Taxes taxes taxes. We knew they were coming, but we just didn’t know how much- until now. According to reports, BC could be charging up to 40% in assorted fees, taxes, and mark-ups for their cannabis.
Let’s break it down.
Earlier this week, the BC government announced its plans to implement a 15% mark-up on cannabis, and that’s on top of the already announced 10% federal excise tax (or $1 per gram, whichever is higher), of which the provinces will get 75% and the feds 25% of the excise tax revenue- which has been projected to generate anywhere from $400 million to $1 billion.
Cannabis sales will also be subject to 5% GST and 7% PST, and in addition to all of that, the government is also considering levying a 2.3% cost-recovery fee on licensed producers, which is a fee often charged for services like regulatory activities.
Add all those assorted costs together, and you get 39.3%!
The 15% mark-up on cannabis will be charged on its landed cost, which means it includes all the associated costs it takes to get the cannabis to the BCLDB’s doorstep, like “the original price of the product, transportation fees, duties, taxes, packaging and handling”, according to the Squamish Chief.
So how much could cannabis cost in BC?
According to the Financial Post, the BC Liquor Distribution Branch is aiming to buy cannabis off the licensed producers at “an average of $3 or $4 per gram”, but many have pointed out that buying at prices that low threaten to bar micro-producers from the market entirely and will make it difficult for even medium licensed producers to survive.
As Dan Sutton, CEO of licensed producer Tantalus Labs, said, “Essentially we don’t have a business at $3 a gram… The micro, micro market won’t have a business at $6 a gram”.
So if we take that $6 per gram price as the landed cost of cannabis and add the 15% mark-up, that brings the price up to $6.90.
Add the 10% excise tax, and we get $7.59.
Factoring in GST and PST brings the price up to $8.50, and with the “cost-recovery fee”, we get a total price of $8.70.
But that’s not even considering the retailer’s mark-up because they need to make money too!
According to Seattle Business, CPC, “Washington’s first and most trusted cannabis company”, according to its website, has an average mark-up of 37% on its cannabis, and if we assume that dispensaries in BC have a similar mark-up, that would give us a retail price of $11.92.
That’s already higher than the average price per gram in BC, as according to a Stats Can survey from earlier this year, British Columbians pay $6.97 per gram, making $11.92 a price increase of 71%- and that’s a lowball estimate!
That’s not even the end of it either as we can probably expect prices of $15 per gram and beyond depending on potency, which all but guarantees the black market will continue to boom under legalization which flies directly in the face of all the government’s rhetoric about how cannabis was legalized in order to fight the black market.
Why is the government encouraging the black market with exorbitant cannabis taxes?
Maybe it’s because they’re secretly hoping to keep people buying that illegal weed so their friends in law enforcement and the legal system can keep busy and their jobs?
Because it does nothing to combat the black market because the illegal cannabis will not only be cheaper, the quality will be better in most cases too.
For comparison’s sake, alcohol sales in BC are subject to 10% PST, 5% GST and a refundable container deposit (if applicable), which is usually 5 cents.
In other news, LP’s begin applying to BC Liquor Distribution Branch to have their products in stores
In a press release, BCLDB CEO Blain Lawson said, “There are more and more licensed producers coming online, and we are committed to working with them to ensure our product assortment remains as competitive as possible in order to compete with the illicit market.”
The BCLDB has already agreed to carry and distribute the products of 32 licensed producers.
Featured image courtesy of Time Money.
Sources
BC Liquor Distribution Branch: FAQS.
CBC: Pot consumers paying less than $7 a gram, Statistics Canada survey finds.
Financial Post: B.C. cannabis advocates warn small-scale producers could be shut out of legal market.
Seattle Business: Cannabis Conundrum.
Squamish Chief: B.C. government sets 15% mark-up on cannabis, starts accepting applications for retail stores.