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WINERY COMPLIANCE IN ONTARIO AND B.C.

UNDERSTANDING THE FEDERAL EXCISE ACT 2001 COMPLIANCE REGIME

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Ontario and British Columbia (“B.C.”) are leading wine-producing provinces with well-established statutory frameworks governing how wineries may produce, market, and sell wine. Those provincial rules, however, are only part of the compliance picture. Wineries in Ontario and B.C. are also subject to the Federal Excise Act, 2001 (“EA 2001”), which imposes a separate compliance regime for licensing, reporting, removals, and recordkeeping.

In this blog, we provide an overview of the Federal excise compliance requirements that drive practical audit risk for wineries.

Provincial Winery Regimes – At a Glance

In Ontario, provincial winery compliance is shaped by a series of statutes, including the Liquor Licence and Control Act, 2019, which governs liquor licensing and sales, and the Liquor Tax Act, 1996, which addresses provincial wine tax obligations. For wineries using VQA designations, the Vintners Quality Alliance Act, 1999 also establishes appellation and labelling requirements.

In B.C., the provincial regime focuses on licensing, distribution, and wine-quality certification. Winery licensing is governed by the Liquor Control and Licensing Act, while the Liquor Distribution Act addresses the province’s distribution and wholesale framework.

Federal Winery Excise Compliance

1. Licencing Requirements: The EA 2001 requires wineries to be licensed to produce or package wine in Canada. A wine license also allows wineries to possess, transport, import, and export bulk wine. To store or possess non-duty-paid packaged wine, a wine licensee may also need an excise warehouse licence.
2. Duty Obligations: Under the EA 2001, duty on wine produced in Canada is generally imposed and payable at the time the wine is packaged. The EA 2001, however, contains rules that may defer or relieve duty that would otherwise be payable at packaging. Two common examples are where packaged wine is immediately entered into a licensed excise warehouse, or where wine is removed for export in accordance with statutory requirements.
3. Documentation and Recordkeeping: The EA 2001 regime is documentation driven. Wine licensees must keep records sufficient to establish compliance with the EA 2001. This is consistently a key audit focus and a common pitfall for wine licensees. As a general rule, records should be maintained in a legible and verifiable manner and supported by source documents.

For wineries, the relevant records will often include production and packaging records, sales contracts and invoices, shipping documents, and export documents. In an audit, CRA will expect to see a clear audit trail, with reported amounts traceable to supporting records without unexplained gaps. Non-compliance can result in duty assessments and penalties of up to 200% of the unpaid duty.

Takeaways

For Ontario and B.C. wineries, compliance does not stop at provincial liquor, distribution, or tax rules. The Federal EA 2001 imposes a separate excise compliance regime, including licensing, duty, reporting, recordkeeping obligations, and more!

Wineries should understand when federal excise duty is imposed, when duty may be deferred, and what records are needed to support that treatment. In practice, incomplete or imperfect records can lead to unexpected duty assessments and penalties.

For help with excise compliance for wineries, please click here.