Michigan applies a 24% wholesale tax on cannabis products at the time of transfer from suppliers to adult-use retailers. This article provides an overview of this tax and how to configure it in Dutchie POS.
Notice
Dutchie does not provide compliance advice. Merchants are responsible for their own compliance. Internal and external Dutchie compliance documentation has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or compliance advice. Dutchie provides tools that assist in compliance in many optional configurations. Merchants should consult their own tax, legal and compliance advisors to determine how best to configure Dutchie compliance settings and, in general, how best to operate within the cannabis industry.
Table of contents
- When does the tax apply?
- Who pays the tax?
- How is the wholesale price determined?
- Categorize non-affiliate vs. affiliate licensees
- Create tax categories and assign them to product types
- Set up wholesale tax for non-affiliate transfers
- Set up wholesale tax for affiliate transfers
- Suppliers: Verify on outbound manifests
- Retailers: Apply wholesale tax when receiving inventory
- Reporting
- Reminders
When does the tax apply?
| Scenario | Does wholesale tax apply? |
| Transfers from cultivators or processors to other cultivators or processors | No |
| Initial sales from cultivators or processors to adult-use retailers | Yes |
| Initial sales from medical provisioning centers to adult-use retailers | Yes |
Who pays the tax?
Retailers pay the tax to cultivators, processors, and provisioning centers, who then remit the tax to the state. The tax does not apply to consumer sales.
All facilities should configure the tax in Dutchie as outlined below. This enables suppliers and retailers to apply and record the tax on outbound manifests and received inventory and factor it in to the cost of goods.
How is the wholesale price determined?
The wholesale price is determined differently for non-affiliate vs. affiliate transfers.
- Non-affiliate transfers are external transfers to adult-use retailers not under common ownership with the originating facility. For this type of transfer, the tax is 24% of the wholesale price you charge the receiving retailer, including any and all fees such as shipping. The wholesale price does not include the wholesale tax itself.
- Affiliate transfers are internal transfers to adult-use retailers that are under common ownership with the originating facility (i.e., vertical operations). For this type of transfer, tax is applied as a flat amount per pound or fluid ounce of each product transferred, based on the Michigan Department of Treasury's published wholesale prices. These prices vary by product type and are updated on a quarterly basis; therefore, you'll need to update your tax configurations in Dutchie each quarter to reflect the Treasury's new prices. This is discussed in more detail below.
Categorize non-affiliate vs. affiliate licensees
Each licensee that you transfer to or receive from should have a profile in your Customers list. Dutchie uses the Customer type setting on each licensee's profile to categorize them as non-affiliate or affiliate for wholesale tax purposes.
- Go to Customers.
- Select Actions > Manage customer types.
- Set the following customer types to Show:
- Retailer (required)
- Affiliate (required)
- Cultivator (optional/as applicable)
- Processor (optional/as applicable)
- Distributor (optional/as applicable)
- Manufacturer (optional/as applicable)
- Click Save.
- In the Customers list, make sure each licensee you transfer to or receive from has the appropriate selection in the Type dropdown on their profile. For example:
- Assign all licensees under common ownership to the Affiliate customer type.
- Assign licensees not under common ownership (i.e., non-affiliate licensees) to Retailer, Cultivator, Processor, Distributor, or Manufacturer customer types.
Create tax categories and assign them to product types
For affiliate transfers, the tax amount per unit varies by product type, so your product types in Dutchie must be assigned to the correct tax category.
Refer to the product types listed in the Michigan Department of Treasury's published wholesale prices and create corresponding tax categories in Dutchie for each one:
- Open Department of Treasury's price list for the current quarter in a separate tab.
- In Dutchie, go to Settings > Taxes & compliance.
- In the Tax categories section, click Add category.
- Copy a product type from the Department of Treasury's Average Wholesale Price List and then paste it into the Category name field in Dutchie (Q2 2026 prices shown; note that the prices change quarterly but categories are expected to remain the same).
- Click Add.
- Repeat for each product type listed by the Department of Treasury.
- Go to Products > Configure > Categories.
-
Select a product category and assign it to the corresponding Tax categories.
Product categories can be assigned to multiple tax categories. For example, you may also have more general tax categories for cannabis and non-cannabis taxes, and more specific tax categories for affiliate transfer purposes So, your Bulk Flower product category could be assigned to both Flower and Cannabis tax categories. - Click Update.
- Repeat until all product categories are assigned to the corresponding tax categories.
For non-affiliate transfers, the tax applies equally to all cannabis products, so each cannabis product type should be assigned to a general "cannabis" tax category.
Set up wholesale tax for non-affiliate transfers
Go to Settings > Taxes & compliance, click Add rate, then configure the tax. The recommendations below are for informational purposes only. Consult a tax advisor to ensure the best configuration for your business.
Rate Configuration
| Setting | Recommended Configuration | Notes |
| Rate name | MI Non-affiliate Wholesale Tax | You can enter any rate name, but make sure the difference between your non-affiliate and affiliate wholesale tax rates is clearly defined. |
| Rate type | Percentage | |
| Rate amount | 0.24 |
Value must be entered in decimal form. 24% = 0.24 |
| Arms length | Yes | "Arms length" refers to transactions between two licensees not under common ownership, so this should be set to Yes for your non-affiliate tax. |
| Book to sales account | No | Setting not in use |
| Is excise tax | Yes | Wholesale tax is considered an excise tax |
| Metrc Tax type | None | Taxes are not transmitted to Metrc in Michigan |
Application Rules
| Setting | Recommended Configuration | Notes |
| Customer types | Click the radio button for Apply to selected types and then check the box(es) for Retailer and any other customers type(s) you assigned to the non-affiliate licensees you transfer to or receive from. |
Retailer must be selected here. All other non-affiliate customer types are optional. Leave the text fields blank. These are only used if different rates apply to different customer types. |
| Tax categories | Apply to selected categories |
Select all cannabis tax categories. Wholesale tax does not apply to non-cannabis items. Leave the text fields blank. These are only used if different rates apply to different tax categories. |
| Apply markup rate | No | Setting not in use. |
| Apply to cost | No | We recommend selecting No because otherwise the tax would apply to the cost, rather than the actual wholesale price charged. |
| Stacks on other rates | No | This should not combine with your affiliate wholesale tax or any other taxes. |
| Gross tax | No | Setting does not apply to wholesale invoices. |
| Apply to wholesale transfers | Yes | This allows you to apply the tax when receiving inventory. |
Online Settings
These should all be set to No because wholesale tax does not apply to retail consumers.
Set up wholesale tax for affiliate transfers
Go to Settings > Taxes & compliance, click Add rate, then configure the tax. The recommendations below are for informational purposes only. Consult a tax advisor to ensure the best configuration for your business.
Video overview
Rate Configuration
Because some products are taxed based on weight (lb) while others are taxed based on volume (fl oz), you will need to create two separate tax rates, one for each unit of measure.
| Setting | Recommended Configuration | Notes |
| Rate name |
MI Affiliate Wholesale Tax - per lb AND MI Affiliate Wholesale Tax - per fl oz |
Create a separate tax rate for each unit of measure. You can enter any rate name, but make sure the difference between your non-affiliate, affiliate (per lb) and affiliated (per fl oz) wholesale tax rates is clearly defined. |
| Rate type | Flat (per item) | |
| Rate unit |
lb AND fl oz |
Create a separate tax rate for each unit of measure. |
| Rate amount | leave blank | The rate amount will vary by tax category, which you'll configure in the Application Rules section below. |
| Arms length | No | "Arms length" refers to transactions between two licensees not under common ownership, so this should be set to No for your affiliate tax. |
| Book to sales account | No | Setting not in use |
| Is excise tax | Yes | Wholesale tax is considered an excise tax |
| Metrc Tax type | None | Taxes are not transmitted to Metrc in Michigan |
Application Rules
The application rules will be the same for both your per-lb and per-fl oz tax rates, but with different tax category selections.
| Setting | Recommended Configuration | Notes |
| Customer types | Click the radio button for Apply to selected types and then check the box for Affiliate. | Leave the text field blank. This is only used if different rates apply to different customer types. |
| Tax categories |
For your per-lb tax rate, select only the tax categories that are taxed per pound, then enter the rate amount for each category in the field next to the category name. Then do the same for your per-fl oz tax rate, selecting only the tax categories that are taxed per fluid ounce. |
Refer to Treasury's current published price for the product type, then multiply by 0.24 and enter that value for each category. See examples below. |
| Apply markup rate | No | Setting not in use. |
| Apply to cost | No | We recommend No because otherwise the tax would apply to the cost, rather than the actual wholesale price charged. |
| Stacks on other rates | No | This should not combine with your non-affiliate wholesale tax. |
| Gross tax | No | Setting does not apply to wholesale invoices. |
| Apply to wholesale transfers | Yes | This allows you to apply the tax when receiving inventory. |
Online Settings
These should all be set to No because wholesale tax does not apply to retail consumers.
Examples
Refer to Treasury's current published price for the product type, then multiply by 0.24 and enter that value for each category. For example:
- The price per pound of flower for the second quarter of 2026 is $629.39. $629.39 x 0.24 = $151.05.
- The price per fluid ounce for infused liquids for the second quarter of 2026 is $0.36. $0.36 x 0.24 = $0.0864
Enter the category-specific amount in the text field next to each category, as shown below (Q1 2026 figures shown - be sure to update these each quarter!):
Suppliers: Verify on outbound manifests
Suppliers should see wholesale tax automatically reflected on manifests when configured correctly. To verify your tax configuration:
- Go to Products > Manifests.
- The Taxes column should show the wholesale tax amount applied to each manifest. If you don't see a Taxes column, click the cog wheel to enable it and click and drag to place it where you want it in the manifests table.
- Click a manifest to view its details. A Taxes line should appear in the Details section.
- Also verify taxes appear on the printed invoice and printed manifest.
Retailers: Apply wholesale tax when receiving inventory
- Go to Products > Inventory > Receive Inventory.
- Open the transfer or receiving record you need to process.
- Confirm the inventory transfer is loaded before making tax changes.
- From the Wholesale tax type dropdown, select Affiliate for inventory received from a supplier under common ownership with your dispensary, or Non-Affiliate for suppliers under different ownership. Select Not Taxed in cases where wholesale tax does not apply, such as transfers between cultivators/processors or transfers to medical retailers.
- Click the cog wheel in the corner of the Item Received table.
- Turn on the Wholesale tax column so tax amounts are visible, and click and drag the column to where you want it in the table for easier review.
- Also display Cost per Unit or Total Cost to verify the tax is calculating correctly against cost.
- Do not save the transfer until you confirm the correct tax type is selected.
Additional notes for receiving:
- Ensure the product’s tax category is configured correctly before using Affiliate tax.
- Double-check that the Wholesale Tax column is visible when validating calculations.
- Remember that Non-Affiliate applies a flat 24% wholesale tax, while Affiliate depends on the product tax category.
- If Not Taxed is selected, no wholesale tax will appear on the receiving record.
Reporting
Use these reports to track wholesale tax:
- Completed Transfer Orders
- Completed Transfer Orders - Detail
- Completed Wholesale Orders
- Completed Wholesale Orders - Detail
- Sales Report Transfers
Reminders
Double-check the following to ensure your wholesale taxes are set up properly:
- Use the current quarter of Treasury prices and remember to update the category-specific amounts on your affiliate tax at the beginning of each quarter.
- Only apply per-pound categories to the per-pound tax rate and only apply liquid/per-fluid-ounce categories to the fluid ounce tax rate.
- Do not configure these taxes through the Metrc API; leave Metrc Tax type set to None on both wholesale tax rates.
- Ensure Apply to wholesale transfers is set to Yes for both tax wholesale tax rates.
- Double-check that the Affiliate customer type is enabled and selected in the application rules for your affiliate tax, and that the Retailer customer type is enabled and selected in the application rules for your non-affiliate tax.
- Make sure every cannabis product category is mapped to the correct tax category.