The Manitoba government will no longer require cannabis retailers to submit Social Responsibility Fee (SRF) payments for 2022 or 2023.
In a bulletin sent to cannabis retailers on May 18, Manitoba Liquor and Lotteries (MBLL), the agency that oversees cannabis in the province, says they are suspending the six percent fee immediately while they wait to pass legislation that will formally repeal the fee going back to January 2022.
Effective immediately, the MBLL will pause the payment withdrawal process for all unpaid SRF assessments that have been approved but not yet processed and will pause efforts to validate 2022 amounts owing for any outstanding bills.
The legislation, Bill 10, was introduced in November 2022 and initially proposed to repeal the fee payments back to January 2023. The government now says they will extend this back an extra year, eventually offering refunds to stores that had paid into the program beyond that date.
Refunds will not be issued until the legislation is passed. A report stage amendment has been on the orders of the day for Manitoba’s House of Commons but has not yet been entered into record. The opposition is not expected to oppose the amendment or the bill.
The six percent fee had been levied on retailers’ sales, to the tune of tens or even hundreds of thousands a year in the case of some larger chains. The government said they were repealing the fee partly because the expected social costs of legalization didn’t come to fruition. In a recent committee meeting, numerous retailers expressed the challenges they faced even trying to pay the fee, and asked the government to push the repeal back by a year.
A spokesperson for Manitoba’s Department of Finance says that while the final amount expected to be refunded to retailers isn’t yet known, it estimates that the SRF would have generated $10.5 million in 2022. The 2022 regulatory costs are estimated at $1.1M. They also note that this is the beginning of more expected changes to help cannabis businesses in Manitoba.
“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; once this legislation is in force, the province of Manitoba will look at entering the federal excise tax agreement.”
In a recent back and forth with the NDP’s opposition critic on the cannabis file, Adrien Sala, Manitoba’s Minister of Finance, Cliff Cullen, said the province estimated it had taken in around $18 million from the fee—$10 million in the over the past year and about $8 million in the year prior.
The Minister of Finance also admitted that the provincial government could not account for how they had spent the money intended to address social costs related to legalization.
Kerri Michell, the president of Farmer Jane Cannabis Co, which has a half dozen stores in the province, says the change to provincial regulations will greatly help retailers.
“Challenging regulations, including one of the most unfavourable tax structures in Western Canada, have hindered potential expansion into Manitoba,” says Michell. “With the removal of the SRF, the province becomes open for business from a retailer’s standpoint. Moreover, Bill 10 holds immense significance in achieving federal legalization goals by creating a healthy industry.
“Additional taxes (like the SRF) make it extremely difficult to create a sustainable and profitable business, which ultimately drives purchasing back to the illicit market. If repealed back to January 2022, many independent stores will now be able to operate sustainable and profitable businesses and avoid potential layoffs and closures. I’m grateful the industry is coming together to support positive changes!”
Todd Friesen, a manager at Supercraft Cannabis in Ste Anne, says he was pleasantly surprised by the new announcement, and by the government’s commitment to respond to industry calls to extend the refund back to January 2022.
“I applaud them for this. I think they’re being very proactive by releasing that statement, and this is going to assuage fears that if this doesn’t get passed by June first, they’re still going to be able to keep the lights on. I’m impressed that they rescinded too quickly to this amendment and to issuing this stop payment until this is settled.”
Friesen says he also has to give credit to Adrien Sala for helping to bring in retailers to the May 10 committee meeting that seems to have pushed the government to make these changes.
“He worked with several retailers to really push for that meeting,” he adds. This has been a long, arduous process to get to this point, with a lot of work from a lot of people. It’s nice to see the community come together and actually be able to achieve something.”