Posted November 19, 2016

New distillery tax major blow to Ontario’s craft distilleries

Toronto – A new 61.5% sales tax on retail stores run by craft distillers in Ontario was introduced in Bill 70 on Wednesday November 16, 2016 by Finance Minister Charles Sousa.

“We were expecting a spirit tax tiered by volume,” says Rocco Panacci of Yongehurst Distillery in Toronto. “This bill demonstrates that the Liberal government doesn’t support the growth of small businesses or a healthy and competitive domestic market. It’s disappointing for all of the Ontario businesses within our ecosystem that could have grown the economy organically to create long-term jobs and prosperity in every corner of the province.”

“This new distillery tax is over ten-times the amount of tax paid on a bottle of Ontario wine, despite a bottle of spirits typically having just slightly more than three times the alcohol content,” adds JD of Dixon’s Distilled Spirits.

Ontario’s craft beer boom was possible because Ontario’s beer tax is both: (1) taxed by the litre, as opposed to the brewer’s list price; and, (2) graduated, with a lower rate of 33 cents per-litre for micro-brewers and 80 cents for large brewers, describes the Ontario Craft Distillers Association (OCDA), who currently have 16 members.

Taxing by-litre means that an expensive to brew barrel-aged barley-wine is taxed at the same rate as a straight forward lager. Products with high labour and ingredient costs aren’t discriminated against with a by-the-litre tax. Graduated taxation is necessary for small producers who by definition lack economies of scale, and so depend on the revenue from their first offerings on a per unit basis to a much greater degree. Craft distilleries in British Columbia pay no provincial tax on their first 50,000 litres sold, with a phased in tax between 50,000 litres and 100,000 litres, according to the OCDA.

In 2009, Marcel Rheault opened Rheault Distillery in Hearst believing that sooner or later distillers would see the same sort of graduated tax as brewers. Rheault notes, however, that “At this point, we’re focusing our energies on export markets, as the tax regime in Ontario doesn’t allow for grain to glass distilling”.

“Apparently Ontario is not open for business”, adds Don DiMonte of Last Straw Distillery in Vaughan. “And despite years of advocacy, the Wynne government will still not let Ontario’s small distilleries sell to bars or restaurants”, says Geoff Dillon, distiller at Dillon’s Small Batch Distillery in Beamsville.

Read the full OCDA release here.

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