DISTILLERY FACES ONTARIO IN COURT FOR RIGHT TO SET ITS OWN WHISKY PRICES.
TORONTO •A new Toronto distillery that says the Ontario taxes it collects are unconstitutional since the legislature never voted on them, will get its day in court Thursday. Toronto Distillery Co. Ltd. opened its doors two years ago, and also opened its own retail store, to sell the liquor it distils from rye, corn, wheat and beets.
It is the first distillery to open in Toronto since 1933. The two owners, Jesse Razaqpur and Charles Benoit, are both lawyers, a training they say is key when navigating Ontario’s complex and byzantine regulations around the distillation and sale of spirits.
A bottle of winter wheat whisky at Toronto Distil- lery costs $ 33.34. Of that, the Liquor Control Board of Ontario gets $ 13, Ottawa gets $ 2.19 in excise tax, and Ottawa and Ontario share $ 3.82 in HST. The province collects a 14 cents bottle levy, a 10 cents container deposit and a nine cents environment fee. The distillery keeps just $9.92.
“If they are intent on taking more than $20 for every bottle that we sell, then there is no prospect for going forward,” said Benoit, 32, an Ottawa native who worked as a lawyer in New York before opening the distillery with his high school friend. “We are paying for our own trucks and our own employees.”
Ontario rules allow startup breweries and wineries to remit smaller portions of what they earn from sales at their premises.
But distilleries don’t get to keep a penny more for bottles they sell themselves than bottles sold at LCBO stores.
The distillery makes the age- old argument that Ontario’s rules amount to taxation without representation, which they say runs afoul of section 53 of the Constitution Act of 1867.
The issue in this case is that the LCBO is forcing the applicant to remit a mark-up that is in fact and law a tax, without any basis in legislation or even regulation,” Toronto Distillery argues in court documents filed in the Superior Court of Justice. “In our case the respondents cannot point to any statutory law or regulation directing payment of the mark-up.”
But Ontario argues in court documents that the steep markup it imposes on hard liquor “reduces the social costs of excessive consumption by avoiding the proliferation of points of sale, restricting the availability of cheap liquor.”
The Alcohol and Gaming Commission of Ontario, which regulates spirits sales in the province, says Ontario is not in fact taxing the liquor, since under provincial law producers must sell all alcohol they make to the province, which is the only one permitted to sell it to the public.
“The LCBO’s liquor, sold by the applicant on the LCBO’s behalf, is Crown property. The LCBO mark-up is a proprietary charge, not a tax, and therefore cannot fall afoul of s. 53,” the commission said in court documents.
High prices for spirits are good social policy, the LCBO argues in its court response.
“Since at least 1960, studies have consistently shown that the price of alcohol has a strong correlation with both alcohol consumption and alcohol-related problems,” the document reads, “including alcohol-related diseases and alcohol- related traffic collisions.”
Spirits sales are also very profitable to the LCBO, which earns 59 cents for every $ 1 of spirits it sells, compared to just 39 cents for every $ 1 spent on beer.
Benoit said he is confident that he will win the case.
“Blood was shed for this in Ontario,” he said, as an odour of stewing organic sugar beets filled the distillery. “It’s responsible government.
“Taxes have to be voted on by the legislative assembly. We are a real business here. We are working the fruit of the land. They are saying, ‘All this product, give it to us, and sell it for us, and we can keep more than half.’ They can go straight to hell.”