Distillery Regulatory And Taxes Paper

Distillery Regulatory and Taxes

Business income is the money earned from a trade, a manufacture, or any activity performed with the intention of earning a profit [10]. For operating a distillery, like any other business in Canada, Federal taxes need to be paid to the Canada Revenue Agency. After the general tax reduction, the net tax rate is

15% as of January 1, 2012 [11]. Prior to December 2013, the Alberta Gaming and Liquor Commission

(AGLC) imposed a minimum production quota of 250,000 liters of product per year on spirit producers

[12]. With this restriction lifted, there is an exciting opportunity to enter the growing Alberta micro-

Table 3: Estimate cost of process equipment

Process Equipment Number Unit Price per unit Total

Still pot 1 –

For this reason, the distillery will be located within the province of Alberta, and Alberta Corporate Tax rates will apply. The general Corporate Income tax rate in Alberta is currently 12%, implying that our product would be taxed at 27% overall [13]. Alberta has one of the most competitive tax rates in North America, which is another incentive to set up the distillery in the western province. Furthermore, Alberta is the only province that does not have a provincial retail sales tax and there are no provincial capital or payroll taxes, which are common in other Canadian provinces and in many U.S. states [14].

Excise duties are imposed under the Excise Act, 2001, on spirits, wine, and tobacco products that are made in Canada [15]. The excise duty on spirits is based on the ethyl alcohol by volume in the product.

For spirits containing greater than 7% absolute ethyl alcohol by volume, the respective rate is $11.696 per liter of absolute ethyl alcohol [16]. Since the distillery will be producing 80 proof gins, which