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The Green Tax

Despite large provincial variations in their business environments, cannabis retailers across Canada continue to struggle with major common difficulties. No matter what the geographic region or regulatory model looks like, retailers are all struggling with the so-called ‘Green Tax’, the not-so-subtle surcharge that is applied to anything and everything to do with legal cannabis.

Whether it’s banking services, real estate acquisition, or professional services like legal and accounting, cannabis retailers are constantly being asked to pay more than equivalent businesses. Even municipal business licencing fees for cannabis retailers can be many multiples what it costs for a bar or liquor retail licence, above and beyond the often absurd provincial excise taxes on the cannabis itself.

The unfair treatment begins with banking, where licenced cannabis retailers continue to struggle to obtain even basic business banking services like a chequing account and point-of-sale (POS) services. Even when they are able to find a bank willing to take on a licenced retailer, cannabis businesses are expected to pay eye-watering monthly fees, which can be several hundred or even thousands of dollars a month for the most basic chequing services.

The dramatic effect that this lack of basic bank services can have on the success of cannabis retail can be easily seen when comparing the situations in Alberta versus British Columbia. In the former, the Alberta Treasury Board (ATB) is able to use their crown agency status to offer normal commercial banking services to cannabis businesses without difficulty, and consequently Alberta retailers have little difficulty with basic banking and POS services.

Cannabis retail is to be treated as a “high risk” business category.

In the latter, the BC regulator that oversees credit unions recently passed along new guidance to credit unions, informing them that cannabis retail is to be treated as a “high risk” business category. As a consequence, many licenced retailers have lost existing bank services, and BC retailers have been forced to take measures as extreme as driving to Toronto in search of banking services. Retailers across BC continue to struggle to find and maintain bank and POS services.

The rare cannabis retailer who is able to get service from a commercial bank or other service provider is often faced with account fees several times higher than what other businesses pay, with retailers unable to seek better rates elsewhere, held captive by their fear of being unable to find any alternative services.

Cannabis retailers who are able to open and maintain bank accounts often find that those accounts are quickly drained by unreasonable surcharging, which begins with real estate. Realtors, landlords, and leasing agents are notorious among the cannabis industry for jacking up rents and prices by significant amounts as soon as they hear the word ‘cannabis’. Lease rates double, purchase prices increase by 30%, and counter-offers including aggressive and unusual demands for profit-sharing are common.

As a result, cannabis retailers in dense urban areas are left fighting over relatively few locations, and are often driven to overbid on the few available sites. Retail investment is consequently also driven into less dense and easier-to-site areas, leading to the phenomenon of intense over-investment in cannabis retail in rural BC and Alberta, while prime neighbourhoods in Greater Vancouver continue to be completely unserved.

The few prospective retailers lucky enough to find a supportive financial institution, an affordable location, and the capital needed to start their project, still face a never-ending parade of surcharging from lawyers, accountants, and other professionals, all of whom appear to think cannabis retail is a never-ending licence to print money.

If cannabis retail is to provide the economic spark that many had hoped for, it is important that government, financial institutions, and professionals begin treating it the same way they treat comparable industries like private liquor, rather than a mystical cash cow that can forever be milked for unreasonable profits.

Tags: ACCRES (13), Association of Canadian Cannabis Retailers (5), cannabis business licencing fees (1), Cannabis Regulations (77), cannabis taxes (3), Jaclynn Pehota (16)