It will cost Vancouver cannabis shops 331 times more for a licence than in other B.C. towns

Business In Vancouver

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With the second legal, privately owned cannabis store in B.C. newly open, the trend so far has been for stores to be approved in communities that charge negligible municipal business licence fees.

Both of those stores are in the southeastern B.C. community of Kimberley, where the municipal business licence fee for cannabis retailers is $100 – a sharp contrast to the $33,097 business licence fee that the City of Vancouver plans to charge cannabis retail entrepreneurs for each store in 2019.

Cannabis/Shutterstock

Those municipal licence fees are on top of provincial fees that include $7,500 to file the application, $1,500 for a first-year licensing fee and a fee of $100 for each worker based in the store.

Provincial annual renewal fees are $1,500. Victoria will also charge business owners a security-screening fee every two years, but it has not yet said how much that fee will be.

The combined total of all these fees is important because it may discourage entrepreneurs from going through the process to operate a legal business. It will also be a cost that is passed on to customers in the form of higher prices for cannabis – something that would benefit the black market. Or, for government-owned stores, it would be taxpayers picking up the bill if stores lose money.

The discrepancy in the amount of the municipal fees that cities charge could also sway where entrepreneurs locate.

Minister of Public Safety and Solicitor General Mike Farnworth confirmed to Business in Vancouver that the B.C. government pays the same municipal fees entrepreneurs do, and he stressed that government decisions about where to locate cannabis stores will not be influenced by how much a municipality charges for a business licence.

The City of Kamloops charged the B.C. government $5,000 for a business licence to open the only government-run cannabis store so far in the province, on October 17, when Canada legalized retail cannabis sales after a 95-year prohibition.

Kamloops city council has since approved two more government cannabis stores and two private stores, which have yet to get final provincial government approval.

Two more private store applications are set to go before city council, said Kamloops chief licence inspector Dave Jones.

The business licence fee to open a liquor store in Kamloops is $196 per year, so the city charges cannabis store owners more than 25 times the rate that it charges liquor store owners.

Over in Vancouver, that disparity is even more stark, with the city planning in 2019 to charge cannabis store owners more than 79 times the $418 that it charges private liquor store owners for a business licence.

City of Vancouver chief licence inspector Kathryn Holm explained that the rationale for her city’s $33,097 licence fee next year for cannabis retail operators is the need to recoup costs of reviewing licence applications, and ensuring through inspections that city bylaws are being followed. She added that city staff have approved four applications for cannabis stores and have forwarded those cases to the province for final approval.

“At this point, we have no information from the provincial government with respect to revenue sharing,” she added, hinting that the amount of the licence fee may partly reflect the city’s lack of success in getting the province to agree to give the city some of the money from cannabis excise taxes, 75% of which flow to the provincial government.

“There’s a lot of merit to being in a smaller market,” said SpiritLeaf CEO Darren Bondar. “It’s not just the lower business licence fees, but rent, and generally it’s less expensive. If you look at the history of alcohol, often it’s stores in the smaller municipalities that are more profitable than the higher-profile stores in the big city.”

Bondar plans to open eight stores across B.C. by the end of next year, including one in Vancouver.

He expects two to be in Kelowna, with others in Vernon, Penticton, Maple Ridge and Castlegar. One store’s location is yet to be determined.

His aim in opening a Vancouver store is to have a marquee location, although he said he does not want to open a money-losing store simply to help increase brand recognition.

Castlegar’s director of development services, Phil Markin, told BIVthat his community’s business licence fees are the same for cannabis retailers as for liquor retailers and coffee shop owners. The only difference for cannabis stores is that there is a one-time $1,500 application fee to cover advertising costs for a public hearing. The business licence fee is $85 plus $10 for each 1,000 square feet of floor area.

Kimberley, with its two legal private cannabis stores, similarly charges cannabis store owners the same $100 business licence fee it charges other retailers.

Laurie Weitzel, president and co-owner of Earth’s Own Naturals Ltd., opened her cannabis store in downtown Kimberley in January 2017, and the City of Kimberley sold her a business licence to operate even though the store was illegal under federal law.

She operated her profitable, 650-square-foot store continuously until November 21, when a licence inspector phoned her and told her to close the store immediately and remove all cannabis because there would be an inspection on November 26. She complied, passed the inspection and ordered products through the British Columbia Liquor Distribution Branch.

Products arrived December 4, and she told BIV that she planned to have an invitation-only launch December 6 and open to the public December 7.

“We’ve been very fortunate to be in Kimberley,” said Weitzel, whose store is the second legal, privately owned cannabis store in B.C., after Kimberley’s Tamarack Cannabis Boutique, which opened in November.

“The community has supported us in every way. We’ve had zero incidents with the RCMP, so it’s been a good experience.”