The fine wine market in Alberta used to be one of the best and most competitive markets in Canada, but now it’s in danger of collapsing say wine sellers.

Alberta introduced a new ad valorem wine tax on April 1, that adds additional proportional markup based on the value of wine sold.

The flat tax rate for wine increased to $4.11 per litre plus an additional increase of 5 per cent for wines that run between $15 and $20 per litre, 10 per cent for wines that run between $20 and $25 per litre, and 15 per cent for wines over $25 per litre.

Due to the way the tax has been structured, higher priced wines have seen a correspondingly higher increase in taxes added, leading to higher prices for consumers at the till. That comes as diverse groups, such as the Calgary Stampede, have been working to increase viviculture and wine variety awareness in the province.

MetroVino Fine Wines, a wine seller in downtown Calgary that supplies many restaurants and carries over 400 wines, has been negatively affected by this new tax.

“I would say 99 per cent of the product that we work with has been hit by this new tax,” said Isaiah Santos, a partner at MetroVino.

That has differed from the Government of Alberta’s initial projection of low double digits in the 16 per cent range, of wines affected by the new taxes.

According to Santos, MetroVino may be unable to reorder from some premium wine producers if the current premium wine stock can’t be sold due to the increase in price from the tax.

Santos said the way the tax was implemented, Magnum wine bottles (1.5 litre bottles) would have the biggest price increase.

“We as a business are questioning if we can continue to work with Magnums due to the egregious increase in price.”

Santos said that with this new tax, wine enthusiasts and restaurants are forced to choose between buying lesser quality wine at the same price or spending more for a better quality of wine.

He said that while its too early see the long-term effects of the tax on their overall sales numbers, there are restaurants that MetroVino has been unable to supply with wine due to the rising prices.

“They can either increase their prices to $18, $19, $20 a glass, which is starting to rival cocktails. Or they can reduce the quality of what they’re giving to consumers and keep the prices the same.”

The wines unaffected by the price change, said Santos, would be the ones created through industrial farming. Those wines are typically created for specific marketplace price points rather than for quality.

As a result of the tax change, MetroVino has started a campaign to ask Minister of Service Alberta and Red Tape Reduction, Dale Nally, to return to the previous flat tax system used for over 30 years in the province for wine sales.

Requests for comments from the Ministry of Public Service and Red Tape Reduction by LWC were not returned.

Minister disputes effects of tax change, despite industry pushback

Brad Royale, a sommelier for the Concorde Entertainment Group in Calgary, said to LWC that Minister Nally did not understand the impacts of the tax on Albertans.

Royale pointed to the difference between Minister Nally saying in interviews that the tax would affect 16 per cent of wines, and then in the legislature said it would affect 18 per cent of wines.

Royale sent an email to Minister Nally and Premier Danielle Smith detailing the number of products, the increase in price, and the percentage of the market that would be affected by this tax.

In that email, he outlined how the tax affects a threshold price of $11.25 per bottle, and that in turn through a basic search of the province’s Connect Logistics which provides wholesaling of wine products for Alberta, shows 719 products below that threshold and 19,543 products above—or 97 per cent of all wines.

In that same email, Royale said wine bottles priced at $26 wholesale will be $29.90 because of the tax, with retail prices for that same bottle of wine would going up from $44 to $51, and restaurant prices would go up from $85 to $100.

Wholesale prices for wines have also risen, said Royale, leading to some prices for wines being the highest in all of North America.

“Due to the extreme nature of this tax on more expensive wines, the market has already shifted by eliminating items entirely or diminishing quantities.  This will result in less tax for the government.”

“For example, Dom Perignon has gone up $46 per bottle to $295 wholesale. If a standard markup of 65 per cent is applied, this wine is now $485 on the shelf, making it the most expensive in North America.”

He said this tax would cause customers, individuals, and businesses to shop buying cheaper wines for the same price affecting importers and producers.

“[This] endangering every single local, small, medium and even large player in this Province,” said Royale.

“Alberta used to be the most competitive fine wine Market in Canada to buy wine before this tax came in.”

A response email sent to Royale by Minister Nally, and provided to LWC by Royale, said the tax would only affect 16 per cent of wine sold in Alberta.

“The additional markup will be between $0.20 and $0.40 for a 750 ml bottle with a retail price of $25, and between $2.80 to $3.25 for a 750 ml bottle with a retail price of $50,” wrote Minister Nally.

Royale said that the products that would likely be exempt from the increase in taxes, would be the ones desirable for consumers based on price point alone.

“The only wines that aren’t actually affected in this are the really low-end commercial ones. These would be the ones that liquor stores probably sell the most,” he said.