Cannabis, Canada, and the taxman.
Only two things are certain in life, death and taxes.
Living in Canada, the shame of trailing behind our southern neighbours in terms of cannabis reform is slightly outweighed by a general feeling of optimism due to the promise of a Trudeau cannabis regulation plan come spring 2017.
Despite this rosy disposition towards the future of the industry, the looming figure of the CRA (Canadian Revenue Agency) casts a shadow of uncertainty upon the otherwise sunny green fields of potentially legal bud; the issue causing the most concern stems from back taxes. There are upwards of 180 dispensaries currently operating in Vancouver alone, and only a handful of them are licensed and legally vetted. Almost all of these stores have been operating purely on cash transactions and many of them produce inadequate paper trails for tax purposes. What will happen to these places once the CRA decide that it’s time to cash in on the millions upon millions of untaxed revenue these stores have been generating? It is highly skeptical that the taxman will be as forgiving as to allow these dispensaries a free pass on their earnings for the past few years.
To draw upon a smaller scale example of an industry hit by the CRA with owing back taxes is the case of casino workers in 2015. The issue stemmed from how gratuities were treated by the casino itself; tips for card dealers and slot attendants were collected in a pool by the casino before being divvied out to each worker equally. This was standard operational procedure in casinos for several decades. Then it was decided that such a way of collecting and distributing gratuities should be considered as wages, and therefore needed to be taxed. Suddenly, casino workers earning $8.5 to $13 an hour owed the CRA upwards of ten thousand dollars in back taxes accumulated over approximately three years.
What the taxman wants, the taxman gets. What will happen to the cannabis industry if the CRA decide that they want a slice of the pie? What would this mean for local dispensaries? Would this destroy small business in cannabis and pave the way for a type of “Big Cannabis” industry of a select few licensees? This may spell the end of craft cannabis in Canada as we know it today, pushing it back into the obscurity of the black-market. One can only hope that the federal government looks upon the successes and failures of our brothers and sisters in the States to tailor their policy so that this does not happen.
There is a strong case to be made for preparing for the worst. Having some semblance of a sales tracking system or a record of transactions can help limit the amount of taxes one would owe; if a store had no records at all, what is to stop the CRA from assigning a completely arbitrary amount of back taxes to a dispensary? Small business owners are an integral part of our cannabis economy, and it is important that they remain so. They must protect themselves and prepare for all outcomes, and that means providing adequate sales records if the occasion should arise.
Greenline Systems is a cannabis technology solutions company based in Vancouver. Interested in our monthly newsletter? Contact us at info@getgreenline.co
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