Promotional distribution exemption: Ontario wineries

Information Notice
Published: July 2011
Content last reviewed: July 2011
ISBN: 978-1-4435-6828-9 (Print), 978-1-4435-6830-2 (PDF), 978-1-4435-6829-6 (HTML)

About this Notice

The Liquor Tax Act, 1996, was amended to provide to Ontario beer manufacturers, licensees of brew pubs and wineries a limited exemption from the beer and wine taxes on the beer, wine or wine coolers they make and distribute without charge in Ontario to promote their products.

This document provides Ontario wineries with general information about the exemption, how it works and how to claim it. It does not replace the law found in the Liquor Tax Act, 1996, and its regulations (Act).

Another Information Notice titled Promotional Distribution Exemption: Ontario Beer Manufacturers and Brew Pubs is available for Ontario beer manufacturers and brew pubs.

Background

As proposed in the 2011 Ontario Budget, the Act has been amended to authorize a limited exemption from beer and wine taxes on Ontario beer manufacturers', licensees of brew pubs', and wineries' promotional distributions of beer, wine and wine coolers in Ontario without charge. Normally, beer manufacturers, licensees of brew pubs and wineries are required to pay the beer and wine taxes on these types of distributions as deemed purchasers of their own products.

The changes complement the marketing initiatives of the Ontario Wine Strategy and Ontario Craft Brewers Strategy.

The exemption is retroactive to July 1, 2010, and is pro-rated for the length of time in the annual period that the beer manufacturer, brew pub or winery carries on its business.

How The Exemption for Ontario Wineries Works

General details of exemption

An exemption from the payment of wine tax on wine and wine coolers distributed for promotional purposes is now available.

1. Some key eligibility requirements are:
   • The exemption is only available to Ontario wineries.
   • The exemption is limited to the wine tax that the wineries would otherwise have been required to pay.
2. The exemption is only applicable to wine and wine coolers that are made by the winery.
3. The exemption is available for promotional distributions made from July 1, 2010, onward.
   • In order for the distribution to qualify for the exemption, the wine or wine coolers must have been distributed:
     • without charge,
     • in Ontario, and
     • for the purpose of promoting the product.
4. The exemption is limited to 10,000 litres of wine and wine coolers per "corporate family" (i.e., corporations that are affiliates of each other under the Act) for each 12-month period beginning July 1, with the first 12-month period starting July 1, 2010.
   • The maximum exemption amount may be apportioned (divided) amongst the corporations in a corporate family however they decide.
5. If a winery carries on business in Ontario for only part of the 12-month period, the maximum exemption amount is reduced proportionately.
   • For example, if a winery carries on business for only half of the 12-month period, the maximum exemption amount for that winery for that 12-month period is 5,000 litres.
6. Documents supporting the exemption must be kept for seven (7) years.
7. The exemption for a distribution must be claimed within four (4) years of the distribution.

Things to watch for

The promotional distribution exemption cannot be claimed for:

1. distributions made with charge (including nominal charge for sampling), and
2. distributions made without charge but which are not promotional distributions, even if the maximum exemption amount has not been reached.

Promotional distributions made without charge in Ontario in excess of the maximum exemption amount remain taxable to the winery. These distributions must be reported as taxable distributions (other than by sale) on Line 2 (retail prices) and Line 12 (litres) of Schedule A – Product Distribution Report of the Wine and Wine Cooler Return.

Documents supporting exemption claim

Documents supporting the promotional distributions made and exemption amounts claimed must be kept by the winery, including records of:

• the date of the distribution,
• the name and address of the recipient of the wine or wine cooler or the event at which the wine or wine cooler is distributed,
• the names of the winery's affiliates, and the promotional distributions made and exemption amounts claimed by each affiliate, and
• the number of containers of wine and wine coolers distributed, and for each container, product particulars including:
  • the product type – whether it is Ontario wine, non-Ontario wine, Ontario wine cooler or non-Ontario wine cooler,
  • the brand of wine or wine cooler,
  • the "retail price", as determined under the Act, of the wine or wine cooler,
  • the volume of wine or wine cooler in the container, and
  • whether the container is a refillable or non-refillable container.

How To Claim The Exemption

For qualifying promotional distributions made beginning July 1, 2011

This refers to the ongoing process to be used to claim the exemption for promotional distributions made beginning July 1, 2011:

• On Line 9[1] of Schedule A – Product Distribution Report of the Wine and Wine Cooler Return, enter the total retail price for each product type (Ontario wine, non-Ontario wine, Ontario wine cooler and non-Ontario wine cooler) claimed under the exemption. Refer to the Wine and Wine Cooler Return Guide or the Act for more information on the "retail price".
• On Line 19[1] of Schedule A – Product Distribution Report of the Wine and Wine Cooler Return, enter the total litres for each product type (Ontario wine, non-Ontario wine, Ontario wine cooler and non-Ontario wine cooler) claimed under the exemption.

As with all exemption claims, documents supporting the claim amounts must be kept on file.

For qualifying promotional distributions made between July 1, 2010 and June 30, 2011

This refers to the one-time process to be used to claim the exemption for promotional distributions that were made between July 1, 2010, and June 30, 2011, and for which the winery reported and remitted tax as taxable distributions (other than by sale) on its previous Wine and Wine Cooler Returns before the reporting period beginning July 1, 2011:

• Enter the total wine tax exemption claim as part of the adjustments on Line 24 of the Wine and Wine Cooler Return, attaching a sheet detailing the claimed amounts at an individual wine label level and total claim level. You may also complete the applicable parts of the Worksheet: Ontario Wineries' Exemption Claim Calculation for Promotional Distributions Made from July 1, 2010, to June 30, 2011 as the sheet detailing the claimed amounts and attach it to the Wine and Wine Cooler Return in which exemption is claimed.

As with all exemption claims, documents supporting the claim amounts must be kept on file.

Warning: unsupported claims or claims over maximum exemption amount

Wineries are responsible for substantiating and tracking their promotional distribution exemption claims.

Exemption claims for distributions that are not supported as qualifying promotional distributions and exemption claims for qualifying promotional distributions in excess of the maximum exemption amount are subject to penalty and interest.

More Information

Telephone

• 1 866 ONT-TAXS (1 866 668-8297)
• 1 800 263-7776 for teletypewriter (TTY)

Footnotes:

[1]To accommodate the promotional distribution exemption, the reporting of certain distributions has changed. As of July 1, 2011, Line 9 and Line 19 of Schedule A – Product Distribution Report of the Wine and Wine Cooler Return are only to be used to record the exemption claimed. All other types of non-taxable distributions that were previously reported on Lines 9 and 19 are now to be reported on other lines of the Schedule. For example, promotional distributions outside of Ontario should now be reported as exports on Line 8 and Line 18 of Schedule A – Product Distribution Report of the Wine and Wine Cooler Return.