Up in Smoke: Financing a Marijuana Business Under the Michigan Medical Marihuana Act

Governor Snyder recently signed into law many amendments to the Michigan Medical Marihuana Act, as set forth in Michigan Compiled Laws, sec. 333.26424.  The new laws bare an effective date of December 20, 2016.  Some of the new provisions address the issue of financing, and look at this issue from a few different perspectives. The policy of the new laws is to separate the financial aspect of the medical marijuana from the business aspect, and also, to tax the operation.

The model for these changes is alcohol, and our laws governing alcohol all grew out of prohibition.  The general idea was to provide many different ways for the government to limit or at least control the supply of the intoxicating substance, to keep any one supplier from getting too big, and to assure that the tax dollars would keep flowing into the government.  Thus, regarding alcohol, Michigan’s three-tier system was and is designed to eliminate the possibility of a monopoly.

Regarding the separation, the recent amendments to Michigan’s Medical Marihuana Act mimic this three tier system in some ways, and the MMA now provides that all the various functions necessary to a large scale business are to be kept separate as follows:

Applicants and InvestorsGrowers and provisioning centers may not own or have any financial interest in either a transportation company or a compliance company.

Growers and Caregivers – a grower cannot also be a registered caregiver, and can’t employ someone who is a registered caregiver.  A grower also can’t have an interest in a medical marijuana transportation company or compliance company.

Secure Transporters – cannot own a growing operation and cannot have a financial interest in a processing or provisioning center, or a compliance business.

Safety Compliance Facility – likewise, a medical marijuana safety compliance center cannot own or have any financial interest in a grower, processor, provisionary center, or a secure transportation company.

Taxes have also been added to Michigan medical marihuana. In addition to regular Michigan sales tax of 6%, there is an additional tax of 3% that is imposed on the gross retail income of each marijuana provisioning center (retail seller/dispensary).

Because these laws are designed to provide for a larger scale medical marijuana business, the mom and pop a registered and licensed patient and registered and licensed caregiver do not have to pay this additional 3% tax.

People in the medical marijuana business, be it growers, provisioning centers, compliance centers or transporters might have difficulties obtaining loans from traditional banks.  Because of this, many different types of venture capital are usually better options for people wishing to start or expand their medical marijuana business.

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