A tax holiday on the purchase of many alcoholic drinks may feel like a cause for celebration for those who indulge over the Christmas season — but for some B.C. wineries and breweries, it’s a different story.
The alcohol producers say while the two-month federal tax break could cut costs for consumers, those making the beverages are still having to remit the Goods and Services Tax (GST) back to the B.C. Liquor Distribution Branch (LDB).
Their concern comes after the LDB sent manufacturers an email saying that, due to the technical risks of implementing complex system changes during the tax holiday, some manufacturers would have to continue remitting GST to the branch.
“We understand that manufacturers face many of the same systems challenges as the LDB, and may or may not have the ability to relieve GST,” an email to manufacturers reads.
“Thus, there will be no change in the reporting process, and the LDB will be calculating GST on all sales reported in the [sales reporting] application.”
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Given that the five per cent GST on beer and wine is no longer being charged to consumers, small alcohol manufacturers say they’re facing a 10 per cent shortfall as they’re having to remit the GST out of their own bottom line.
“So they’re paying that GST on that product and being billed for that product, but yet are unable to levy that GST in order to recoup that same cost,” said Teresa Townsley, the owner of Festina Lente Estate Winery in Langley, B.C.
She’s among the winery and brewery operators asking the LDB for leniency during the two-month tax holiday, especially as they already face a downturn in revenue during the lean winter season.
Townsley’s meadery and winery manufactures over a dozen products. Even though her consumers won’t have to pay the GST, she says manufacturers will still have to remit the GST to the LDB. (Sohrab Sandhu/CBC)
Townsley’s winery and meadery produces over a dozen products. She says the LDB’s unclear instructions will make tax paperwork very confusing.
The winery owner says manufacturers were only notified of the LDB’s intention to continue charging GST the night of Dec. 13, one day before the tax holiday went into effect — with the winery already scrambling to implement the tax changes to their cash registers.
“I think it was a bit of a nasty little trick to bring this forward when we were definitely distracted trying to upgrade our systems,” she said.
The Faculty Brewing Company, which makes a range of beers and kombucha drinks, is seen on East Vancouver’s Ontario Street. (Sohrab Sandhu/CBC)
Mauricio Lozano, the owner and operator of Vancouver’s Faculty Brewing Company, says he was disappointed to see that the LDB had cited the complexity of changing its systems as the reason it would continue to charge GST.
“The attitude was what I felt was concerning,” he told CBC News.
“Because as a small manufacturer, you want to comply. And here you have this very big controlling branch of the liquor distribution just saying, ‘Well, our system is too complex.'”
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Lozano estimates he’ll be out at least 20 per cent of his payroll due to the GST shortfall, amounting to thousands of dollars, which is of particular concern given small businesses like his run on credit lines and tight margins.
“We’re coming into this low season for liquor manufacturing, which is January and February,” he said. “And so that is definitely a cash concern.”
Liquor branch acknowledges impacts
In a statement, the LDB said it made all reasonable efforts to comply with the tax holiday, and would work with manufacturers on a case-by-case basis to minimize impacts to cash flow.
“Due to risks created when trying to change LDB’s systems for the two months of this program, the LDB will work with industry associations and B.C. manufacturers that direct deliver to mitigate financial impacts,” the statement reads.
“At this time, we believe the impacts will be small, but the LDB is continuing to work with industry to learn more.”
The B.C. Liquor Distribution Branch says it will work directly with manufacturers who are affected by the tax changes, and estimates the impact will be small. (Ben Nelms/CBC)
Lozano is asking the province and Canada Revenue Agency for flexibility when the time comes for audits and tax paperwork, given the confusing nature of the tax holiday rollout.
“I think the government should have a lot of leniency and a lot of tolerance for mistakes for people that weren’t able to adapt right away,” he said.