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Wine Tax Hikes Make News in the USA

Tuesday, 10 March 2009 14:47

Written by Mark Hicken

Proposed new or increased taxes on wine by various states are making news south of the border, and particularly in California, home of the vast bulk of the U.S. wine industry. The state of California, which is experiencing serious financial problems, is proposing hefty tax hikes on all alcohol including wine. See these stories for details: Sonoma Valley Sun and the Wine Spectator.

In previous years, similar proposed tax hikes have been defeated but the wine industry in California is concerned that the current initiative may sneak through this time due to the deteriorating financial situation of the state government. Not to diminish the seriousness of the situation for California wineries, but if you compare the proposed taxes to B.C.'s existing taxes on wine, the charges look like small potatoes. The proposed increase in California is from $0.20 a gallon to $1.48 a gallon. While that would no doubt have a serious effect on "Two Buck Chuck", it pales in comparison to B.C. tax rates which often reach $8 to 10 per gallon on a moderately priced bottle of imported wine.

In certain channels, the tax on B.C. wine is a lot less but even there, the minimum tax is 15% plus assorted fees such as the recycling fee which would still exceed the proposed California taxes. Maybe we should consider making our wine industry more competitive by reducing this disproportionate tax burden?

It's also interesting to note that the same rationale for higher alcohol taxes that is being used in California is often used here: that being that taxes on wine are "sin taxes" and thus they are permissible at a higher rate than normal. That argument doesn't wash for me. The vast majority of British Columbians moderate their wine consumption to low to moderate levels. There is, in fact, a great deal of evidence that such low to moderate consumption has overall health benefits not detriments. As a result, it is not appropriate to tax wine consumption as a sin - as in the Mediterranean countries, it should be viewed as a normal part of a healthy lifestyle. Consequently, the taxation rate on wine should be a normal rate, not an oppressively high one, as is currently the case in B.C.

Host Liability Issues for the Wine Industry

Friday, 12 December 2008 10:34

Written by Mark Hicken

The holiday season is upon us. While most of the season generally revolves around a spirited (pardon the pun) and responsible celebration involving wine and other liquor, the issue of legal liability for alcohol service always crops up at this time of year as businesses of all kinds become aware that good times can turn into a problem if someone ends up injuring themselves or others following a seasonal party at which they have consumed alcohol.

I have received a number of inquiries about this issue in the past few weeks so here is a quick (non-comprehensive) summary of the applicable law as well as a few ideas for limiting your liability.

There is one set of rules that I will call "commercial host liability" for restaurants, bars etc... most situations where a business is making money serving drinks. This would definitely include wineries or agencies in situations where they are either charging for wine, running a tasting room/event, or selling or promoting wine as an adjunct to an event. On the commercial host side, the rules are pretty strict in that the business has a fairly high duty of care toward a patron who has had too much to drink and they can be found liable if they don't do enough to prevent that person from injuring either themselves or someone else. All wineries and agencies should have staff trained to recognize liability and alcohol service issues for these types of events. You can read more on commercial host liability in the Supreme Court of Canada decision of Stewart v. Pettie (2005) which is the leading decision in this area.

On the other side, there are a set of rules for "social host liability" which basically apply to private parties. A more recent (2006) Supreme Court of Canada decision, Childs v. Desmoreaux, has found that, for the most part, social hosts do not have a duty of care to their guests and those guests are responsible for their own behaviour. If you are interested, you can read about this decision in this article or here.

U.S. Wine Shipping Restrictions Struck Down (Again)

Thursday, 20 November 2008 09:13

Written by Mark Hicken

Wine shipping restrictions contained in Massachusetts state law have been struck down by a U.S. court as being discriminatory and unconstitutional in the case of Family Winemakers of California v. Jenkins. The restrictions at issue were complex but effectively prevented 95% of wineries from shipping direct to consumers in Massachusetts. The restrictions prevented wineries from shipping if they produced more than a set annual case volume or if they had wholesaler representation in Massachusetts. The court applied the reasoning in the earlier U.S. Supreme Court decision in Granholm v. Heald. Similar challenges are pending in other U.S. states that have enacted shipping restrictions.

The U.S. courts' reasoning is interesting because similar arguments could be used in Canada, particularly against the imposition of liquor board markups as between shipments of wine between wine producing provinces such as Ontario and B.C. The basis of the legal arguments in Canada would be slightly different due to the fact that the U.S. and Canadian constitutions are different but the nature of the discrimination is similar.

Okanagan Water Law for Wineries

Wednesday, 19 November 2008 13:56

Written by Mark Hicken

It's already a major issue for wineries in California. I know that faculty at UC Davis are now considering water needs and ability to survive drought as an important factor when selecting rootstocks for new vineyard plantings. Here in water-abundant Canada, this has historically not been a major concern. But an article in Wine Business Monthly Online shines a light on similar Canadian concerns in its review of the Okanagan Sustainable Water Strategy and the implications for wineries in the region. The article points out that winery use of water is a tiny percentage of overall usage and that conversion to drip irrigation is making industry use of the resource even more efficient.

The legal implications of water usage are still generally a backburner issue. However, occasionally, as the article points out, the Province can use its powers under environmental laws to cut off water supplies to users as happened for some Okanagan wineries in 2003 during a drought. In addition, water concerns can block development, whether residential or otherwise (including wineries), if the development threatens to change water usage or conservation patterns.

Shipping Laws on Wine within Canada

Wednesday, 05 November 2008 17:00

Written by Mark Hicken

This article provides a summary of the shipping laws regarding wine (and other liquor) within Canada. This article is updated frequently. However, the laws in this area are changing rapidly so please contact me (or your own lawyer) in order to ensure that you have the latest information. If you are interested in wine shipping issues related to bringing wine from a foreign country to Canada, please see this article: Bringing Wine to Canada After a Trip.

The shipping of any alcohol from one province into another province was previously prohibited by a federal law (which stems from the prohibition era) called the Importation of Intoxicating Liquors Act (Canada). However, on June 28, 2012 that law was amended by Bill C-311. While the general prohibition remains in place, the Bill created a national personal use exemption for wine subject to applicable provincial laws. In June 2014, the federal government also amended the law to extend the personal use exemption to include the interprovincial shipment of beer and spirits. That amendment was effective June 19, 2014. However, the various provinces have not embraced the spirit of these changes and have created various barriers to interprovincial "direct to consumer" shipments.

The following chart summarizes my views on the ability of consumers to receive "direct to consumer" interprovincial shipments of wine under the laws in the various provinces. See the FreeMyGrapes site for more detailed analysis and other interpretations of the law.

	DTC from Winery?	DTC from Retailer?	Quantity Limits	...	Comments
BRITISH COLUMBIA
	Yes	No	Amount for personal consumption if 100% Cdn wine from winery.		OK for Canadian wine. Imported wine has different rules: subject to 9 liter cumulative quantity limit and only for "in-person" importation (no shipment).
ALBERTA
	Yes?	Yes?	Amount for personal consumption.		AGLC says that amounts for personal consumption may only be imported if they are "personally transported" into Alberta (i.e. not shipped). However, Alberta law says that adults may "import" liquor from other provinces (and other countries) in amounts determined by regulation. It is my view that the only reasonable interpretation of the word "import" as used in these laws (see s.86 of the Gaming & Liquor Act and s.89 of the Gaming & Liquor Regulation) includes both in person transport and direct shipment. However, Alberta has recently amended the regulation (s.89), to make importation from other provinces "subject to the policies of the Board" which appear to be set out here and which restrict importation to amounts that are personally transported. It is now likely a complicated legal issue as to whether the Board can, in fact, effectively reverse the language in the Act and Regulation through a "policy statement".
SASKATCHEWAN
	No	No	9 liters.		Use of words "personally bring" may exclude shipment.
MANITOBA
	Yes	Yes	Amount for personal consumption.		Kudos to Manitoba!
ONTARIO
	Yes	Yes	Amount for personal consumption.		Ontario's laws are silent on the issue of interprovincial importation of alcohol. Generally, in law, "that which is not prohibited is permitted" so it should be ok to import wine for personal consumption as allowed by the federal law. However, the LCBO has issued a "policy statement" that disagrees with this and says that only "in person transport" is allowed. It is my view that this "policy statement" has no basis in law in Ontario. See FreeMyGrapes analysis for details.
QUEBEC
	No	No	9 liters		Provincial law restricts transport of wine not purchased from liquor board within Quebec. Regulations have been issued which allow the importation of alcohol from other provinces but they only permit 9 liters of wine per person and only if it has been personally transported (no direct to consumer shipment).
PEI
	Yes	Yes	9 liters.		It is my view that the only reasonable interpretation of the word "import" in the amended legislation includes both in person transport and direct shipment. The PEI liquor board is stating that it is not open for shipment, only for "in-person transport". In my view, this is not a reasonable interpretation of PEI law.
NEW BRUNSWICK
	No	No	One bottle of unspecified size.		Permits shipment from another liquor board but unreasonably low quantity limit makes it unworkable.
NOVA SCOTIA
	Yes?	No?			Current laws restrict transport of wine within NS. Govt introduced legislative changes and originally stated that it would copy BC's approach on 100% Cdn wine only. However, the necessary regulations have not been introduced.
NEWFOUNDLAND
	No	No	1.14 liters.		Unreasonably low quantity limit. Use of word "bringing" may exclude shipment.