The numbers behind B.C.’s lagging cannabis industry
In the first six months after the October 17, 2018 legalization date, British Columbians purchased just $9.3 million dollars worth of legal cannabis products, according to Statistics Canada.
Alberta’s revenue for legal cannabis sales was nearly $72 million during the same time period.
B.C.’s monthly sales revenues did not break $3 million until May, the most recent month for which data is available, bringing the province’s total sales to about $13 million.
The low figures may come as a surprise given B.C.’s notoriety as Canada’s cannabis capital, but the finance ministry says it never expected cannabis to be a cash grab.
“When it comes to cannabis, the priorities of our government are to protect children and youth; promote public health and safety; reduce the criminal element associated with cannabis; keep our roads safe; and support economic development,” the ministry told BC Today. “The sale of cannabis is not expected to generate substantial revenue for the Province in the early years of legalization, as there are significant costs associated with setting up and implementing the provincial regulatory framework.”
B.C.’s coffers receive legal cannabis revenue via three related streams: Liquor Distribution Branch (LDB) sales, which include retail sales from B.C. Cannabis Stores and wholesale transactions with licensed private retailers, provincial sales tax (PST) and the province’s share of the federal excise tax.
The ministry was not able to provide information on how much PST it has collected on cannabis sales. A spokesperson told BC Today neither the ministry nor the LDB are “set up” to publicly report monthly sales totals for legal cannabis products.
Provinces are required to report certain figures — mostly related to provincial cannabis inventories — to Health Canada, but the national health agency is not mandated to collect sales totals.
However, StatsCan has been collecting sales data from producers as well as provincial entities — including B.C.’s LDB — posting updated, processed figures online monthly since the beginning of 2019.
The Ministry of Finance did provide BC Today with a chart outlining the monthly excise tax payments it has received from Ottawa — a total of $5 million since the feds began flowing cash in March.
Province may have over-purchased early cannabis supply
Data on the excise tax — which tax is applied to cannabis imports and producer sales, not consumer level transactions — reveals the quantity of cannabis being obtained by legal retailers has dropped dramatically since the first months of legalization.
Ottawa’s first excise tax payment to B.C. was paid in March 2019 and applied to the last two weeks in October only. It totalled over $1.3 million and the province posted about $333,000 in sales during that time.
In October, the LDB bought a considerable amount of cannabis in anticipation of consumer enthusiasm for the newly legalized product and a need to stock the government’s online and lone brick-and-mortar store; B.C.’s first licensed private retailer did not open its doors until November.
In December, legal cannabis sales totalled $1.2 million and B.C.’s excise tax payment for that month was just over $1 million. In January, cannabis sales revenue nearly doubled to $2 million, but January’s excise tax payment plummeted to less than $436,000.
This suggests the LDB continued to buy a sizeable amount of legal cannabis products in both November and December before severely curtailing its purchasing in January. Since then, the LDB does not seem to have bought much. This year’s first three monthly excise tax payments total $1.6 million — not even half the $3.3 million B.C. received for the last 10 weeks of 2018, according to the ministry figures.
The tax is paid by producers who are then required to file details of the sale, including type and quantity or volume of product sold, with the Canada Revenue Agency.
The amount of excise tax Ottawa doles out depends on a number of factors. The most simple formula is $1 per gram or 10 per cent of a given product’s selling price, whichever is higher. However, there are nuances depending on the type of product sold (cannabis seeds vs. flower, for example) and, according to StatsCan, some products are taxed per unit, rather than by volume.
Data from Statistics Canada shows both licensed producers and provincial agencies have seen their cannabis inventories increase at significantly higher rates than their sales, which poses a problem because of its perishable nature.
Old, dry product could be leaving British Columbians with little enthusiasm for legal cannabis and turning to illicit options instead. Or maybe inflated prices are deflating demand: since legalization, prices for licensed cannabis have risen while those for unlicensed cannabis have dropped slightly, according to Statistics Canada’s cannabis implicit price index.
“The Province anticipates B.C.’s share of the federal excise taxes on cannabis sales will continue to grow in the coming years,” according to a ministry statement.
More than 40 per cent of Canadian cannabis users are still purchasing at least some of their pot from illegal sources, according to Statistics Canada’s most recent quarterly National Cannabis Survey. Another 37 per cent said they got their stash from family and friends. The survey did not include provincial figures for illicit cannabis use.
B.C. may not be buying or selling much legal cannabis these days, but British Columbians are more than keeping pace with other Canadians when it comes to cannabis consumption. About 18 per cent of B.C. residents over the age of 15 used cannabis within the past three months, slightly above the national average of 16 per cent.