Distru’s Michigan Wholesale Tax feature automatically calculates the excise tax amount on each line item of your sales orders — so you can stay compliant without manual math 🧮
This article covers how to set up and use the feature, with background on the tax itself further below.
How It Works in Distru
Starting January 1, 2026, Michigan’s Comprehensive Road Funding Tax Act requires a 24% wholesale excise tax on adult-use cannabis. Distru handles the complexity of this for you. The feature supports both vertical and non-vertical operators, with different calculation methods for each:
Non-Vertical (Arms-Length) Operators
The 24% tax is calculated based on the actual sales price on your sales order line items.
Vertically Integrated Operators
The 24% tax is calculated using the state’s published average wholesale prices, broken down by product category (e.g., flower, concentrates, edibles, etc.). Distru updates these prices quarterly when the Michigan Department of Treasury publishes new guidance — you don’t have to track this yourself.
When you create a sales order with taxable products, Distru auto-calculates the Michigan wholesale excise tax and displays it as a per-line-item breakdown on the order. The tax amount flows through to your invoices.
Note: The Michigan tax feature currently applies to sales orders only. Purchase orders are not affected. The tax is calculated based on the sales order date, not the invoice date — so the rate and pricing in effect when the order was created are what apply, even if the invoice is generated later.
Charges, discounts, and shipping
Under Michigan law, the wholesale excise tax applies to the full transaction value. A few important details:
Shipping and transport charges may be included in the taxable base. The tax applies broadly to the wholesale transaction, and Michigan guidance indicates that fees and charges are part of the taxable amount. Consult your compliance advisor to confirm how this applies to your specific business.
Order-level discounts and credits do not reduce the taxable base. The tax is calculated on the invoice price before any post-sale rebates or general discounts are subtracted.
Price tier discounts are handled by the Tax on Gross / Tax on Net setting (see below).
Setting Up the Michigan Wholesale Tax
Step 1: Create the Tax
If you are switching from a previous tax setup: Create a new Michigan tax rather than editing your existing one. This preserves historical order data on the old tax and gives you a clean audit trail going forward.
Navigate to Settings → Taxes.
Click Add Tax.
Fill in the following fields:
Tax Name: MI Wholesale Excise Tax (or your preferred name)
Tax Code: MI
Tax Rate: 24%
If available, you will see a Tax Calculation Basis option. Select the appropriate setting:
Tax on Net (default) — Tax is calculated on the line item price after price tier discounts are applied. Use this for most standard tax types.
Tax on Gross — Tax is calculated on the line item price before price tier discounts are applied. Select this for Michigan’s wholesale excise tax if you use price tiers, as Michigan law (RAB 2026-3) requires the tax to be calculated on the pre-discount price.
Complete any remaining fields (such as your QuickBooks Income Account mapping) and click Create Tax.
⭐️ Note: The Tax on Gross option is a new addition rolling out in April 2026. If you don’t see it yet, it will be available shortly. If you don’t use price tier discounts, Tax on Net and Tax on Gross will produce the same result.
🚨 Important: The Tax Calculation Basis cannot be changed after the tax is created. If you need to change the basis, create a new tax with the correct setting and retire the old one. Historical orders are not affected.
Step 2: Assign Tax Categories to Products
For the Michigan tax to calculate correctly — especially for vertically integrated operators who rely on the state’s average wholesale prices — your products need to have the correct Tax Category assigned.
Navigate to a Product in your product catalog.
In the product form, locate the Tax Category field.
Assign the appropriate category (e.g., Flower, Concentrates, Edibles, Vapes, etc.).
Repeat for all products that are subject to the Michigan wholesale tax.
💡 Tip: If you have a large catalog, multi-select products of the same category from the products table and click the pencil icon at the top of the table to bulk apply all at once! Ask your Distru CSM for any assistance in setting this up if you get stuck!
Step 3: Apply the Tax to Sales Orders
Once your tax is created and your products have tax categories assigned, the Michigan wholesale excise tax will automatically calculate on qualifying sales orders.
Create a new Sales Order.
Add line items with products that have tax categories assigned.
The 24% Michigan wholesale tax will appear as a line item on the order, calculated based on whether you are a vertical or non-vertical operator.
Review the tax breakdown on the order details before finalizing.
Tax on Gross vs. Tax on Net
This feature is rolling out in April 2026. If you don’t see the Tax Calculation Basis option in your tax settings yet, it will be available soon.
This setting determines which price the tax rate is applied to:
Setting | Tax Calculated On | When to Use |
Tax on Net (default) | Line item price after price tier discounts | Standard taxes like sales tax |
Tax on Gross | Line item price before price tier discounts | Michigan wholesale excise tax (required by law) |
Example
Product base price: $100/unit
Price tier discount: 10% → net price: $90/unit
Quantity: 10 units
Tax rate: 24%
| Tax on Net | Tax on Gross |
Taxable base per unit | $90 | $100 |
Tax amount | $90 × 10 × 24% = $216 | $100 × 10 × 24% = $240 |
If you use volume-based price tiers and are subject to Michigan’s wholesale excise tax, selecting Tax on Gross ensures your tax calculation complies with RAB 2026-3.
Average Wholesale Prices (Vertically Integrated Operators)
If you are a vertically integrated operator, your Michigan wholesale tax is calculated using the average wholesale prices published quarterly by the Michigan Department of Treasury — not your internal transfer price.
Distru automatically updates these prices each quarter when the state publishes new guidance. You will see an in-app banner notification when prices have been updated.
The current price guidance can always be found at: michigan.gov/taxes/business-taxes/wholesale-cannabis-tax/average-wholesale-prices
About the Law: Michigan’s 24% Wholesale Tax
Effective January 1, 2026, Michigan’s Comprehensive Road Funding Tax Act (House Bill 4951) introduced a 24% wholesale excise tax on adult-use cannabis. Here’s what you need to know:
The tax applies to the wholesaler — the entity making the first sale or transfer of adult-use cannabis to a retail licensee. This includes cultivators, processors, and microbusinesses.
Medical cannabis sales are not subject to this tax. The wholesale excise tax applies only to adult-use cannabis. However, if a medical provisioning center transfers product to its own adult-use retail license, that transfer is a taxable wholesale transaction.
Vertically integrated operators (affiliated-party transactions) must use the Michigan Department of Treasury’s published average wholesale prices rather than their actual transaction price. These prices are published quarterly and vary by product category.
Non-vertical operators (arms-length transactions) use the actual price paid between buyer and seller.
Quarterly estimated payments are due April 20, July 20, October 20, with a full annual return due January 20 of the following year.
For full details on the law, visit michigan.gov/taxes/business-taxes/wholesale-marihuana-tax.
Frequently Asked Questions
Does this feature apply to medical cannabis?
The 24% wholesale excise tax applies only to adult-use cannabis. Purely medical sales are not subject to this tax. However, if a medical provisioning center transfers product to its own adult-use retail license, that transfer is taxable.
Can I use this feature on Distru Commerce (DComm) menus?
DComm support for the Michigan tax feature is not yet available. The feature currently applies to sales orders created within Distru.
What happens if I created the tax with the wrong Tax Calculation Basis?
The Tax Calculation Basis cannot be edited after creation. Create a new tax with the correct basis and stop using the old one. Historical orders with the old tax are not affected.
How often are the average wholesale prices updated?
The Michigan Department of Treasury publishes new average wholesale prices quarterly. Distru updates these prices in the system as soon as new guidance is released.
Does the Michigan tax apply before or after order-level discounts?
The Tax on Gross / Tax on Net setting only affects price tier discounts (line-item level). Order-level charges and discounts are handled separately. Under Michigan law, discounts and credits generally do not reduce the taxable base — the tax is calculated on the full invoice price.
Is the tax calculated based on the sales order date or the invoice date?
The tax is calculated based on the sales order date. This means the tax rate and any average wholesale prices in effect when the order is created are what apply, even if the invoice is generated at a later date.
Are shipping charges subject to the Michigan wholesale tax?
Michigan’s tax guidance indicates that the wholesale excise tax applies broadly to the transaction value, which may include fees and transport charges. We recommend consulting your compliance advisor or accountant to confirm how shipping should be handled for your specific operations.
I already have a Michigan tax set up in Distru. Should I edit it or create a new one?
If you are switching to the new Michigan tax feature or changing your Tax Calculation Basis, create a new tax rather than editing your existing one. This preserves all historical order data tied to the old tax and ensures a clean audit trail. You can then retire the old tax so it is no longer applied to new orders.
Can I see the tax breakdown per line item?
Yes. The Michigan wholesale tax is displayed as a per-line-item breakdown on your sales orders, so you can see exactly how much tax applies to each product. On reports, the tax is shown as a roll-up total.
Where can I learn more about the law?
Visit the official Michigan Department of Treasury page: michigan.gov/taxes/business-taxes/wholesale-marihuana-tax, or review Revenue Administrative Bulletin 2026-3 for detailed compliance guidance.
Need Help?
If you have questions about setting up the Michigan Wholesale Tax feature, reach out to your CSM or contact us via live chat. We’re happy to walk you through it.