A noteworthy decision by the New Brunswick Provincial Court will not impact the taxes that must be paid when alcohol is purchased in one province and brought to another. The recent New Brunswick decision of R v. Comeau, 2016 NBPC 3 (“Comeau“), concluded that a law limiting the amount of alcohol that can be purchased in one province and brought back to New Brunswick is unconstitutional because it constitutes a trade barrier. It remains to be seen whether other provinces will follow New Brunswick’s decision, but even if they do, buyers will still be required to pay taxes when they bring alcohol back to their home province.
In Comeau, Gérard Comeau purchased 168 bottles of beer and 3 bottles of liquor in Quebec and brought them back to his home province of New Brunswick. Comeau was fined $292.50 under subsection 134(b) of New Brunswick’s Liquor Control Act, R.S.N.B. 1973, c. L-10, for exceeding the restricted amount of alcohol that could be brought into New Brunswick from another province. Provincial Court Judge Ronald Leblanc ruled that subsection 134(b) of the New Brunswick Liquor Control Act was unconstitutional because it constituted a trade barrier, which violated section 121 of The Constitution Act, 1867, 30 & 31 Victoria, c. 3 (UK). Section 121 of the Constitution states that “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall… be admitted free into each of the other Provinces.” Although the early 1920’s Supreme Court of Canada case Gold Seal Limited v. Alberta (Attorney General), (1921) 62 S.C.R. 424, had narrowed this law into obscurity, now in New Brunswick the constitutionality of laws restricting how much alcohol can be brought back to the province have been called into question.
Saskatchewan currently has laws that restrict the amount of alcohol that can be brought back to the province. The Alcohol Control Regulations, 2013, R.R.S, c. A-18.011, Reg. 6, limits the amount of alcohol that can be brought back to Saskatchewan from other provinces to 3 litres of spirits, 9 litres of wine, and 24.6 litres of beer or coolers in any combination. British Columbia enforces similar restrictions to Saskatchewan, while Alberta does not impose any restrictions on bringing alcohol back to the province.
Although these restrictions may eventually be removed if they are considered provincial trade barriers, the taxes imposed will likely remain. Importation restrictions could be removed if they are considered trade barriers that violate the Constitution and/or the New West Partnership Trade Agreement, a barrier-free, interprovincial market agreement between British Columbia, Alberta, and Saskatchewan. Currently, The Provincial Sales Tax Act, R.S.S. 1978, c. P-34.1, requires a buyer who brings alcohol back to Saskatchewan to report his or her purchase to the Ministry of Finance. The purchaser must pay the same tax rate that they would have paid if the alcohol was purchased in Saskatchewan, which is 10% pursuant to The Liquor Consumption Tax Act, S.S. 1979, c. L-19.1. Note that the tax rate is based on the what the alcohol would have cost if it were purchased in Saskatchewan, and not the price the purchaser actually paid in the other province. Failure to report and pay for the purchase of alcohol outside of the province could attract a penalty of up to $500.00 plus interest.
Even if restrictions on provincial alcohol importation were eliminated in Saskatchewan, buyers would still be required to pay taxes. The Provincial Sales Tax Act provides authority for the province to charge tax on any tangible personal property brought into Saskatchewan. Taxes are not considered a trade barrier in the same manner that alcohol quantity limitations may soon be because taxes do no restrict what or how much can be traded between the provinces.
Since the ruling by Judge Leblanc arises from New Brunswick’s Provincial Court, it is not binding on other provinces. However, it was announced on May 27, 2016 that New Brunswick Government is seeking leave to appeal the Comeau decision to the New Brunswick Court of Appeal. A date has not been set for an appeal hearing. There is a possibility the Comeau case will eventually reach the Supreme Court of Canada. We will continue to watch this case with interest and discuss any further proceedings.