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B.C. government sets 15% mark-up on cannabis, starts accepting applications for retail stores

Mark-up will be in addition to 10% excise tax, GST, PST and possibly a cost-recovery fee

The B.C. government on August 10 revealed that it plans to levy a 15% mark-up on the price of cannabis when legal sales launch on October 17.

That levy will be in addition to the 10% excise tax that the federal government will apply to all sales. The federal government will then distribute 75% of the excise-tax revenue back to the provinces.

Retail cannabis sales will also be subject to the federal government’s 5% goods and services tax and the provincial government’s 7% provincial sales tax.

In addition to this, Health Canada is consulting until August 13 with stakeholders about potentially levying a 2.3% “cost-recovery fee” on licensed producers. The federal government has no such “cost-recovery fee” for alcohol.

“We certainly expected the BCLDB to be making some markup,” said Cannabis Compliance Inc.’s vice-president of business development and government relations, Deepak Anand.

“But this is quite significant. It will directly impact the cost per gram, and the government needs to be careful on how high that cost per gram goes.”

Having high taxes and mark-ups, he added, will make it difficult for legal-cannabis sales to compete with the black market.

Other news that the B.C. government released August 10 includes that the government is now accepting applications from entrepreneurs who want to open retail-cannabis stores. It also announced that it will open a new call for licensed producers to apply to have their products stocked by the British Columbia Liquor Distribution Branch so that the products can be sold to the government’s e-commerce system, government-run cannabis stores and private cannabis stores.

Last month, the BCLDB announced that it has entered into memorandums of understanding to stock products from 32 licensed producers.

“Now that we have finalized our initial product assortment, we’re looking forward to engaging with additional licensed producers that are interested in supplying the B.C. market,” said BCLDB CEO Blain Lawson in a release.

“There are more and more licensed producers coming online, and we are committed to working with them to ensure our product assortment remains as competitive as possible in order to compete with the illicit market.”

The BCLDB’s 15% mark-up will be on the landed cost of cannabis, which is the total price of the product once it has arrived at the BCLDB’s doorstep, and it includes the original price of the product, transportation fees, duties, taxes, packaging and handling.

All cannabis retailers, including private retailers and BCLDB-operated BC Cannabis Stores, will purchase cannabis at a common wholesale price. Retailers will be prohibited from pricing cannabis products below the wholesale price.

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