Michigan’s new 24% wholesale tax on marijuana is generating revenue for road repairs, but a legal challenge could derail the funding source just as communities prepare for what officials expect to be a severe pothole season.

The tax, which took effect January 1, directs revenue to local road improvements. However, the Michigan Cannabis Industry Association and other opponents have filed a lawsuit challenging its constitutionality in the Michigan Court of Claims.

“We’re going to see I imagine an epic pothole season here,” said Denise Donahue with the County Road Association.

County road departments are expected to receive 55% of the tax revenue under the new law.

“For that to happen and be overturned, it doesn’t put us on a good path to restoring Michigan roads and bridges,” Donahue said.

The County Road Association filed a brief asking the court to consider the impact on road departments if the funding disappears.

“To have that disappear or delayed in any way would be detrimental the enthusiasm there is to going out and fixing our roads,” Donahue said.

Cannabis retailers are already feeling the impact of the tax increase. Evie Hernandez, manager at Cake House Lansing, said prices have changed immediately since the law took effect.

“The 24% tax has a very real and immediate impact every day to day basis,” Hernandez said. “Our prices have already changed immediately so even some prices, lower prices, we are not able to do anymore or even some deals we ran before are simply not feasible.”

Hernandez said customers have noticed the price changes and are adjusting their shopping habits accordingly.

“We see less of our regulars and big people who are spending quite a bit,” Hernandez said.

Hernandez hopes the court’s decision won’t come too late to preserve the business relationships her dispensary has built with regular customers.

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