Cannabis Retailer Social Responsibility Fee and Wholesale Mark-ups



Frequently Asked Questions

 

How will Manitoba price cannabis products?

Manitoba Liquor and Lotteries (MBLL) will apply a wholesale mark-up on non-medical cannabis, including a $0.75 per gram mark-up as a placeholder to the provincial share under the Canada-Manitoba Coordinated Tax Agreement, and a 9 per cent mark-up applied on top of the $0.75 per gram.

The mark-up is effective upon legalization and this approach is similar to that for the sale of alcohol in Manitoba.

The Manitoba government will also collect a cannabis retailer Social Responsibility Fee (SRF) on the annual revenues from the sale of non-medical cannabis by all provincially-licensed cannabis retailers. The fee is effective on January 1, 2019.

Manitoba will not apply the provincial sales tax (PST) on non-medical cannabis sales, but will continue to apply the PST to the sale of medical cannabis. The federal goods and services tax (GST) will apply to both medical and non-medical cannabis sales.

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Why are you not collecting PST on cannabis?

Charging the PST on cannabis would increase the cost to consumers and reduce the competitiveness of legal sales. Our goal is to keep the price for legal cannabis as low as possible to help end the illegal market.

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Why not just charge PST instead of the retailer Social Responsibility Fee?

PST would be paid by the consumer. By applying the SRF instead of PST, Manitoba ensures that all cannabis retailers are contributing to the social costs that will be associated with the use of non-medical cannabis.

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Why are you charging the PST on medical cannabis and not on non-medical cannabis?

PST is an existing tax on medical cannabis, but the Manitoba government will be reviewing its application on medical cannabis in the future. Medical cannabis is also not subject to the Manitoba Liquor and Lotteries' (MBLL) mark-up, because medical cannabis is federally regulated and distributed to licensed users.

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Why are you collecting the excise tax, the mark-up by Manitoba Liquor and Lotteries (MBLL) and also the Social Responsibility Fee (SRF)?

The mark-up is collected to ensure MBLL's administrative costs are met and to also cover costs to the Manitoba government. The mark-up is embedded in the final price paid by the end consumer.  Mark-ups will apply in all provinces that are using a provincial Crown to distribute cannabis.

The SRF is the retailer's contribution to the social costs of legalized cannabis, and is designed to apply after the retailer has earned revenues rather than as an up front cost that would increase the retail price.

All provinces are working with the federal government to finalize arrangements for the collection of excise tax.  As an interim measure and to provide certainty for retailers, the MBLL is including $0.75 per gram in their mark-up as a placeholder until these excise tax arrangements are finalized.

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How much revenue do you expect to generate from your fee and mark-ups, and what will these revenues be used for?

While the costs and revenues associated with this new market are very difficult to predict, initial projections indicate that the costs associated with the legalization of non-medical cannabis will exceed revenues from mark-ups and fees. Revenues from the SRF will be used to fund the many social costs associated with the legalization of cannabis, including addictions treatment and public education campaigns.

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What will Manitoba Liquor and Lotteries' (MBLL) mark-up be used for?

MBLL's mark-up of nine per cent will be used for its administrative cost recovery, and to cover some provincial costs associated with the legalization of cannabis. The mark-up is embedded in the price at the wholesale level and is ultimately paid by the consumer.

The mark-up may be adjusted to ensure that the retail price remains competitive and Manitoba accomplishes the goals of eliminating the illegal market and protecting our youth.

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What will the Social Responsibility Fee (SRF) revenues be used for?

The SRF and mark-up revenues (net of administration costs) will be used to ensure cannabis legalization protects vulnerable populations and to help eliminate the illegal market. This includes paying for the social costs that result from cannabis use (e.g., health and addictions, education, policing and enforcement, and court costs).

Campaigns are being developed about the dangers of impairment (related to driving, working), the greater safety of regulated and licensed products versus illicit products, the consequences of consumption and excess consumption, how to identify legal product, how much you are allowed to purchase, and what remains illegal.

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How does this fiscal framework impact First Nations?

Manitoba's retail framework allows First Nations to participate in this new market and earn profits for the benefit of First Nation communities.

First Nations cannabis consumers are impacted in the same way as non-First Nations consumers in that the Manitoba Liquor and Lotteries (MBLL) mark-up will be part of the price.  This is the consumer's contribution to the costs of legalized cannabis.

The Social Responsibility Fee (SRF) applies to all provincially-licensed retailers, including First Nation retailers, representing the retailers' contribution to the costs associated with non-medical cannabis legalization that will be borne by all Manitobans.

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Will First Nations with status exemptions pay taxes on cannabis?

First Nation Status Indians have a section 87 tax exemption, so retail purchases by a Status Indian individual or Band on a reserve will be exempt from the federal GST. PST does not apply to the purchase of non-medical cannabis.

The wholesale mark-up and Social Responsibility Fee are not taxes; the mark-up is included in the price paid by all retail consumers in Manitoba, including First Nations consumers. All licensed retailers must pay the Social Responsibility Fee as a condition of being able to hold a retailer licence in Manitoba.

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Why have you not signed the federal excise tax agreement?

Manitoba is waiting for the federal government to provide a copy of the agreement, given that Manitoba has announced its regulatory framework and Social Responsibility Fee, as is the normal protocol for such agreements.

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How does Manitoba's approach compare to other provinces?

All provinces agree on the need to keep prices low to ensure that we can eliminate the illegal market. Each province has developed a cannabis fiscal approach in line with their local markets:  some provinces have a hybrid approach (like British Columbia, Alberta and Ontario), or a fully private model (like Saskatchewan and Manitoba).

Like Manitoba, other provinces will apply administrative cost-recovery mark-ups to cover the cost of legalization. Provinces with a sales tax (PST or HST) will also apply these on sales.

Manitoba is uniquely not applying the PST to keep prices low.

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When will edible cannabis products be allowed and how will they be taxed?

The federal government has indicated its intention to legalize edibles within twelve months of October 2018. Manitoba's priority will remain the elimination of the illegal market and making sure that cannabis products are regulated in a way that protects public safety and vulnerable populations, like youth.


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