WineLaw.ca

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.

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:

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.

HST Related Changes Cause Confusion

The BC LDB has just released an information package explaining the removal of the licensee "discount" that will occur as a result of the implementation of the HST on July 1st. A number of licensees have emailed me expressing concern and confusion over the effects of the changes. Particularly, there seems to be confusion over the LDB's claim that licensees will make more money following the changeover.

Licensees should pay attention to the information contained in the package as it is important for their accounting and financial planning. While the financial impact is not major, the changes will have an impact on profitability if close attention is not paid to the changes in taxation and pricing structure. Particularly, licensees should be aware that they will need to re-calculate the pre-tax menu prices for almost all liquor products if they wish to maintain the same profit margins before and after the changeover. A detailed analysis is provided below (click the "Read More" link if necessary).

Read more: HST Related Changes Cause Confusion