Cider still Canadian wine, federal court rules in tax dispute

The Federal Court of Appeal has ruled on what can and can’t be considered Canadian-made wine, at least for tax purposes.

The court dismissed the government’s appeal of a prior tax court ruling, sparing a British Columbia cider-maker roughly $2 million in duties. The ruling means the cider still qualifies for a made-in-canada exemption even though it added some concentrated apple juice made from foreign apples.

To come to that conclusion, Federal Court of Appeal Justice Wyman W. Webb embarked on discussion of the wildly complicated question of when wine becomes wine.

First, Webb establishes that the cider in question — Okanagan Premium Cider and Extra Hard Cider, produced by the Mark Anthony Group — is wine. Mark Anthony crushes and ferments Canadian-grown apples. That meets the Excise Act’s definition of wine, which includes any alcoholic beverage made from fermenting plants (other than grains).

“The cider in issue is in this appeal is wine,” Webb wrote in his June decision, which the court published online Tuesday.

The Excise Act imposes duties on alcohol, but allows an exception for Canadian-made wine. But the CRA argued Mark Anthony’s cider didn’t qualify for the exemption because Mark Anthony added foreign-sourced apple juice concentrate before packaging the liquid. Also, in a small portion of the cider, Mark Anthony fortified its cider using foreign spirits.

A central question, for Webb, was when to test a wine’s Canadian-ness. The CRA argued that the test should occur at the time a wine is packaged. At that point, the wine in question would include non-canadian apple juice concentrate.

But Webb looked to the text of the exemption, which refers to wine “produced in Canada and composed wholly of agricultural or plant product produced in Canada.”

“Wine is produced when it is brought into existence by fermentation,” he wrote, quoting a definition in the Excise Act.

“Therefore, in my view, the test for wine that comes into existence by fermentation is to be applied at the time that the agricultural or plant products are fermented,” Webb wrote, agreeing with the Tax Court judge who ruled in favour of Mark Anthony in 2017.