line to retail receipts. Both are wrong:

• Posted to tax payable, it never reaches COGS, margin reporting is overstated by 24 points of cost, and the 280E COGS calculation on adult-use sales is understated — you lose a deduction you are entitled to.
• Added to the receipt, the customer is charged a tax the retailer doesn't owe, on top of excise and sales tax that are computed on the wrong base.

The treatment

1. On receipt — the wholesale-tax line is part of landed cost. Invoice unit cost × accepted quantity, plus the 24% allocated across lines, plus freight → inventory (asset), by package tag. If accepted quantity is less than invoiced, the credit memo includes the tax share.
2. On sale — the package's landed cost (including the tax share) moves to COGS by license type.
3. On the receipt — 10% adult-use excise and 6% sales tax on the retail price. Nothing else. Medical sales: per the medical rules, which this post doesn't cover.
4. In the chart of accounts — no "wholesale tax payable" account on the retailer's side. If your bookkeeper wants visibility, a sub-account under inventory purchases ("wholesale tax component") is fine; it still rolls to inventory and COGS.
5. In pricing — if your shelf price is a cost multiple (BudAlly's Michigan learned rule PR-MI-01 is "shelf = cost × 2.1, round up to the next dollar"), make sure "cost" is landed cost including the tax. Otherwise the 24% comes straight out of margin.

Worked example

Invoice GLD-77184: six lines, goods $3,678.00, wholesale tax $882.72, total $4,560.72. Line 4, Huron Haze pre-roll 5-pack, 36 units × $12.00 = $432.00; its share of tax is $103.68 (24%), so landed unit cost is $14.88, not $12.00. At shelf = cost × 2.1 rounded up, the shelf price is $32, not $26. A store that priced from the pre-tax $12 is giving away $6 a unit before it has sold one.

One line on that invoice carries a tag that isn't on the manifest. It stays held — the tax share of the held line ($64.80 on $270) stays out of the bill too, until the corrected invoice arrives.

Checklist for Michigan receiving and close

• Wholesale-tax line mapped to inventory, allocated across lines by value.
• Landed cost per package includes the tax share; shelf-price rules use landed cost.
• No wholesale-tax line on any retail receipt template; excise and sales tax computed on the retail price only.
• Credit memos include the tax share of short-shipped quantity.
• Month-end: COGS by license type reconciles to packages sold; no balance accumulating in a "wholesale tax" liability account.

BudAlly's invoice capture reads the tax line, books it into cost, floors price proposals at landed cost, and holds any line whose tag isn't on the Metrc manifest — see it on a Michigan invoice.