Promotional Distribution Exemption: Ontario Beer Manufacturers and Brew Pubs

Information Notice
Published: July 2011
Content last reviewed: July 2011
ISBN: 978-1-4435-6822-7 (Print), 978-1-4435-6824-1 (PDF), 978-1-4435-6823-4 (HTML)

About this Notice

The Alcohol and Gaming Regulation and Public Protection 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 beer manufacturers and brew pubs with general information about the exemption, how it works and how to claim it. It does not replace the law found in the Alcohol and Gaming Regulation and Public Protection Act, 1996, and its regulations (Act).

Another Information Notice titled Promotional Distribution Exemption: Ontario Wineries is available for Ontario wineries.

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 Beer Manufacturers and Licensees of Brew Pubs Works

General details of exemption

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

  1. Some key eligibility requirements are:
    • The exemption is only available to Ontario beer manufacturers and licensees of brew pubs.
    • The exemption is limited to the beer tax that the beer manufacturers or the licensees of brew pubs would otherwise have been required to pay.
  2. The exemption is only applicable to:
    • in the case of beer manufacturers, beer that is made by the beer manufacturer, and
    • in the case of licensees of brew pubs, draft beer that is made at the brew pub.
  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 beer 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 beer per "corporate family" (i.e., corporations that are affiliates of each other under the Act) for each sales year beginning March 1, 2011.
    • The maximum exemption amount may be apportioned (divided) amongst the corporations in a corporate family however they decide.
  5. If a beer manufacturer or licensee of a brew pub carries on business in Ontario for only part of the sales year, the maximum exemption amount is reduced proportionately.
    • For example, if a beer manufacturer carries on business for only half of the sales year, the maximum exemption amount for that beer manufacturer for that sales year is 5,000 litres.
  6. Since the beer tax came into effect on July 1, 2010, the maximum exemption amount, per corporate family, for the period between July 1, 2010, and February 28, 2011, is 6,667 litres.
  7. Documents supporting the exemption must be kept for seven (7) years.
  8. 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 beer manufacturer or licensee of a brew pub. These distributions must be reported as taxable distributions (other than by sale) on Line 25 (Line 9 for brew pubs) of Schedule A – Inventory Reconciliation Report of the Beer Return.

Documents supporting exemption claim

Documents supporting the promotional distributions made and exemption amounts claimed must be kept by beer manufacturers and licensees of brew pubs, including records of:

  • the date of the distribution,
  • the name and address of the recipient of the beer or the event at which the beer is distributed,
  • the names of the beer manufacturer's or the licensee of a brew pub's affiliates, and the promotional distributions made and exemption amounts claimed by each affiliate, and

for beer manufacturers:

  • the number of containers of beer distributed, and for each container, product particulars including:
    • the beer type – whether it is draft or non-draft beer,
    • the volume of beer in the container, and
    • whether the container is a refillable or non-refillable container.

for licensees of brew pubs:

  • the volume of draft beer distributed.

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:

Claim the exemption in respect of the beer destined as a promotional distribution at the time of the beer's initial distribution from the beer manufacturer or the brew pub.

  • On Line 32[1] (Line 11[1] for brew pubs) of Schedule A – Inventory Reconciliation Report of the Beer Return, enter the total litres for each product type (draft beer and if applicable, non-draft beer) claimed under the exemption.

The above method should be the case for most promotional distribution exemption claims.

In the rare instance where beer was sold or shipped as a taxable distribution (e.g., to The Beer Store) at the time of the beer's initial distribution from the beer manufacturer or the brew pub but is later claimed as a promotional distribution (by refunding to the person to whom the beer was initially sold or shipped the full amount that was collected from that person), after beer tax was remitted in respect of that distribution, claim the exemption in respect of that beer as follows:

  • On Schedule B – Adjustments of the Beer Return, enter the details of the exemption claim. In particular, complete as follows:
    • Column A, Adjustment Period – enter the date on which the promotional distribution was made that is being claimed under the exemption.
    • Column B, Customer Name – enter the recipient of the promotional distribution or the event at which the beer was distributed.
    • Column D, Adjustment Reason – For distributions that were made during the 2011-2012 Sales Year (March 1, 2011 to February 29, 2012 inclusive), enter exactly as: "Promotional Distribution Exemption Claim for the 2011-2012 Sales Year". For future sales years, replace the "2011-2012" component of the reason with the applicable start and end years for that sales year.
    • Complete the remaining columns as normally required.

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 process to be used to claim the exemption for promotional distributions that were made between July 1, 2010, and June 30, 2011, (the transition period) and for which the beer manufacturer or the brew pub reported and remitted tax on its previous Beer Returns before the reporting period beginning July 1, 2011:

For distributions made between July 1, 2010, and February 28, 2011:

  • On Schedule B – Adjustments of the Beer Return, enter the details of the exemption claim. In particular, complete as follows:
    • Column A, Adjustment Period – enter the date on which the promotional distribution was made that is being claimed under the exemption.
    • Column B, Customer Name – enter the recipient of the promotional distribution or the event at which the beer was distributed.
    • Column D, Adjustment Reason – enter exactly as: "Promotional Distribution Exemption Claim for July 1, 2010 – February 28, 2011".
    • Complete the remaining columns as normally required.

For distributions made between March 1, 2011, and June 30, 2011:

  • On Schedule B – Adjustments of the Beer Return, enter the details of the exemption claim. In particular, complete as follows:
    • Column A, Adjustment Period – enter the date on which the promotional distribution was made that is being claimed under the exemption.
    • Column B, Customer Name – enter the recipient of the promotional distribution or the event at which the beer was distributed.
    • Column D, Adjustment Reason – enter exactly as: "Promotional Distribution Exemption Claim for March 1, 2011 – June 30, 2011".
    • Complete the remaining columns as normally required.

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

Warning: unsupported claims or claims over maximum exemption amount

Beer manufacturers and brew pubs 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 32 (Line 11 for brew pubs) of Schedule A – Inventory Reconciliation Report of the Beer Return is only to be used to record the exemption claimed. All other types of non-taxable distributions that were previously reported on Line 32 (Line 11 for brew pubs) are now to be reported on other lines of the Schedule. For example, beer manufacturers' promotional distributions outside of Ontario should now be reported as exports on Line 29 of Schedule A – Inventory Reconciliation Report of the Beer Return.

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