Municipalities call for cannabis tax changes

Cannabis production commercial not agricultural operations, say municipal groups

Municipalities are losing out because of tax rules that favour cannabis producers, say organizations representing Alberta communities.

Under provincial regulations, the portion of a cannabis operation used for growing — often a huge part of the facility — pays far lower taxes than other industries.

In urban municipalities, the grow part of a cannabis operation is taxed at 20 per cent of the rate of other businesses and is expected to go to zero in coming years. In rural municipalities, the tax rate is already zero, because they are treated as agricultural buildings.

The Alberta Urban Municipalities Association saw the taxation problem coming from the beginning, when Aurora set up its massive facility near Cremona in 2016.

“We asked for it to be changed when the very first plant came into Cremona,” said association president Barry Morishita.

Aurora has since built other facilities and other players have entered the market, many of them picking central Alberta as their home.

In Olds, Sundial Growers is on the path to become the town’s biggest employer, with about 1,000 employees expected to be on the payroll by the end of the year.

Morishita said the province’s approach to cannabis production taxation was a mistake that should have been fixed earlier.

“They are basically a commercial operation. They require traditional commercial services, so they should be taxed at a traditional commercial rate.

“My residential taxes shouldn’t be subsidizing a commercial operation, and that’s exactly what’s happening in those areas now.”

Rural Municipalities of Alberta president Al Kemmere said while there are extra tax dollars at stake, it is more about the principle of treating businesses fairly.

“All we’re looking to do is to level the playing field. Everybody else pays for services, and we just need to make sure these are treated consistently and fairly,” said Kemmere, a councillor in Mountain View County.

“These guys are not growing a food product. They are growing a product that is used for recreation or medicinal purposes.

“They have the same impact and infrastructure as other commercial businesses, that they are often located right next to, yet they get to have a different tax rate than those other businesses.”

Municipal Affairs Minister Kaycee Madu said he agrees the issue warrants a “hard look.”

“Alberta taxpayers shouldn’t be responsible if these facilities are being assessed at an inappropriate rate,” he said in a statement, adding the jobs and economy cabinet policy committee, which he chairs, will review the issue next month.

“There, we will explore the subject further, and likely propose recommendations for change.”

Kemmere said that’s what communities would like to see and hopes municipalities are consulted before any changes are made.

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