Ontario may soon allow direct-to-consumer wine imports from other provinces. Will high taxes kill the program?

Toronto Star

5 hours ago

For small Canadian wineries, the removal of trade barriers between the provinces — meant to boost Canadian industry in the face of Trump tariffs — could be a once-in-a-lifetime chance to reach customers from coast to coast.
But for one B.C. winery, the barrier went up again almost as soon as it came down.
The Alberta government, which in January announced a promising direct-to-consumer wine program with B.C., announced in March that it was introducing a three-tiered tax on wine, including B.C. imports.
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The new tax adds five per cent to the price of wholesale wine ranging from $15 to $20 per litre, 10 per cent for wines ranging from $20 to $25 a litre and 15 per cent for wine priced at $25 and up. The new tax is being applied on top of a $3 levy that was already in place on any 750 ml bottles of wine sold in Alberta.
The result is that a premium bottle of wine 'ends up being just ridiculous — prohibitively expensive,' said Mireille Sauvé, the general manager and winemaker at B.C.'s Lakeboat Vineyard and Winery in the heart of Okanagan Valley, which opted into the direct-to-consumer program, but has now stopped exporting wine to Alberta.
Sauvé, who became Canada's youngest sommelier when she was certified in 1997 and the first female sommelier in B.C., said her winery produces about 2,000 bottles a year that it sells primarily to private liquor stores and restaurants in the province.
'I think that Ontario, Nova Scotia, and B.C., we all have really fantastic wine industries that we don't get to see. And I feel like that's absolutely tragic,' said Sauvé. 'And the fact that it's significantly easier for us to get Italian wine, French wine, South African wine, than it is for us get wine from our own country — a travesty.'
It's been two years since a national model for direct-to-consumer wine sales was agreed to by the federal, provincial and territorial governments, said Dan Paszkowski, president and chief executive officer of Wine Growers of Canada. But the plan is only moving forward now because of an unprecedented push to remove trade barriers in the face of hostile U.S. tariffs.
'On a reciprocal basis, the provinces are starting to engage in discussions,' said Paszkowski. 'And the fundamental part about this is what level of tax are you going to apply to wine that goes through the direct consumer delivery channel.'
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His organization is advocating for a nominal levy to cover regulatory costs, such as tracking every bottle of wine that enters a province — but not a tax that will price the wine out of the market.
In reference to Alberta, Paszkowski said, 'you've taken away an internal barrier to trade and you put in place an internal tax barrier.'
Provinces incur little cost with direct-to-consumer sales, said Paszkowski. Wineries take the orders, collect the taxes, package the wine and ship it to the customer. Unlike the LCBO, which he said has a more than 70 per cent markup on wine, provinces have 'no warehousing cost. There's no retail operating cost, no staffing, no marketing,' he said.
Wine for private consumption was allowed to cross provincial borders as early as 2013, thanks to the passing of the Inter-Provincial Importation of Wine, Beer and Spirits Act. But Paszkowski said only Manitoba, B.C. and Nova Scotia set up programs and interprovincial imports weren't taxed.
Ontario has recently signed a number of non-binding agreements, called Memorandums of Understanding, to explore direct-to-consumer alcohol sales with other provinces, including Nova Scotia, New Brunswick and Manitoba.
When asked if Ontario would tax wine imports similar to the Alberta model, the province said that it 'is currently in the design stage and further details will be available as the framework is finalized,' according to an email from Scott Blodgett, a senior media relations adviser in the Communications Services Branch.
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' Ontario is committed to establishing a DTC sales model, for personal consumption, that ensures fairness and competitiveness for Ontario producers,' said Blodgett, noting the program 'would open new domestic markets for local alcohol producers, which will stimulate economic growth, and create the conditions for increasing consumer choice and convenience.'
Four million people visit Canadian wineries each year, said Paszkowski.
For many small wineries, whose wine isn't in liquor stores because they don't produce enough volume or can't make enough of a profit, sales depend in part on how many people drive down their gravel roads to visit.
'If we had direct consumer delivery, possibly all the wine that they sell could enter into that channel,' said Paszkowski.
Sauvé said Lakeboat has only ever sold to Alberta customers through direct-to-consumer channels, which she said is common for B.C. wineries, because Alberta requires that all wine be centrally stored at its Alberta Gaming, Liquor and Cannabis warehouse in Edmonton. And that requirement can result in excessive shipping costs for B.C. wineries that are far away.
Sauvé also said that AGLC's warehouse costs are the highest in the country.
When Alberta introduced its direct to consumer model, charging a flat tax of $3 a litre, Paszkowski was 'touting it as the best model ever put forward in Canada.
'Then they put another level of tax on top of it and it kills the market.'