Alberta Reverses Liquor Tax Hike

In late breaking news this afternoon, Premier Stelmach of Alberta announced that he is reversing the liquor tax hikes that were implemented in the recent April budget. The hikes had added 75 cents to Alberta's flat tax on a bottle of wine, increasing the total tax to $3.00 per bottle. Stelmach indicated that he had been uncomfortable with the increases all along.

Cal ABC Warns on Internet Wine Sales

The California Alcoholic Beverage Control Department (ABC) has issued an advisory warning wineries (and other licensees) that they should be cautious in dealing with unlicensed third parties who offer to promote or sell their products for them on the internet. The ABC notes that some such activities are permissible but, in their view, others are not without a license.

The problems basically stem from the fact that California's laws define the "sale" of alcohol to include (amongst other things) the solicitation or receiving of orders for alcohol. The ABC's position is that anyone who is soliciting or receiving orders for alcohol is engaged in the "sale" of alcohol and therefore should be licensed as a seller (even if the activity is done on behalf of another business, like a winery, that is licensed).

These interpretations raise obvious compliance issues in respect of many internet businesses such as wine clubs and other promotional services that seek to sell wine on behalf of a winery (and who would previously have been relying on the fact that the winery was licensed to make the sale).

This article in Wines & Vines describes the problems and also notes that there are practical issues of enforcement including jurisdictional problems. It's likely that either some legislative reform or a court case will be necessary before the issues are resolved.

British Columbia's wineries may want to give some attention to this issue. Although the Liquor Control and Licensing Act in B.C. does not define the "sale" of alcohol to include solicitation, it does include a similar provision at s.51 where it states the following:

A person must not canvass for, solicit, receive or take orders for the purchase or sale of liquor, or act as agent for its purchase or sale, except as provided under this Act.

As a result of this provision, we likely have similar issues here in regards to whether an activity constitutes a sale or solicitation (which must be authorized under the law) or whether it simply constitutes advertising and marketing. The dividing line between these types of activities likely is not that easy to define and there will be a substantial grey area. In B.C., we don't have the vast array of internet wine marketing services that they have south of the border, so it's much less likely that wineries will be involved in such activities. However, some caution is advisable. Wineries should ask providers of such services if they can provide assurances of the legality of their services and at the very least, it would be wise for wineries to get their own advice before participating in such a service.

Border Wine Duty/Fees Update

With the summer travel season upon us, I've just updated an earlier article on "Bringing Wine Back to Canada After a Trip". This article explains the duty-free allowances for wine as well as the extra charges and fees that you may have to pay at the border if you exceed the duty-free allowance. It also discusses the legal authority for charging these fees and the differences in fees between provinces and other jurisdictions.

EU-Canada Trade Pact Will Include Wine

I attended the Conference on the European Union - Canada Relationship yesterday in Vancouver which was very well attended by those seeking to determine the scope and impact of a possible EU-Canada Trade Pact for which negotations have just commenced. The EU trade officials made it clear that wine and beer has been a trade irritant in the past and would certainly be included in any trade deal. Indeed, the EU's chief negotiator, Mauro Petriccione, made it clear that "when we say the agreement will be comprehensive, we mean it". The negotiations are hoping to conclude a deal within 2 years.

The impact of the negotiations and any prospective trade deal on British Columbia's wine industry could be significant for VQA producers as there are currently preferential treatments given to BC VQA wine in respect of both pricing (application of liquor board markup) and distribution within the province. I'll write a more in-depth analysis on this subject in due course but there could be problems and issues with both the VQA rebate system and preferential distribution channels. Although the dollar amounts related to these programs are small in the grand scheme of things, they are likely significant to VQA producers.

Wine & Liquor Tax Issues Heating Up Across America

Governments are facing challenging fiscal situations world-wide. As a result of mounting economic pressures, governments across North America appear to be looking to liquor and wine taxation as a source of increased revenue. In April, Alberta raised its provincial markups (hidden taxes) on all forms of liquor. The U.S. federal government is exploring the idea of taxes on wine, liquor and sugary soft drinks. California has debated this issue prior to almost every state budget recently. And the latest salvo comes from New Jersey where that state is proposing to increase liquor taxes by about 25%.

Which of course brings us to BC and the newly re-elected Liberal government. Unfortunately for the Liberals, there is basically no room for increasing revenue within the current system. BC already has the highest wine taxes and prices in North America and the highest in the world in any significant wine producing region. Liquor sales in BC were down significantly by both volume and price in the last quarter. That trend is excessive compared to other neighbouring jurisdictions and could be a harbinger of growing problems of evasion for an uncompetitive system.

In my view, the government should be taking a serious look at overhauling the current system so that we can have a liquor distribution and revenue structure worthy of the 21st century. Here's some food for thought: the Alberta and BC governments generated almost exactly the same amount of per capita revenue from liquor even though the Alberta system is privatized and has lower prices. And that was BEFORE the recent increase in Alberta markups. Maybe BC should consider systemic reform if it wants to maintain or increase its liquor revenue.