LCLB: Enomatic & Tasting Rules Under Review

In an earlier post, I noted that there has been a minor controversy this summer regarding the use of Enomatic "wine tasting machines" in some private retail stores. I asked for clarification on this from the LCLB and I can now confirm the following:

  • The use of Enomatic machines is permitted so long as the store is otherwise complying with the terms of its license in regard to consumer tastings. Store owners should check the terms of their license - but the terms and conditions for most licenses are here.
  • For most stores, the most significant restriction will be that self-service on tastings is not permitted (in other words, customers cannot pour their own tastes) ... this will mean that they cannot operate the Enomatic machine themselves. Instead, as applicable, the agent or a store employee would have to operate the machine.

Some retailers have complained to me that the rules regarding tastings in LRS stores are overly restrictive particularly the requirements to dispose of any unfinished bottles at the end of the day (which defeats the purpose of the Enomatic machine). In this regard, the LCLB has told me that they are currently reviewing their policies in regards to tastings and they expect to "clarify" the policies in the near future. Hopefully, this will mean some modernization of the policies with clearer accommodation for new technology like the Enomatic.

Generally, it's my view that the current policies need to be updated - so long as there are safeguards to over-service, it's always a good thing if consumers can try wine before they buy it. In regards to limiting the amounts served, the Enomatic is actually a great tool because the machine measures pours much more accurately than people do and customers could be given a "smart card" that limits them to the exact amount permitted by the tasting policy. If it is any consolation to private retailers, I can attest that the rules for tastings in LDB stores are equally frustrating - a recent LDB memo on this subject has caused some agents to re-think how they will address in-store tastings in government stores.

Update: this story has now been covered by the Vancouver Sun: Another Bizarre BC Wine Law Dampens Competition


Summer News: LDB Sales Down, HST Impact, Enomatic Controversy

Here's a grab bag of a few bits of interesting summer liquor news ...

BCLDB Liquor Sales Down. The latest edition of the BC LDB's Quarterly Market Review shows that overall liquor sales in British Columbia for the quarter ending in June were down 8% by volume and almost 5% by value over the previous year. Those are significant drops when total annual sales figures for BC are $2.8 billion. Sales of wine and spirits were both essentially flat while sales of both beer and coolers were down considerably. The LDB missed its sales targets last year and numbers like these seem to indicate a repeat performance.

HST Impact on Restaurants. As was expected, it has now been confirmed by the Canadian Restaurant and Food Services Association that the introduction of the HST had a strongly negative effect on restaurant sales in July. The Association is now asking government to mitigate the impact by considering other compensatory measures such as a long requested wholesale discount on liquor. As I have previously written on many occasions, BC's liquor wholesale distribution system for restaurants is seriously outdated since restaurants get zero discount - they pay full retail price when they buy wine and other liquor. This puts them at a serious competitive disadvantage when compared to restaurants in neighbouring jurisdictions (such as Alberta and Washington) and also creates sticker shock and dismay when tourists see the price of wine on restaurant wine lists. Let's hope government listens on this one.

Enomatic Controversy. I have recently been made aware of a minor controversy involving the use of "Enomatic" wine dispensing machines in various private liquor stores. These machines (from Italy) dispense measured pours of wine for tasting and keep the wine fresh for up to 3 weeks by preventing oxygen from entering the bottles. A few private retailers have purchased these machines to allow customers to sample wine before purchasing. I can attest from seeing them in operation in Italy and California that they work extremely well. However, the LCLB is apparently having some difficulty with them: read the full story here on the Winecouver blog. Update: August 6th ... I haven't been able to get any additional information on this to date but Wines & Vines has now covered the issue: Government Limits Wine Dispensers.

Border Wine Taxes & Fees Modified for HST

It's the summer travel season. Many British Columbian wine enthusiasts will be venturing south of the border and will want to bring a few bottles home with them. As most will know, that is a very expensive proposition in BC if you exceed your miserly duty-free allowance of two 750ml bottles of wine per person. However, the introduction of the HST has made these importations ever so slightly less expensive. Previously, for BC, the charges were 85% liquor board markup plus 10% PST plus 5% GST.  However, the sales tax portion has now gone down from 15% to 12% and is calculated in a way which is slightly more advantageous. Canada Border Service Agency (Customs) has revised its memo on this issue to show the new tax collection rates and process. The following table shows you the comparative rates for importing a non-duty-free 750 ml bottle of wine into a Canadian province when you return from a trip to the U.S and also shows you the effect of these charges if you import a 750 ml bottle of wine that cost $15.

As you will see, the rates charged at the border for British Columbians are very high in comparison to most other provinces (Quebec is also very high). In BC, you will end up paying more than double the original price once you have imported the wine. Once again, British Columbian wine lovers are getting soaked by our government on this issue.

Province        
Excise Tax
Liquor Board Markup
GST/HST
PST  

Border charges
for a $15 bottle of wine

Total Cost
of $15 Wine
British Columbia
$0.47
85% of value
(min $1.83, max $12.75)
12%
n/a
$15.08
$30.08
Alberta
$0.47$2.60 for 750 ml bottle
5%
n/a
$3.97
$18.48
Manitoba
$0.47$3.12 for 750 ml bottle
5%
7%
$5.72
$20.29
Ontario
$0.4739.6% of value
13%
n/a
$8.60
$23.66
Quebec
$0.47
66% of value + $0.67
5%
7.5%
$14.15
$29.15

Please note that for almost all provinces, these rates are only valid in the "travellers stream" - which means you must personally bring the wine across the border with you. If you ship the wine, the rates are generally much higher (it's hard to believe that the BC rates could be higher, but they are!). There are also quantity limits for these rates: 45.45 litres for BC; 45.45 litres for AB (although the memo says 9.09 which is wrong); 45 litres for ON; no limit for MB; 9 litres for Quebec. Also note that the way of calculating these fees differs from province to province - see the CBSA memo for details.

You may also wish to read my Bringing Wine Back to Canada After a Trip article.

Washington State Privatization Initiative Certified

The Costco led initiative in Washington state to privatize the remaining elements of Washington's liquor distribution system has been certified and will appear on voters' ballots in the fall. If the measure passes, Washington's remaining state liquor stores (which have a monopoly on spirit sales) would be privatized. The distribution system would also be deregulated and price controls repealed. As will be apparent (and despite the 'success' of the anti-HST campaign), the process for getting a voter initiative such as this on to the ballot is much easier in WA than here in BC. Still, progress and reform south of the border may have some influence on legislative policy here in BC. Is it too much to hope that our archaic distribution system and irrational wine tax structure will soon be changed? If you need reassurance that the time for change is overdue, read Jake Skakun's recent blog post: "A Layman's Attempt to Understand What It Means to be a Licensee" where he shares his frustration at our outdated system.

Provincial Per Capita Liquor Tax Amounts

People ask me all the time why wine prices (and other alcohol prices) are so high in BC. The short answer is that there are two reasons: 1) extremely high tax rates (including hidden taxes like liquor board markup) and 2) inefficiency in our monopoly distribution system.

To give you a comparison on the tax side of the equation, here are the per capita (per person) annual amounts of money that the major provincial governments in Canada made from liquor tax revenue in 2009:

Province   
Annual Liquor Tax Revenue (2009)       
Population 
Per Capita Annual Revenue from Liquor 
Quebec
973,066,000
7,870,026
123.64
Ontario
1,883,422,000
13,134,455       
143.39
Alberta              
684,468,000
3,711,845
184.40
BC
900,135,000
4,494,232                   
200.28
Canada Overall
5,426,005
33,930,830
159.91 (Canadian Average)

As you can see, BC makes a lot of money from liquor tax revenue ... over $900 million per year. You can also see that BC makes a disproportionately large amount of money on the per capita revenue as compared to the other major provinces and the Canadian average. BC takes in just over $200 per person per year from liquor tax revenue ... almost $60 more per person per year than Ontario (the other major wine producing province) and almost $80 more per person per year than Quebec.

It's also interesting to note that Alberta, the only province with full retail privatization, makes considerably more money per person per year than either Ontario or Quebec and only a bit less than B.C. where we have much higher retail prices and almost no competition. The bottom line in BC is that we are getting soaked on the tax levels compared to the other major provinces. Makes you want to have a drink ... preferably in another province.

Also ... if you are a glutton for tax punishment ... you may want to check out my updated BC Liquor Store Wine Markup calculators which now show the HST and increased markup amounts (as of July 1st) that are hidden in the bottle prices at government stores.

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