What happened: Legal cannabis retailers in B.C. are calling the BC Liberals’ more than $10-billion promise to eliminate the provincial sales tax (PST) for one year, and then have a reduced tax for another year, unfair because the tax will still be applied to most legal cannabis products even as it is removed from retail alcohol purchases.
Why it matters: The legal retail cannabis sector is filled with small business owners trying to gain market share from unregulated and unlicensed competition that do not have to pay the hefty licence fees (more than $33,000 in Vancouver) and other costs that legal operators must bear.
Legal cannabis retailers in B.C. are calling the BC Liberals’ promise to eliminate the provincial sales tax (PST) for one year unfair because the tax will still be applied to most legal cannabis products even as it is removed from retail alcohol purchases.
The current PST on alcohol, whether purchased in restaurants or in retail stores, is 10%. The BC Liberals are promising to eliminate that tax for one year, and then bring in a reduced 3% PST for one additional year. This is part of a larger plan to eliminate the 7% PST on most non-essential consumer items for one year, and impose a reduced 3% PST for one additional year.
Legal cannabis products are taxed with a 7% PST, which the Liberals are promising to keep in tact. Cannabis products that users vape are levied with a 20% PST, instead of the 7% PST that is levied on products such as dried flower, edibles and cannabis-infused drinks.
“Obviously, it’s not fair,” said Evergreen Cannabis owner Mike Babins, who, in December 2018, was the first cannabis retailer to be granted a B.C. government licence to sell weed, after Canada legalized recreational cannabis use, ending 95 years of prohibition.
“I don’t want to take sides, but it’s such a clueless, uninformed decision on their part that it’s just making it obvious that we don’t even have to worry about them being elected.”
The BC Liberals sent BIV a statement saying that the intent of eliminating the PST is to encourage consumer spending, and that alcohol is included in the tax cut because doing so will reduce the cost of dining out, thereby helping restaurant owners.
Eliminating the PST on street-front retail alcohol sales is likely to have no effect, or a detrimental effect, on restaurant alcohol sales, but the BC Liberals' promised to chop the tax on street-front retail alcohol sales because the party did not want to create a long list of exemptions, the party said. Tobacco and cannabis are rare exemptions from the proposed tax cut that the BC Liberals have accepted.
“It's really as simple as wanting to provide an assist to the hospitality industry,” the BC Liberals’ statement said.
The Association of Canadian Cannabis Retailers (ACCRES) is concerned with the move.
“It’s unfortunate and maybe an oversight on the part of the BC Liberals,” said Jaclynn Pehota, executive director of ACCRES. “It’s disappointing from our perspective.”
When the federal Liberal government legalized cannabis in 2018, Prime Minister Justin Trudeau made clear that the main reasons were to keep the products out of the hands of youth, and to reduce illegal sales.
Pehota said keeping the PST on legal cannabis, instead of removing it, will not help in the goal of “co-opting the unregulated market.”
While black market cannabis sales remain significant in B.C., legal cannabis sales in B.C. have grown substantially, and have notched record sales in each of the seven months up to July, which is the last month for which data is available. The nearly $34.6 million worth of legal cannabis sales in B.C. in July was 479% more than the nearly $6 million in legal cannabis sales that took place in the province in the same month a year ago.
To read more about this trend, click here.
Liberals' PST tax-cut promise also excludes cannabis medicine
Cannabis activist Dana Larsen told BIV that it would be particularly unfair for the government to remove the PST on most items but keep it on legal cannabis medicine.
He has long criticized the B.C. government for taxing cannabis medicine when it does not tax other medicine.
The process for buying doctor-authorized cannabis is different from buying recreational cannabis in that patients must buy direct from licensed producers if they do not grow their own. Street-front retailers are not legally allowed to sell medical cannabis to patients. Federal regulations also forbid street-front cannabis retailers' staff from discussing attributes of strains to potentially treat medical conditions.
There is, however, no difference in the provincial tax on medical cannabis, as recreational and medical cannabis are both levied with a 7% PST.
Other taxes on legal cannabis include a 10% excise tax and the 5% goods and services tax.
“Alcohol is a serious health issue for a lot of people,” Larsen said. “It leads to social problems, like riots and street violence, and to encourage alcohol use while penalizing people who want to make the choice of consuming cannabis is an absurd and dangerous policy.”
Cannabis, particularly edibles, is often used by those suffering from opioid addictions, when they are trying to kick their habit, he added.
Larsen said the BC Liberals' promise a discriminatory tax regime that is aimed at deterring cannabis use may hint at other future changes in provincial regulations around cannabis if the BC Liberals are elected.