Category: Latest News

The Alberta liquor board (AGLC) has written to several BC wineries threatening them with criminal enforcement action if they continue shipping wine to Alberta. The letter states that shipping wine directly to individual customers in Alberta is illegal under both the federal Importation of Intoxicating Liquors Act (\”IILA\”) and the provincial Gaming and Liquor Act and Regulation. The AGLC claims that all liquor shipped into Alberta must be consigned and shipped to the AGLC. The AGLC action raises countless issues, some practical and political, as well as a number of legal issues.

John Schreiner covers the issues from the wineries perspective here.

The various legal issues (including a workaround for shipping and possible solutions) are discussed in this article on wine shipping law in Canada which I have updated to deal with the AGLC\’s actions.

I wrote the wine column in this month\’s edition of the Advocate (which is the magazine distributed to all lawyers in BC). Here\’s a link to a PDF of the column which discusses public policy relating to pricing and taxation of wine in British Columbia\’s retail distribution system. I have also thrown in some wine recommendations which reflect my take on wines available in BC which are actually good deals in terms of global pricing and quality.

Good article in today\’s Times-Colonist on the need to reform B.C. liquor laws, specifically the \”tied house\” restrictions which impose strict limits on business when a person owns both an interest in a liquor manufacturer (such as a winery or brewery) and a retail establishment (such as a restaurant, bar or store). These antiquated laws (which date from post-prohibition times) prevent the owner of Lighthouse Brewing in Victoria from selling his own beer in his own bar, the Podium Sports Grill. They also prevent the Bishop family from selling their own wine (made at Carbrea winery on Hornby Island) at their restaurant at Seabreeze Lodge.

As the article points out, the original purpose of these laws was to prevent vertical control of the liquor industry such that major players would not limit choice at the retail level. However, times have changed … and there are certainly better ways to address these concerns, even if they are still valid.

Similar laws were the subject of intense criticism in Washington state, which recently reformed them so as to solve issues like the ones noted above. British Columbia could also reform its laws … it just takes the political will to do so.

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.

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.

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.

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.

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.

Interesting article this morning out of Washington, D.C. indicating that the U.S. federal government is proposing to dramatically increase federal taxes on all forms of liquor (as well as on soft drinks made with sugar) in order to pay for health care for about 50 million uninsured Americans. The proposed taxes would add 49 cents to a bottle of wine and 48 cents to a six pack of beer.

One of British Columbia\’s neighbours, Washington State, is reforming many aspects of its winery and wine distribution laws in Bill 2040 which resulted from hearings of a Joint Select Committee from both the state senate and house. The Bill has now been signed into law by the Governor. The bill is multi-faceted: it removes \”tied house\” restrictions so that the owners of a retail establishment serving liquor such as a hotel or restaurant could also invest in a winery (previously prohibited). It also reforms many, but not all, aspects of state distribution laws which were the subject of a long running legal battle between Costco and the state. These include elimination of both the required 10% markup by distributors and the \”post and hold\” requirement which restricted changes to the prices of beer and wine. Costco, however, has indicated that it will seek further changes \”to bring the beer and wine regulations into the 21st century\”.

Maybe it\’s time for similar reform here in B.C.? After all, our laws are even more archaic than Washington state\’s. If you agree, please contact your MLA and express your support for wine law reform.

Washington state originally had a state control liquor system similar to BC. Washington stands as an interesting contrast to BC because at one point, Washington\’s state control system was similar to BC\’s current one in that all imported product was marked up substantially and had to be sold through government stores. Washington wineries, however, escaped the markups and could sell through other channels. Consumers were supposed to only purchase through the government system and were required to pay markup on any imported wine brought back into the state (much like BC\’s current laws). Of course, in the U.S., it was not that difficult to circumvent the system by ordering or purchasing wine in another state at a lower cost and then bringing it back to Washington.

Eventually, after some prosecutorial blunders by the liquor board, public pressure forced the Washington state government to reform the system. Reform has resulted in nearly all wine and beer now being sold through private retailers. A network of state liquor stores has been maintained with a continued monopoly over the sale of spirits and a small portion of annual wine sales. Taxes are, of course, much lower in Washington than in BC so prices are also lower.