In a previous blog post, we discussed the high tax rates on Wine, Beer & Spirits products and the complex legal framework surrounding them.  In this 101 series, we will cover key topics, including Licensing Requirements, Audits and Assessments, and Enforcement Actions.  This first installment focuses on the Licensing Requirements for producers of Wine, Beer & Spirits products.  Licensing is often seen as the first step in compliance, and failure to meet these requirements can result in severe penalties, including fines, imprisonment, or both.

Wine Licence

Under subsection 62(1) of the Excise Act, 2001 (the “EA 2001”), a person is prohibited from producing or packaging wine without a Wine Licence, except in certain cases such as producing for personal use.  To obtain a licence, applicants must meet specific eligibility criteria, which vary depending on whether they are individuals, partnerships, or corporations.  A common requirement is that the applicant has to demonstrate sufficient financial resources to operate business in a responsible manner.

Brewer’s Licence

A Brewer’s Licence is mandatory for manufacturing beer under the Excise Act (the “EA”), except when brewing for personal use.  A separate licence is required for each physical location where manufacturing occurs or where brewing equipment or products are stored.  Under EA 168(1), applicants for a Brewer’s License must provide a bond to the government, with financial security ranging from a minimum of $5,000 to a maximum of $1 million, as determined by the Minister. 

Spirits Licence

Under EA 2001 60(1), producing or packaging spirits requires a Spirits Licence.  Unlike wine and beer, there is no personal-use exemption for spirits production. Holders of a Spirits Licence are permitted to also possess and transport bulk spirits that are produced or imported by a spirits licensee.  Applicants for a Spirits Licence must provide security in a form acceptable to the Canada Revenue Agency (the “CRA”), ranging from $5,000 to $2 million, as specified in EA 2001 23(3). 

Recourse for Refusal or Cancellation of Licence

Under the EA and the EA 2001, the Minister of National Revenue has the discretionary power to issue, refuse or cancel a licence.  What this means is that, in cases where a licence application is refused or an existing licence is cancelled, affected producers have limited recourse.  They can either submit representations to the Minister or initiate a judicial review application with the Federal Court.  However, the Federal Court process is both complex and costly.  Therefore, it is crucial to get it right the first time to minimize legal complications and avoidable litigation costs.

Takeaways

Obtaining the appropriate licences for producing wine, beer or spirits is essential for compliance with the EA and the EA 2001.  Each licence type has unique requirements and conditions, with strict regulations governing financial security, validity periods, and renewal timelines.  Furthermore, producers have limited and potentially costly recourse if a licence application is refused or a licence is canceled.

Understanding and adhering to these rules is critical for anyone involved in the production or packaging of these products.  Due to the complexity of the requirements, specialized legal counsel is highly recommended.

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