Judge rules against Halifax microbrewery

A judge has ruled a Halifax microbrewery must pay the retail markup collected by the province’s liquor regulator, even when it gives suds away on its own premises.

Unfiltered Brewing Inc. took the Nova Scotia Liquor Corp. and the province to court arguing the remittance — set at 50 cents a litre when the lawsuit was launched but since reduced to five per cent of wholesale cost — it pays on beer it sells, samples or gives away is a tax and, therefore, beyond the power of the NSLC.

“I conclude that the (retail sales markup allocation) is in pith and substance a proprietary charge within the authority of NSLC pursuant to its statutory mandate,” Nova Scotia Supreme Court Justice Glen McDougall said in a written decision released Wednesday.

“Accordingly, Unfiltered’s application to rule the remittance invalid is dismissed.”

Unfiltered sells beer from its own North Street premises under a permit from the NSLC, but not at the regulator’s retail stores.

“NSLC policy deems microbreweries’ beer to have been purchased first by the NSLC, then sold to customers,” McDougall said.

The liquor corporation maintains it “can lawfully impose mark-ups and charges such as the remittance,” he said.

The sale or manufacture of alcoholic beverages is prohibited in Nova Scotia except as permitted under the province’s Liquor Control Act.

“The NSLC has complete control over the manner of sale,” said the judge. “The respondents also point out that Unfiltered was aware of its obligations when it received its permit. They say the (retail sales markup allocation) is valid either as a regulatory or a proprietary charge.”

The NSLC argues one purpose of the markup is to monitor beer production, he said. “Unfiltered says the reason for this is unclear and it is further unclear why a fee would be attached to its reports of the amounts sold, given away, and sampled. The purpose of the remittance, according to Unfiltered, is simply to raise revenue for the provincial treasury.”

Unfiltered told the court it gets no benefit from the markup, which it dubs “an unlegislated tax-grab.”

The markup “is pure detriment,” said the microbrewery, and “it makes running a small business in Nova Scotia that much more difficult.”

The judge agreed that it’s “difficult to see how Unfiltered either benefits from, or causes a necessity for, the remittance, which has no obvious purpose beyond raising funds for theprovincial government’s general revenues. Theonly possible benefit to Unfiltered is that by agreeing to pay the (retail sales markup allocation), it is permitted to brew and sell its beer. In other words, paying the fee allows Unfiltered to receive the permits it needs to conduct its business in a field from which the regulator, NSLC, has the power to bar it.”