Judge needs time in distillery case
TORONTO •A distillery founded in Toronto two years ago said Thursday it will have to close if it loses a constitutional challenge against Ontario’s rules for the sale of spirits.
“If we lose this, we’ re done,” said Charles Benoit, 32, co-founder of the Toronto Distillery Co.
Laughlin MacEachern, a tax lawyer in Alberta who went to high school with Benoit and Toronto Distillery’s other co-founder, Jesse Razaqpur, appeared for the distillery in the Superior Court of Justice.
The mountains of factums and books of authorities tabled by the government illustrated the extent to which the distillery has rattled Ontario, which was represented by five lawyers.
At the same time, if the distillery loses, and has to pay court costs — all the province’s lawyers and their research — it will put them out of business, they said.
The distillery, which distils small batches of spirits from local organic corn, wheat, rye, juniper and beets, right now may keep less than $ 10 on a bottle of spirits it sells in its store for $ 33.50, and must send the rest to governments. That usurious levy is a tax, it says.
“Now, I’m just a simple Prairie lawyer, but I do know a thing or two about tax,” MacEachern said. Since Ontario lawmakers never legislated a spirits tax, this markup violates Canada’s Constitution, he said.
“The principle ‘ No taxation without representation’ is central to our democracy.”
The founders of two other startup distilleries, Last Straw Distillery in Hillsburg, Ont., and Yongehurst distillery in Toronto, attended the court to offer support.
Scott Hutchinson, a lawyer for the Alcohol and Gaming Commission of Ontario, told the court that Ontario legislated a monopoly on alcohol sales in Ontario with three statutes: the Liquor Control Act, the Liquor Licensing Act and the Importation of Intoxicating Liquor Act.
“The monopoly is created to achieve both a regulatory and a revenue objective,” Hutchinson said. “For whatever reason the legislature has not fixed what taxes should be imposed if a retail store were to open in a distillery. If my friends think it makes sense to have a distillery store, they can apply for an authorization. They signed the deal. Maybe it works out for them and maybe it doesn’t.”
Margaret Jill Dougherty, appearing for the Liquor Control Board of Ontario, conceded that rules allow wineries to keep more of money from vineyard sales, compared with distilleries.
“There are health risks associated with higher alcohol content which don’t exist with wine and beer,” she said. “Government policy does not want to proliferate distilleries.”
Justice Suhail Akhtar appeared at one point to side with the distillery.
“If there was a social good (to a high markup on spirits) it would have been very easy for the legislature to impose a tax,” he said.
The judge said he will need some time to rule on the case. “This is not only complicated, but with ramifications across the province,” he said.