Changing the federal excise rate has been at the top of the industry wish list since legalization began, but making logistical changes to how the program is managed can also make a big difference.

That’s one of the messages from a recent meeting held by the Cannabis Council of Canada (C3) on October 1 in Ottawa that brought together industry leaders and government officials for a half-day of panel discussions. 

One of the subjects highlighted by the recent meeting was changing how the excise stamps used by producers are implemented, and can save the industry millions of dollars a year in staffing and logistics alone. 

Call for a single federal excise stamp

Moving to a single, federal excise stamp rather than 13 provincial and territorial stamps is a great example of one of these changes, says Orville Bovenschen, President of Pure Sunfarms. Pure Sunfarms is a member of C3 and a subsidiary of Village Farms International.

Based on the extra costs involved with managing all these different stamps and ensuring they are being sent to the correct jurisdictions, he says it could save his company around one million dollars a year. This compares to $78.3 million the company incurred in excise tax for the year ended December 31, 2023.

“It’s not just us,” says Bovenschen. “If you look at small producers, medium-sized producers, it’s very complicated for them as well. A change like this can make it easier for us to operate and become more profitable. I think this is much easier to achieve before we get to the bigger issue of the excise tax itself.”

He notes he’s encouraged by events like the recent C3 meeting in Ottawa, and seeing representatives from Health Canada and CRA in the room, listening and engaging. While he knows the industry is very frustrated by a lack of movement on big ticket issues like the federal excise rate, he sees collaboration as the only real viable path forward. 

Changing the excise rate is complicated, he admits, which is why solutions like these could make more sense in the more immediate term. 

“I think it could be an achievable win. Nothing is easy but I think it can be a much needed win for everybody. For the government, for us. I don’t think there’s a single person that isn’t aligned with this idea of having one single stamp for the entire industry.”

Challenges for smaller cannabis businesses

Highlighting some of these logistical issues, another cannabis producer in BC, Dylan King, CEO of Pistol and Paris, who processes and sells cannabis from an array of micro and craft producers, says the deposits the CRA requires them to pay upfront are often very difficult for his company to meet. 

While King says he’s accepted the excise rate as something that won’t change anytime soon, being forced to pay upfront before they even receive payment for the cannabis they sell into provincial markets pushes his small business to the limit. The company currently pays around $200,000 a month in excise.

“As I pay more and more excise every month as my company grows, the CRA wants to keep upping our security deposit with them,” says King. “I started with a $5,000 deposit. Because my company grew so fast they now want over $200,000 deposit. Again, where am I supposed to just come up with an extra $200,000 that I dont have sitting around for a deposit?”

Another issue, says King, is he was recently hit with a tax bill for 130 kilograms of cannabis stolen from his facility in a rare break-in in 2023.

“A year later the CRA gave me an excise tax bill for $130,000,” explains King. “I thought there was some sort of mistake, but there wasn’t. They told me that due to the loss of the 130 kilograms, because in their eyes it was destined for the Canadian market, they didn’t get their excise. 

“I was in shock. I don’t have an extra $130,000 to pay them as I’m already out $200,000 from the loss. The flower that was stolen was bulk and not excised so it just makes no sense.”

King says he will be fighting this bill. 

Tremendous amount of waste

In an equally frustrating issue on the other side of the country in New Brunswick, Jonathan Wilson at Crystal Cure—a micro producer who recently revoked their licence—posted a video online explaining how they had to deal with all the stamps they had on hand as they went through the process of closing their facility. 

This included counting tens of thousands of individual stamps and then burning them rather than being able to sell or otherwise transfer them to another producer. 

“Tell me again that there’s not a tremendous amount of waste,” he asks.

“The excise stamps are absolutely ridiculous, for many reasons,” says Wilson in the video. We know that we can already know where the product is going without the use of a stamp. We report it, and they report it back. It’s there. We see it in beverages/alcohol, and it works fine. We’ve just been hit with a much more convoluted system as punishment, it seems.”

Jen Meyers, CEO & Founder of micro processor Zelca Ltd., and a member of C3, says events like the recent C3 summit in Ottawa help rally the industry around these specific issues. 

“The summit successfully brought together key stakeholders from industry and government, fostering productive dialogue toward a sustainable future,” Meyers told StratCann in an email. “It reflected both the maturation of our industry and C3’s evolution under new leadership, uniting a strong and diverse membership.

“Excise reform remains crucial. A simple solution, such as changing ‘10% or $1 per gram, whichever is greater’ to ‘10% or $1 per gram, whichever is lesser,’ could provide much-needed relief without reinventing the wheel. 

“Additionally, the discussion around adopting a universal stamp would significantly ease the regulatory burden, especially for small producers selling across provinces.”

Related Articles

The rocky road to excise duty reform

February 28, 2024

Canadian Cannabis Leadership Summit 2024 in Ottawa

September 20, 2024

C3 announces new president, a former Canopy exec with extensive public service experience

April 2, 2024