The Alberta government’s decision to substantially increase its tax on all wine it sells is riling B.C. winemakers, who are preparing for a showdown.
They would like Alberta to exempt them from this new tax increase because their wines are Canadian. They see the higher tax as an interprovincial trade barrier.
Some B.C. winery owners are considering snubbing the Alberta government and not paying that province's new higher taxes. Instead, their plan is to sell wine directly to Alberta residents without the Alberta government's approval and dare the Alberta government to act.
After all, B.C., since 2015, has allowed all Canadian wineries to sell 100-per-cent Canadian grape wines directly to B.C. consumers without adding British Columbia Liquor Distribution Branch’s (BCLDB) mark-ups, according to Farris LLP senior counsel Al Hudec, who works with many winery clients.
BCLDB mark-ups on wine start at 89 per cent on the first $11.75 per litre that the producer charges as a base price and then falls to a 27-per-cent mark-up on the remainder of wine’s base price.
Waiving this mark-up in B.C. therefore benefits Ontario wineries even though that province has not reciprocated and does not provide the same perk to B.C. wineries.
Winery owners have told BIV that if they need to pay the higher Alberta taxes, it will not be viable to sell in that province.
Flouting the Alberta government and selling direct to residents without charging tax is risky though.
The move could ratchet up tensions between the Alberta and B.C. governments, perhaps confounding efforts between provinces to work together in response to U.S. President Donald Trump’s tariff war on Canada.
It may involve the Alberta government taking a hard line against courier companies that it deems have delivered contraband wine.
Alberta could also levy penalties on offending wineries, have an Alberta court issue an order to enforce those penalties against the wineries and then have a B.C. court enforce that order.
Time will tell.
This skirmish comes at a bad time, given that all provinces, except P.E.I. and Newfoundland, on March 5 announced that they had agreed to remove obstacles preventing their alcohol from being sold in other jurisdictions.
Here’s what Alberta’s wine-tax increase looks like
Alberta has long charged a flat fee of approximately $3 per bottle of wine that passes through its Alberta Gaming, Liquor and Cannabis Commission (AGLC).
It also last year reached an agreement solely with the B.C. government that allows B.C. wineries to register with the AGLC to be approved to directly sell and ship wine to Alberta residents if the wineries send the approximately $3 levy per bottle to the AGLC.
No other jurisdiction in Canada or around the world has such an agreement.
Starting April 1, the Alberta government will slightly raise its flat fee and separately introduce a new tax based on the value of the wine – something called an ad valorem tax.
Higher priced wines will be taxed at a higher rate.
Wine priced at up to $15 per litre will not carry the new ad valorem tax.
Wines that are more expensive will be charged that tax in three increments:
- A five-per-cent ad valorem tax on the price between $15 and $20 per litre;
- A 10-per-cent ad valorem tax on the price between $20 and $25 per litre; and
- A 15 per cent ad valorem tax on the remaining price above $25 per litre.
BIV contacted the Alberta government for a rationale for why it is increasing its wine mark-ups.
“Alberta is improving the equity between products by aligning mark-up rates for the most popular wine- and refreshment-beverage categories, with those of the most popular spirit category,” wrote back Brandon Aboultaif, press secretary to Minister of Service Alberta and Red Tape Reduction Dale Nally.
He stressed that the new mark-up and ad valorem tax will be in place for all wines, including those that B.C. wineries are selling directly to Alberta residents.
Some B.C. winery principals are defiant
Summerland-based Lightning Rock Winery owner Ron Kubek sells a lot of wine to Albertans, much of it direct-to-consumer.
He has done this for years – even before the Alberta and B.C. governments reached their deal last year to formalize a system where B.C. wineries register with the AGLC and agree to charge Alberta customers the $3 fee per bottle and then remit that fee to the AGLC.
Lightning Rock sold about 50 to 100 cases of wine to Albertans in 2023, Kubek told BIV. He had planned to grow those sales to 500 cases in 2025.
Some of his Albertan sales are through the AGLC, which then resells to stores.
Lightning Rock’s total production tends to be in the 3,200-case range, with most of that wine sold in B.C.
“We will make a business decision,” Kubek said. “It will either be, ‘Yes, we're collecting that tax and doing it [in compliance with the new AGLC system,] or we're going to de-list ourselves from selling into the AGLC and just continue selling as we were [directly to consumers.]”
That means that one of his options is to not collect the new tax and to not remit anything to the AGLC.
Kubek said he believes a legal precedent allowing him to do this stems from something the federal government did in 2019.
Canada amended its Importation of Intoxicating Liquor Act, which removed all federal barriers to selling alcohol between provinces.
It permitted suppliers to ship directly to consumers across provincial borders to the extent that the receiving province also permitted such transactions.
This meant that the federal government no longer restricted Canadian wineries, breweries or distillers from shipping their products to consumers across Canada, allowing restaurants, hotels and consumers to buy Canadian products that their provincial liquor authority did not sell.
A landmark lawsuit known as the Comeau case said something more important, however.
Vancouver lawyer and Harris & Co. partner Shea Coulson represented B.C. wineries and others at the Supreme Court of Canada in that case, which released a judgment in 2018.
He told BIV yesterday that the Comeau case upheld that provinces have jurisdiction over alcohol distribution and related taxes and mark-ups, as long as the provincial mark-ups are not meant to be a tariff barrier that could be unconstitutional.
The Alberta government’s plan to levy its new ad valorem taxes on all grape wines from all over the world is an argument that the new tax is not a targeted tariff barrier, Coulson said.
He said the Alberta government’s response to wineries that sell directly to Albertans and do not charge and remit taxes to the AGLC could be to levy penalties and have an Alberta court issue an order that B.C. courts would honour.
B.C. courts could then uphold the Alberta court order on B.C.-based wineries and issue penalties that could include garnishing money.
“The Alberta government has the choice to enforce its laws,” Coulson said. “Sometimes they choose not to. If they do, and it went to a court and there was a court order, that court order could be enforced in any province in Canada.”
