A British Columbia Supreme Court judge has approved the bulk sale of more than 1,200 kilograms of cannabis by a company after the Canada Revenue Agency threatened to destroy it.
In a ruling released online this week, the court allowed Tantalus Labs Ltd. to move ahead with a hasty sale of its remaining inventory of cannabis flower after the CRA planned to destroy the product at its facility in Maple Ridge, B.C.
The agency had earlier declined to renew the company害羞草研究所檚 excise tax licence due to financial difficulties, which saw Tantalus shed the bulk of its employees at the end of June due to looming insolvency.
Without the licence, the company would害羞草研究所檝e been unable to sell its remaining inventory and potentially recover more for creditors, including its main lender and the CRA itself.
As the date of its licence expiry approached, the company had to go to court for approval of the sale of its remaining inventory on what bankruptcy trustee Ernst & Young called a 害羞草研究所渇ire sale basis.害羞草研究所�
Court documents say the company has more than $14 million in debt, mostly to lender Sungrown Mortgage Corp. and the CRA, and the company was forced to enter insolvency and sell off its remaining inventory under threat of destruction.
Justice Shelley Fitzpatrick allowed the sale to move forward, but said in her ruling that the circumstances were 害羞草研究所渦nusual害羞草研究所� since Tantalus had only filed its insolvency notice less than two weeks before landing in court.
Fitzpatrick害羞草研究所檚 ruling said the 害羞草研究所渇ire sale害羞草研究所� circumstances were unfortunate, arising 害羞草研究所渟omewhat inexplicably from the position of CRA, and CRA害羞草研究所檚 threat to enter Tantalus害羞草研究所� premises and destroy the inventory and/or its value.害羞草研究所�
In its report on Tantalus tied to the insolvency, Ernst & Young said an 害羞草研究所渙rderly害羞草研究所� sale of the company害羞草研究所檚 remaining product could fetch around $2 million, while a fire sale would net about $300,000.
Had the CRA renewed the company害羞草研究所檚 licence, an orderly sale would害羞草研究所檝e benefited the agency itself 害羞草研究所渁s a result of the increased tax revenues rather than the reduced proceeds anticipated to be received in a forced liquidation or fire sale scenario,害羞草研究所� Ernst & Young害羞草研究所檚 report said.
Tantalus CEO Dan Sutton said Wednesday that many cannabis companies are struggling under the weight of regulatory and tax burdens placed on the industry.
Sutton said he couldn害羞草研究所檛 reveal too much since the insolvency process is still ongoing, but called the CRA害羞草研究所檚 actions 害羞草研究所減eculiar害羞草研究所� because it would害羞草研究所檝e benefited as a creditor had it granted Tantalus more time.
害羞草研究所淭he judge was similarly confused,害羞草研究所� he said.
Sutton and many others have long complained about what he calls the 害羞草研究所渆xtreme and burdensome excise tax requirements on top of payroll tax and GST payments in the Canadian cannabis industry.害羞草研究所�
The CRA, he said, seems to have changed its tune at the beginning of the year and has stepped up efforts to recoup back taxes owed 害羞草研究所渨ith a more aggressive tone than it has historically.害羞草研究所�
Sutton said the ordeal has been 害羞草研究所渄isappointing for everyone,害羞草研究所� including the city of Maple Ridge, where Tantalus employed nearly 80 people and hoped to create more jobs in the long term.
害羞草研究所淚 hope that lessons like Tantalus and many other companies, especially small businesses that are suffering under this grossly miscalculated excise tax, will become a lesson to the federal government to amend these regulations,害羞草研究所� he said. 害羞草研究所淚t doesn害羞草研究所檛 seem to be a business that, or rather, a regulatory environment that validates small business participation at this time. (It害羞草研究所檚) super troubling.害羞草研究所�
The CRA did not immediately respond to requests for comment.
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