With Canada about to legalize recreational marijuana, the industry is shaping into a completely different one than that implemented in the nine U.S. states that permit its sales already. Canada is going to do its do its own thing. Government involvement in sales and distribution, age limits, and even access to banking services are just some of the major discrepancies.
Canadians will be able to buy marijuana online and have it shipped via mail, an activity illegal in the United States. On Wednesday, Prime Minister Justin Trudeau announced October 17 as the date that pot will go legal nationwide. Until then, Canada’s cities and provinces are figuring out how to regulate their own jurisdictions. This is what Canadians can expect:
Provinces and territories will decide on their own how they wish to handle distribution, and they have various options available to them. Ontario intends giving its Liquor Control Board full control over running the 150 stores it plans to open, a form of public ownership almost unheard of in the United States. The small town of North Bonneville in Washington has the country’s one city-owned weed shop.
British Columbia is aiming for a mixture of privately owned and public stores, while Saskatchewan and Newfoundland will only open private shops. In some of the remotest regions, where stand-alone weed shops are not economically viable, such as in the Northwest Territories, existing liquor stores will likely be selling cannabis.
As in the United States, provinces also differ on how they want to handle home cultivation, with most permitting its residents to grow up to four plants, and others barring it altogether, such as in Quebec. Instead of the 21-year minimum age set by most U.S. states, Canada is setting its federal minimum age at 18, with the majority of provinces opting to set it at 19-years old.
According to Matt Gray, founder and chief executive of Herb, a news and social media platform for the weed industry based in Toronto, the differing approaches of the various provinces is a bit of a laboratory test for determining exactly which way is the best way to legalize. He said:
“It is this amazing case study for countries globally to see the amazing benefits that legalizing cannabis can have on things like the economy, eradicating the black market, and getting cannabis out of the hands of minors.” The world awaits the results with baited breath.
Taxes and Prices
Whether private entities run them or the government does, pot shops will get their supplies exclusively from growers with federal licenses. Authorities will set a minimum price, as well. The country’s finance ministers are pegging this figure at about $10 a gram, but the minister in charge of pot in Yukon says the government wants to displace the black market even further by setting it at just $8.
The federal government also plans to tax legal weed at either one-tenth of the price a product sells for or at $1 per gram, whichever is higher, plus provincial and federal tax on sales. It is likely that this will be notably lower than the taxes states are imposing currently in the United States. The tax rate in Washington is a whopping 37 percent, plus both local and state sales tax too.
In California, licensed storeowners are blaming the growth of the black market on total tax rates, which are extreme at almost 50 percent and are driving prices so high that more people are buying illegally than ever before. In Canada, the government agreed already to give 75 percent of all tax revenues to territories and provinces.
Cannabis companies in Canada will have full access to banking services, unlike their American counterparts, who are at a major disadvantage. Because pot remains illegal under federal U.S. law, banks are hesitant to service the industry for fear of legal troubles, even in states that legalize. Data from the U.S. Treasury Department reveals some interesting facts.
It shows a very slow increase in the number of credit unions and banks keeping accounts for businesses in the pot industry. Just last spring, there were only 411 reporting that they had such accounts. However, most of these institutions still do not offer full-service banking, which makes it extremely difficult for weed businesses to access any loans.
As Seattle-based business attorney, Chris Barry, who manages industry transactions for law firm Dorsey and Whitney in both countries, says, “The major Canadian banks were slow to warm to this.” He credits small investment banks, independent banks and brokerage firms for starting the work. “That has pretty much dissolved as a problem,” he stated. “The majors are coming around to participate in the market.”
Some consumers are unhappy that they will not find edibles on store shelves when sales start, only seeds, oils, and dried flowers. The government says that, in order to create regulations for edible sales, it requires approximately another year. Labeling is also an issue. Health Canada is dictating big warning labels on packages that will be otherwise plain, with strict regulations on colors, styles, even font sizes.
The goal is to avoid attracting youths and to discourage people from misusing weed, but it also restricts company branding and logos. Chris Clay, owner of Warmland Cannabis Center, a medical pot shop on Vancouver Island, said, “It looks like each bag is housing radioactive waste. It is a tiny logo with this huge warning label. It does not leave much room for craft growers that want to differentiate themselves.”
That, Clay explained, is just one of many issues that will make it particularly tricky for small growers to do well. Giant marijuana companies have been brokering deals to supply the provinces with weed. While there is room for micro-producers, Clay worries that “all the contracts are going to be scooped up” by the time the government releases the rules.
Mail Order Delivery
It may be a novel in the United States to get pot by mail, but it is already common in Canada. Since 2013, its postal service has been shipping medical cannabis to authorized patients across the country. “Many of our processes are in place today for medicinal cannabis and will continue for any regulated product sent through Canada Post from licensed distributors,” the postal service said in a written statement.
However, there will be rules and regulations in place for mail order weed delivery. If you are not at home when the agency delivers your stash, it will not leave it lying on your doorstep or in your mailbox. It will also require Canadians to prove their ages upon delivery. It will not deliver to anyone underage, no matter what trickery youngsters try.