Excise tax, store markups crushing cannabis industry, producer says

On an icy, hard-to-find back road near Shediac sits a monument to what might have been, at least according to Jonathan Wilson: a massive cannabis production plant providing local product and local jobs.

It never got there.

Wilson is the CEO of Crystal Cure, a Japanese-owned cannabis company and one of many that sprang up in the wake of the federal government's legalization of the drug in 2018.

Six years later, he closed a scaled-down version of the 5,800-square-metre plant, frustrated by government taxation and pricing that he said are choking the nascent industry to death.

"There was absolutely no sign that there was going to be any reform, any help at all," Wilson said in an interview. 

"We just couldn't get to a point where you're able to make money."

Initially, construction problems and other challenges forced Crystal Cure to operate a smaller production plant within the partially built one — and it seemed to work.

The company had sales in several provinces and operated a retail store at the facility that was popular with buyers wanting to avoid government-owned stores — people who might otherwise have bought cannabis illegally.

But a crushing excise tax and aggressive price markups by the provincially owned Cannabis N.B. stores squeezed Crystal Cure to the breaking point, Wilson said.

He shut down last August.

The excise tax, agreed to by Ottawa and the provinces when cannabis was legalized, is either 10 per cent of a sale or $1 per gram — whichever is higher.

In practice, the latter rate always applies, and Wilson says it gobbled up 35 per cent of the company's revenues, on top of sales tax, regulatory fees and other costs.

Wilson is not alone, according to Harrison Jordan, a Toronto lawyer specializing in controlled substances such as cannabis, alcohol and tobacco.

"There's many issues facing the industry," he said. "Excise is not the only one, but it is a significant one."