Tories about to throw $10-M lifeline to pot stores By: Danielle Da Silva Posted: 7:00 PM CDT Tuesday, May. 16, 2023 Last Modified: 10:27 AM CDT Wednesday, May. 17, 2023 Updates

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Millions in provincial revenue from cannabis sales could go up in smoke as the Tory government looks to further repeal taxes owed by cash-strapped retailers.

A proposed amendment to Bill 10 — introduced by the Progressive Conservatives last fall — would repeal the six per cent social responsibility fee on gross cannabis revenue, which is paid by retailers, retroactive to Jan. 1, 2022.

As written, Bill 10 (The Liquor, Gaming and Cannabis Control Amendment Act – Social Responsibility Fee Repealed) would eliminate the fee retroactive only to Jan. 1, 2023. During public hearings on Bill 10, cannabis retailers urged the government to go even further and waive fees owed for 2022.

The amendment proposed by Finance Minister Cliff Cullen could cost the government about $10.5 million in revenue in 2022.

AAAAA Supercraft Cannabis manager Todd Friesen said the fee “kneecaps” retailers who are struggling to pay the bills while competing with the illegal cannabis market.

Fees for the past year are due at the end of June and some stores will be forced to close this summer if the legislation passes without the amendment, he said. Retailers who don’t pay the fee risk losing their sales licence.

“I would implore that this government get moving and get this bill passed as quickly as possible,” Friesen told reporters at the Manitoba Legislative Building on Tuesday afternoon.

“We can then inject that cash back into our business, lower our prices, bolster our employment, get better education out there, and help stamp out the illicit market,” Friesen said.

“We can then inject that cash back into our business, lower our prices, bolster our employment, get better education out there, and help stamp out the illicit market.”–AAAAA Supercraft Cannabis manager Todd Friesen

He was joined by fellow cannabis store operator Shannon Sala and Manitoba Liberal Leader Dougald Lamont, who grilled the Tories about the social responsibility fee during question period.

“The government has done an incredibly bad job of the cannabis rollout,” Lamont said, noting he supports Bill 10 and the proposed amendment.

The St. Boniface MLA accused the government of ignoring the black market and failing to enforce retail cannabis laws that give licensed retailers a shot at success.

“There absolutely has to be crackdown on the black and grey market,” Lamont said.

“There absolutely has to be crackdown on the black and grey market.”–Liberal Leader Dougald Lamont

The social responsibility fee was introduced in 2018 when recreational cannabis was legalized to “ensure retailers share in the social costs of public education, safety, health and addictions,” according to the government.

It was imposed in lieu of charging PST on cannabis and to fund regulatory efforts.

If Bill 10 passes, the Manitoba government will look at entering the federal excise tax agreement, which is expected to be revenue neutral going forward. The province opted out of the program in 2018.

Currently, cannabis retailers pay the federal government’s 25 per cent share of the excise tax but not the 75 per cent share other provinces collect.

Finance Minister Cliff Cullen said the province estimates 50 per cent of cannabis customers have moved to the legal market and there are 175 stores across Manitoba.

“Once we eliminate the social responsibility fee, we will have one of the most competitive pricing for cannabis in the country,” Cullen said in question period.

Essential Cannabis owner Shannon Sala said retailers regularly educate their customers about cannabis and consumption limits as part of doing business. However, it’s unclear how the government has spent the money it collects through the social responsibility fee.

“We’re simply asking to keep our own money as means to carry on our business and we look forward to the prompt amending of this bill and having it pass before the session ends,” Sala said. The house will rise for the summer on June 1. The election is scheduled for Oct. 3.

“We’re simply asking to keep our own money as means to carry on our business and we look forward to the prompt amending of this bill and having it pass before the session ends.”–Essential Cannabis owner Shannon Sala

Friesen said he expects stores that have paid the tax will receive a rebate and others trying to scrounge up the money to pay their bill will have a weight lifted from their shoulders, if the legislation passes.

“We will be able to actually get a month’s worth of inventory back into our shop and not have to worry and penny pinch and fret and have our stores be bare and empty,” Friesen said, noting financial challenges and product pricing have made it difficult to attract customers from the black market.

“If you don’t have cannabis in legal cannabis stores, you’re going to have to find it somewhere else.”

“If you don’t have cannabis in legal cannabis stores, you’re going to have to find it somewhere else.”–Todd Friesen, AAAAA Supercraft Cannabis

According to the government, the cannabis market has matured and regulatory costs, estimated to be $1.1 million last year, have stabilized.

A request for comment from Cullen was not returned on Tuesday. Instead, the government provided a statement from an unnamed spokesperson for the finance department.

“As of Jan. 1, 2022, cannabis retailers will no longer be required to pay the social responsibility fee,” the spokesperson said.

“Cannabis retailers set their own retail price for product and we expect that the repeal of the social responsibility fee will be reflected in what consumers pay,” the statement said.

“Repealing the social responsibility fee is the first step in providing business owners in the cannabis sector with more financial room to build their business.”

danielle.dasilva@freepress.mb.ca