Taxed Again..? They’re working on it.

A newly introduced Michigan House bill would impose a 32% excise tax on smartphones, tablets, gaming systems, and other internet‑connected devices marketed to or primarily used by minors. Lawmakers backing the proposal argue the measure is designed to curb youth addiction to social media and digital technology. Critics say the tax is excessive, regressive, and unlikely to meaningfully address the underlying issues.

What is Happening?

Michigan legislators introduced a bill that would create a 32% tax on the sale of internet‑enabled devices intended for children. The revenue would be directed toward programs addressing youth mental health, digital addiction, and technology‑related harms.

They will probably also sue the tech companies for billions and blame it all on the lack of parenting (the root cause).

Where will the money really go?

Who knows.

Who Is Involved?

• Michigan House lawmakers sponsoring the bill (names not yet widely reported in early coverage)
• Parents and youth‑advocacy groups concerned about social‑media addiction
• Retailers and tech manufacturers, who would be responsible for collecting the tax
• Civil‑liberties and consumer‑rights groups, raising concerns about overreach and affordability

When was this introduced?

The bill was introduced in early February 2026 and is currently awaiting committee consideration.

Where will they enforce it?

The legislation applies statewide across Michigan, affecting all retailers selling internet‑connected devices to consumers.

Why Lawmakers Say It’s Needed

Supporters argue:

• Children are increasingly exposed to addictive digital platforms.

• Social‑media use is linked to anxiety, depression, and attention issues.

• Parents need more tools to limit access.

• Tax revenue could fund mental‑health programs and digital‑literacy initiatives.

Some lawmakers have compared the proposal to “sin taxes” on alcohol or tobacco — a financial deterrent intended to reduce harmful behavior.

How the Taxes Would Work

A 32% excise tax would be added to the sale of:

• Smartphones
• Tablets
• Laptops
• Gaming consoles
• Smartwatches
• Any device capable of connecting to the internet

Thescam applies only when the device is marketed for or primarily used by minors. Don’t feel left out. Adults will be next. Retailers would be responsible for determining applicability and collecting the tax.

Funds would be earmarked for:

• Youth mental‑health services
• Anti‑addiction programs
• Research on technology’s impact on children

Of course – for the children

Some Questions

Would you go to jail like a drug dealer or Al Capone for tax evasion if you bought it and then gave it to your kid?

How will they know a kid is using it without digital surveillance?

Reactions & Opinions

Supporters

• Say the tax is a necessary intervention to slow the rise of digital addiction.

• Argue that tech companies have failed to self‑regulate.

• Believe the revenue could meaningfully expand mental‑health resources.

Opponents

• Call the tax punitive and unrealistic, noting that nearly all modern devices connect to the internet.

• Warn it will disproportionately affect low‑income families.

• Question whether a tax will actually reduce screen time.

• Raise concerns about enforcement and retailer liability.

• Suggest the bill may face constitutional challenges related to commerce and parental rights.

What’s at Stake besides the further grabbing of your hard earned money and the economy?

• Affordability: A 32% surcharge could add hundreds of dollars to the cost of a single device.

• Digital equity: Low‑income families may be priced out of essential technology.

• Youth mental health: Supporters argue the bill could fund critical services.

• Precedent: Michigan could become the first state to impose a device‑specific tax targeting youth technology use.

• Legal challenges: The bill may face scrutiny over vagueness, enforcement, and potential conflicts with federal commerce rules.

Here it is

HB 5496 of 2026

House Bill Taxation: excise taxes; excise tax on the purchase of wireless communications devices; require for purchases of devices primarily for the use of individuals under 18 years of age. Creates new act.

• PDF LINK as Introduced
• Page Link HB 5496 of 2026

Sponsors

Komorn Law, founded in 1993, brings decades of seasoned experience to Michigan’s most complex criminal and regulatory matters, including the evolving cannabis framework from the MMMA to today’s MRTMA landscape. The firm represents clients facing controlled‑substance offenses, DUI and drug‑related driving charges, firearm violations, property crimes, resisting or obstructing, and the most serious allegations such as manslaughter and homicide. With a proven record in courts across Michigan and the federal system, Komorn Law delivers relentless advocacy when the stakes are highest. Call our office when you are ready to hire an attorney experienced and seasoned fighting the system of “Justice”  248-357-2550. 

Hands up Capone

Michigan’s regulated cannabis industry is in a very different place than it was when medical marijuana and adult-use legalization were the primary battlegrounds. As prices compress, margins disappear, and tax burdens increase, enforcement doesn’t disappear—it evolves. In a post-legalization environment, one of the most predictable pivots is the government’s shift from “marijuana cases” to “money cases,” especially tax fraud and failure-to-file prosecutions.

Enforcement Round About

This is not theoretical. Michigan’s Attorney General has already announced multiple felony tax cases tied directly to alleged unlicensed marijuana operations, including charges for filing false or fraudulent income tax returns and “Taxes-Failure to File/False Return.”

The underlying theme is familiar to anyone who knows American enforcement history: when prosecutors decide an industry (or a segment of it) is depriving the government of revenue, tax statutes become the leverage point. The “Al Capone” analogy resonates because it captures the strategy—use financial crimes to punish conduct that may be difficult to charge, politically unpopular to charge, or resource-intensive to prove with traditional “drug case” methods.

Tax Enforcement Division

What’s changing in Michigan: taxes are becoming the enforcement center of gravity Michigan’s Department of Treasury has a dedicated Discovery and Tax Enforcement Division, and Treasury is explicit about the mission: the Tax Enforcement Unit “concentrates on civil and criminal investigation and prosecution of tax fraud cases,” working with the Michigan State Police and the Attorney General.

When you combine that structure with today’s cannabis market pressures, the incentive and the capability to bring more tax cases are both present.

A key accelerant is the new wholesale marihuana excise tax that took effect January 1, 2026. Michigan Treasury describes this as a 24% excise tax on the wholesale sale/transfer of adult-use marihuana, with monthly returns and payments due on the 20th of the following month (e.g., January sales due February 20, 2026).

Why tax cases are so effective in cannabis

In other words: more tax, tighter deadlines, higher risk of non-compliance, and stronger motivation for the State to enforce—especially against operators the government believes are not participating in the regulated system or are under-reporting within it.

Why tax cases are so effective in cannabis, even after legalization There are three structural reasons cannabis is uniquely exposed to tax enforcement—regardless of what the state legalization map looks like.

1.  The cash reality and recordkeeping problem Even today, cannabis remains a complicated space for financial institutions, and the practical result is that many state-licensed cannabis businesses operate heavily in cash. The American Bankers Association notes that cannabis remains illegal under federal law and that banks face risk when servicing state-authorized cannabis businesses; it also notes SAR (suspicious activity report) obligations tied to “marijuana-related businesses,” which contributes to cash-heavy operations.

Cash businesses create predictable investigative pressure points: incomplete bookkeeping, inconsistent deposits, employees paid off-book, and sales that don’t match inventory/track-and-trace records. Those mismatches are the kinds of patterns tax investigators look for.

2. “Illegal income is still taxable” A common misconception among illicit-market participants is that if the underlying business is illegal, they don’t have to report the income. That is wrong as a matter of tax law. The IRS is explicit that income from illegal activities must be included in income.

This creates a trap: if an illicit operator reports the income, they’re admitting the business exists; if they don’t, they’re exposed to failure-to-file and tax fraud theories.

3. Cannabis-specific tax friction for licensed operators Licensed operators have their own pressure points. At the federal level, Internal Revenue Code §280E disallows deductions/credits for businesses “trafficking” in Schedule I or II controlled substances (as defined by the Controlled Substances Act), even when the business is legal under state law.

Add Michigan’s state and local tax requirements, the new wholesale excise tax, and the general economic downturn—and the risk calculus changes. When margins collapse, some operators make “creative” choices with reporting, vendor payments, payroll practices, or inventory accounting. That’s where civil tax exposure can become criminal exposure.

The Michigan criminal statute you should know: MCL 205.27 Michigan has a centralized criminal tax statute in the Revenue Act that prosecutors lean on because it is broad and flexible.

MCL 205.27 prohibits (among other things) failing/refusing to make a return or payment within the time specified, making a false or fraudulent return, making a false statement in a return, aiding/abetting an attempt to evade payment of a tax, or making/permitting a false return or claim for credit/refund.

If the violation is “with intent to defraud” or “to evade” (or assist in evasion), it is a felony punishable by up to 5 years’ imprisonment and/or a fine up to $5,000.

Two additional points matter for real-world defense strategy:

• MCL 205.27 also expressly recognizes that both the Attorney General and county prosecutors have concurrent authority to enforce the Act.
• The statute is broad enough that it can be paired with “classic” financial felonies (false pretenses, forgery, conspiracy, money laundering theories, etc.) depending on the facts.

Real Cases

Real examples: Michigan AG tax cases tied to marijuana activity When you tell the market “this is coming,” it helps to show that it is already here.

Example 1: Alleged illegal grow/distribution and false income tax returns In September 2025, the Michigan Attorney General announced felony charges (three counts) for Filing a False or Fraudulent Income Tax Return in connection with an alleged illegal marijuana growing and distribution operation (2019–2021), following a search warrant that reportedly uncovered more than 1,000 plants and over 50 pounds of processed marijuana. The case was referred by the Michigan State Police Marijuana and Tobacco Investigation Section.

Example 2: Alleged unlicensed marijuana sales, plus tax and fraud counts In November 2025, the Michigan Attorney General announced felony charges against a Holland man alleging (i) false pretenses connected to an alleged vehicle transaction and (ii) six counts of “Taxes-Failure to File/False Return,” based on allegations that the defendant failed to pay income or sales taxes from 2020–2022 tied to both the vehicle sale proceeds and over $1.1 million earned from unlicensed marijuana sales. The announcement also referenced investigative assistance from the Michigan State Police Marijuana and Tobacco Investigation Section and included a statement from the Cannabis Regulatory Agency’s executive director emphasizing accountability within the regulated system.

Public Announcements

These are public announcements of allegations—not convictions—and every defendant is presumed innocent. But from a market-trend perspective, they demonstrate the point: Michigan is already using tax felonies as a primary vehicle to prosecute cannabis-connected conduct.

Why “tax cases” may expand beyond the illicit market The illicit market is the easiest political target: “they didn’t participate in the regulated system and didn’t pay taxes.” But tax enforcement pressure rarely stays perfectly contained, especially when the state’s revenue interests are high and the regulated market is under financial stress.

Several dynamics can broaden exposure:

The new 24% wholesale tax increases the number of reporting events, the money at stake, and the incentives for audit/investigation when tax payments don’t match sales volumes.

Cash-on-delivery proposals (if enacted) can increase cash movement and change the payment patterns investigators track. A proposed Michigan bill (HB 4963) includes language that would prevent a marihuana establishment from purchasing marihuana from another marihuana establishment unless it pays “at the time the marihuana is transferred.”

Financial distress pushes compliance errors into willfulness territory. Investigators and prosecutors often draw intent inferences from patterns: repeated late filings, unreported cash sales, payroll irregularities, dual ledgers, or “phantom” vendor expenses.

A parallel issue: contracts, enforceability, and the cash crunch Separate from criminal tax enforcement, Michigan’s adult-use statute (MRTMA) states as a matter of public policy that contracts related to the operation of marihuana establishments (or tribal marihuana businesses) “be enforceable.”

Yet because cannabis still intersects with federal illegality in different contexts (banking, federal jurisdiction, etc.), businesses sometimes face disputes where counterparties attempt to weaponize legal uncertainty—especially when cash is tight. That broader environment contributes to the same core risk: pressure that leads to missed payments, tax shortfalls, and the kinds of “paper trails” that become evidence in a tax investigation.

What to Do

What to do if Treasury, MSP, the AG, or the IRS comes calling If you are contacted by investigators or served with a subpoena, audit notice, or request for records, do not treat it like “just a paperwork issue.” In tax cases, early decisions are often outcome-determinative.

General guidance (not legal advice):

1. Do not make statements to investigators without counsel. Tax cases are built on admissions, contradictions, and intent evidence.

2. Preserve records. Destruction, “cleanup,” or back-dating documents is how civil exposure becomes obstruction exposure.

3. Coordinate criminal defense and tax strategy. A “tax-only” approach can be incomplete if the case is being built for prosecution, and a “criminal-only” approach can miss critical technical tax defenses.

4. Move quickly. Treasury’s Discovery and Tax Enforcement apparatus is designed to identify non-filers and under-reporters, and Michigan specifically describes coordinated civil and criminal enforcement.

How Komorn Law fits these cases

Komorn Law has spent decades in the center of Michigan cannabis law—from the medical program era through adult-use legalization—and has long experience defending individuals and businesses in criminal matters, forfeiture matters, regulatory matters, and litigation. This makes the firm well-positioned for the next phase of Michigan cannabis enforcement: cases where the government’s headline charge is “tax fraud,” but the underlying narrative is cannabis.

If you are a licensed operator, business owner, or individual who is under investigation—or you suspect a tax issue has become a criminal issue—engage counsel before you engage the government.

Komorn Law, founded in 1993, brings decades of seasoned experience to Michigan’s most complex criminal and regulatory matters, including the evolving cannabis framework from the MMMA to today’s MRTMA landscape. The firm represents clients facing controlled‑substance offenses, DUI and drug‑related driving charges, firearm violations, property crimes, resisting or obstructing, and the most serious allegations such as manslaughter and homicide. With a proven record in courts across Michigan and the federal system, Komorn Law delivers relentless advocacy when the stakes are highest. Call our office when you are ready to hire an attorney experienced and seasoned fighting the system of “Justice”  248-357-2550.