P.E.I.'s craft beer industry is calling on the province to follow New Brunswick's lead and permanently scrap a tax on beer sold directly to consumers from breweries.
The New Brunswick policy has been dubbed "no touch, no tax," meaning that since the province has no involvement with selling or distributing beer products, it is no longer imposing the tax.
But on P.E.I., a $0.25 per litre tax remains and applies to beer sold at breweries, including "to go" orders and, more recently, online orders for home deliveries.
Jared Murphy, CEO and co-owner (along with sales officer Dillon Wight and head brewer Spencer Gallant) of Lone Oak Brewing Co. in Borden-Carleton, wonders why there is a tax since the province has no part in online sales. He also says that consumers are also taxed when they purchase beer products.
"It's a product that we're producing and are selling directly to a consumer. And then, on top of having to pay taxes on the materials that we make the products out of, the customers are paying taxes to buy the products. We're paying another $0.25 per litre tax on top of that just for selling it, I guess," he says.
So far, the tax has added up to a little more than $1,000 a month for Lone Oak. As the summer approaches and assuming demand increases, that amount could grow to $2,000 or $3,000 a month.
"I mean, $2,000 or $3,000 a month, that's a full-time employee," says Jared Murphy.
Kevin Murphy, co-owner of the P.E.I. Brewing Company, and Jeff Squires, president and CEO, have been calling on the province to scrap the tax for more than a decade. Kevin Murphy recalls that at one point, the tax was $0.50 a litre, but around 2012, the province lowered it to be more competitive with New Brunswick and Nova Scotia.
Besides the tax on sales from breweries, the province also applies a $0.70 per litre tax on craft breweries for beer sold at P.E.I. liquor stores, Kevin Murphy says. "They're doing very well off us."
Given the volume of craft beer the P.E.I. Brewing Company produces in a year, these taxes per litre add up. But the greater concern is the impact the tax is having on the survival of smaller breweries, such as Lone Oak, that contribute to rural economies and communities and employ Islanders.
"We're looking for the $0.25 to go to zero, and it would be a part of permanent structure of doing business on P.E.I., no different than they have in New Brunswick," says Squires.
Kevin Murphy says it takes about three to five years for a craft brewery to be profitable. And, with four breweries opening in the past couple of years, the province needs to create an environment so these breweries can be sustainable during the pandemic. With usual revenue streams affected, such as restaurant sales and fewer liquor stores opened, along with the tax, he is also concerned that craft breweries on the Island could shut down as they have in other parts of Canada.
"We have nine great little breweries across Prince Edward Island, and it's part of our tourism product as well. We do not want to see any of them close," he says.
Craft breweries are part of the P.E.I. Craft Beer Alliance, which gives them a unified voice when dealing with the province. The alliance has been in contact with the government about this matter, and received written responses from Finance Minister Darlene Compton and the P.E.I. Liquor Control Commission in the past couple of months.
P.E.I.'s Craft Breweries:
- Barnone Brewery and Hop Farm (Rose Valley)
- Bogside Brewing (Montague)
- Copper Bottom Brewing (Montague)
- Lone Oak Brewing Co. (Borden-Carleton)
- Evermoore Brewing Company (Summerside)
- Gahan House (Charlottetown)
- P.E.I. Brewing Company (Charlottetown)
- Moth Lane Brewing (Ellerslie)
- Upstreet Craft Brewing (Charlottetown)
Compton was not available for an interview with The Guardian. But a statement from a department spokesperson says that "The P.E.I. Liquor Control Commission is aware of recommendations that were brought forth by the P.E.I. Craft Beer Alliance and they are (working) with the Board of Commissioners for further consideration." The statement further talks about government efforts to help the industry, such as waiving and renewing licensing fees from June 1, 2020, to May 31, 2021, and waiving marketing fees "until all stores are opened and customers have access."
P.E.I. Liberal Party MLA and finance critic Heath MacDonald also wants the province to adopt the "no touch, no tax" policy permanently.
MacDonald, also a former finance minister, says the department's response that the recommendations are before the board for further consideration isn't good enough.
"We're in the middle of an economic downturn that is going to be so important to keep these small businesses going. It's an unknown what is going to come out the other end. Are all these businesses going to survive? We're not a 100 per cent sure. And, some of them may not," he says. "So, it's no excuse to say it's something we're looking at. You make the decision now, and you provide some support. We're in unprecedented times. I can't believe that they would actually say that. (Compton) should just stand up and say 'I'm going to waive this, we're going to make this decision now, and then we'll make a decision further if it's going to be forever.'"
Jared Murphy says Lone Oak is more fortunate than some other businesses since there is demand for beer. This has allowed Lone Oak to stay open by taking online orders and making Island-wide deliveries for free. Even so, this isn't shaping up to be the summer Murphy was hoping for when the brewery launched last fall.
"You can't plan for a pandemic hitting four months into your operations, especially when you open in November a business that relies heavily on the tourist and summer season. So, you're sort of in survival mode as you open to get to that first summer season, and then you're in survival mode because a pandemic hits. It's been interesting. It's been all about adapting. We know that we're not the only ones affected. It's affecting everyone."
