Several cannabis retailers are telling the Manitoba provincial government that they support its efforts to repeal a six percent fee charged to stores, but say the government needs to go even further.
During a meeting where the Standing Committee on Social and Economic Development discussed Bill 10—a bill that would repeal Manitoba’s six percent Social Responsibility Fee (SRF) charged to retailers—retailers discussed the often dire economic circumstances many are facing, in part due to the fee.
The SRF was originally intended to offset the cost of legalization borne by the province. The provincial government now says those expected costs did not bear out, and cannot say where the money from that fee has gone.
Retailers have been paying the fee since June 2022, and the provincial government says they now want to repeal the bill retroactively to January 2023. However, several retailers who came to share their support for the bill also said they would like to see the change made retroactively to January 2022.
Cliff Cullen, the province’s Minister of Finance, told retailers and other speakers that he would take their concerns under consideration as they continued to discuss the bill. The committee passed the bill, which will now be sent back to the House for third reading, along with a report.
Several of the retailers who spoke shared their concerns with many owners’ ability to pay this year’s SRF, due June 30, and said stores pay tens of thousands or even over $100,000 a year in SRF fees. Because this is taken from their revenue, not their profits, some store owners say it is very difficult to maintain profitability.
Todd Friesen, a manager at Supercraft Cannabis in Ste Anne, who was the first of about ten stores represented at the meeting, said the fee is taking money away from small business owners. Given that the government says the fee wasn’t even used for its intended purpose, he considers it misallocated.
“I would suggest that this is borderline fraudulent, and we want our money back so that we can continue to run and grow this industry as we have, year over year,” said Friesen.
Sean Stewart, the owner of Supercraft, says their annual SRF bill has been as high as $142,000, and in their first year of operation, the fee put them into the red.
Shannon Sala, the owner of Essential Cannabis Company in Selkirk, who also said the fee should be repealed back to 2022, tried to convey to the committee that the industry is not awash in cash as some might think, with the smaller independent stores most impacted.
“The Manitoba cannabis industry currently has approximately 170 cannabis retail stores, with 70 percent of those stores being independently owned and operated. We are not big publicly traded companies with access to lines of credit and payroll loans. But we are the majority of cannabis stakeholders in Manitoba. While many businesses and industries are receiving financial help as they slowly try to recover from the pandemic, we are not.”
In response to one question from another retailer, Minister Cullen also shared that the Manitoba government is in conversation with the federal government around the federal cannabis excise tax, something the provincial government has discussed in the past. Manitoba is the only government that opted out of participating in the federal excise tax, but has suggested they may revisit that agreement.
The bill will still need to pass third reading before coming into effect. No changes to the bill were added during their vote.
The meeting can be viewed here.
Cannabis sales brought in over $24 million for Manitoba in 2021-2022 (Year ending March 31) after all operating costs and allocations. This was up nearly 75% from the earnings in the previous year of $14.1 million.
Although it doesn’t break down specific cannabis dollars, the province released more than $11 million in social responsibility funding in 2021-22 and more than $12 million in the previous year.
Revenue generated by cannabis operations in the province was $113.9 million in 2021-22, an increase of $33.7 million, or 42 percent from revenue of $80.2 million in the prior year. Manitoba also launched a “cross docking” service in 2022 to address some of the challenges the province’s direct-to-retail distribution can pose.