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 company91裸聊视频檚 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 would91裸聊视频檝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 91裸聊视频渇ire sale basis.91裸聊视频�
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 91裸聊视频渦nusual91裸聊视频� since Tantalus had only filed its insolvency notice less than two weeks before landing in court.
Fitzpatrick91裸聊视频檚 ruling said the 91裸聊视频渇ire sale91裸聊视频� circumstances were unfortunate, arising 91裸聊视频渟omewhat inexplicably from the position of CRA, and CRA91裸聊视频檚 threat to enter Tantalus91裸聊视频� premises and destroy the inventory and/or its value.91裸聊视频�
In its report on Tantalus tied to the insolvency, Ernst & Young said an 91裸聊视频渙rderly91裸聊视频� sale of the company91裸聊视频檚 remaining product could fetch around $2 million, while a fire sale would net about $300,000.
Had the CRA renewed the company91裸聊视频檚 licence, an orderly sale would91裸聊视频檝e benefited the agency itself 91裸聊视频渁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,91裸聊视频� Ernst & Young91裸聊视频檚 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 couldn91裸聊视频檛 reveal too much since the insolvency process is still ongoing, but called the CRA91裸聊视频檚 actions 91裸聊视频減eculiar91裸聊视频� because it would91裸聊视频檝e benefited as a creditor had it granted Tantalus more time.
91裸聊视频淭he judge was similarly confused,91裸聊视频� he said.
Sutton and many others have long complained about what he calls the 91裸聊视频渆xtreme and burdensome excise tax requirements on top of payroll tax and GST payments in the Canadian cannabis industry.91裸聊视频�
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 91裸聊视频渨ith a more aggressive tone than it has historically.91裸聊视频�
Sutton said the ordeal has been 91裸聊视频渄isappointing for everyone,91裸聊视频� including the city of Maple Ridge, where Tantalus employed nearly 80 people and hoped to create more jobs in the long term.
91裸聊视频淚 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,91裸聊视频� he said. 91裸聊视频淚t doesn91裸聊视频檛 seem to be a business that, or rather, a regulatory environment that validates small business participation at this time. (It91裸聊视频檚) super troubling.91裸聊视频�
The CRA did not immediately respond to requests for comment.
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