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Canadian distillers petition government to lower excise tax rate

Some 250 craft distillers from across Canada are rallying together to urge their local representatives to lobby the government to match the United States Small Distiller Reduced Excise Rate, which was implemented in the U.S. in 2017 in an attempt to stimulate job growth and agricultural production.

“Our message is to all MPs but particularly those who have craft distilleries in their ridings,” Tyler Dyck, president of the Craft Distillers Guild of B.C., said in a press release. “They are familiar with these operations and understand the positive impact they have had on local employment and agricultural production.”

The U.S. government implemented the Small Distiller Reduced Excise Rate in 2017 to try to create more jobs and support the agricultural industry by reducing the excise rate on the first small amount of alcohol — the first 100,000 proof gallons — produced by domestic American distilleries.”

“With the U.S. government giving up a little upfront excise revenue, small and medium sized American distilleries had additional cash to invest in equipment, labour and marketing. It worked fantastically well in the U.S., with almost 1,000 new distillery upstarts since its implementation and tens of thousands of jobs created,” said Dyck. “And the best part is that all of the economic development is local and spread out across all parts of the country.”

Canada currently has an escalator tax attached to the excise tax, and Canadian distillers pay $12.61 per litre whereas distillers in the states pay about $1.77 per litre.

“This massive cross-border tax excise imbalance has essentially made it impossible for Canadian distillers to compete and has stunted the potential of distilleries and agricultural producers,” said Dyck.

Wade Jarvis, owner of Kimberley-based distillery Bohemian Spirits, said that an Ontario-based distiller tried to accomplish this about four years ago. At the time, Wayne Stetski was the Member of Parliament for Kootenay-Columbia and Jarvis remembers telling him that for what he pays in excise tax over the course of a year, he could hire an extra full-time employee.

“It’s one of those things, like I get it, we need to pay taxes, for sure, that’s just life,” Jarvis said. “But the thing that always gets me with excise is, so say with GST as a business, if I buy a $100,000 piece of equipment I pay five per cent GST, so that’s $5,000. And then I charge GST on what I sell, but I only start paying GST when I’m taking in more GST than what I payed out. So it’s like kind of on your profit. Whereas excise they take it off the top.”

Jarvis is hopeful that the petition to lower the excise rate will go through this time around. The last time it was attempted, while craft distilleries were popular here in B.C., they were still catching on in other parts of the country. Now that there’s more businesses like Bohemian Spirits in communities across the country, Jarvis thinks it will give the movement more steam.

“I think it would be amazing,” he said, “because I’ve talked to some American distillers and they’re like ‘oh yeah, it’s a game changer.’ Because now it’s like the feds have made way more money than I have out of Bohemian Spirits over the years.

“If I were to put a price tag on my first batch of vodka, the bottle should be worth like $400 — all the startup costs and mistakes and everything. Obviously I didn’t charge that because you can’t, but it took us years for a bottle to be profitable, but the whole time the feds get a cut no matter what.”

Bohemian Spirits, even as a relatively small local distillery, supports the regional agricultural industry.

“We support B.C. farmers,” Jarvis said. “I buy a tonne of grain every week from a farmer in Creston and I get a pretty good deal from him but I know that I’m paying a heck of a lot more than if he was going to the wheat board or something.”

He added that distillers, throughout all of history, often make their product by utilizing things that might otherwise be thrown away.

“Our whole thing is using stuff that no one else wants,” Jarvis said. “We did a cherry brandy once because there was this farmer who had 12,000 litres of cherry juice in Creston.”

There is a petition created for people to sign in order to help support this initiative that can be found here.

“To highlight how much of a driver every community’s local distillery could potentially be; each 200L barrel of Canadian Whisky produced requires 1 ton of local grain grown by local farmers, and every bottle of gin or vodka made requires 20 lbs of locally grown Canadian apples or fruit,” reads the writeup found on the petition website. “The best part is…when you support local Canadian Distiller’s by enjoying their 100% Canadian made products, you are really powering your own local economy while contributing to national fabric and culture by celebrating everything Canada, from “Farm-to-Flask’!”

Columbia River-Revelstoke MLA Doug Clovechok posted about the issue on his Facebook page on Thursday, Aug. 13 saying:

“I know issue falls under federal jurisdiction, however, the excise tax hurts our local distilleries, especially at a time when they have been so nimble (switching gears and providing hand sanitizers to our communities). Educate yourself on this tax, then show your support for Canadian businesses.”

READ MORE: Bohemian Spirits provides free ethanol for hand sanitizer

“I’m pumped that he’s kind of pushing it in” Jarvis said. “I’ve only met him once or twice but he’s been pretty awesome from a business perspective every time.

“And like Doug said, all the smaller distilleries, we were the quickest ones to pivot into hand sanitizer, so hopefully that gives us a bit of credibility, or leeway.”

Jarvis added that, looking ahead to the future in a world impacted by pandemics, “having a distillery in every town, or every other town all of a sudden seems like it’s not a bad perk.”

Jarvis has coached or given advice to numerous other craft distilleries as they were starting up, including Invermere’s Taynton Bay Spirits, and he says that the excise tax is not something widely known by most people.

“I talk to people and I go ‘it’s not easy, especially with the excise tax, that’s something that people never realize until they’re in it and all of a sudden they say ‘oh I’m selling a bottle for $25 to a store so they can sell it for $38, so okay my bottle costs $2 to $3, I have to pay the feds, it all just starts to chip away at everything.’ I think [a lower excise rate] would be really positive for the industry.”

Kootenay-Columbia MP Rob Morrison said that what he’d like to do is speak with Jarvis to then draft up a letter to send on to the federal government explaining the situation and seeing what kind of response he gets.

“I think another big positive, is by lowering the excise tax [Bohemian Spirits] would get to hire another individual,” Morrison told the Bulletin. “So now we’re reducing unemployment, people are going to be employed in some of our smaller communities because these are local distilleries.

And again, supporting our small communities, because we are all small communities pretty well. I live in Cranbrook, and everything in Kootenay-Columbia is fairly small in comparison to the cities. So if we can support our economic growth by having smaller distilleries that’s a major bonus.”

Morrison said he’d be happy to write a letter to the federal govermment supporting craft distillers in their endeavour to have the excise tax lowered.



paul.rodgers@kimberleybulletin
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