High cost to setting up a retail cannabis store

It costs a lot to get a cannabis retail storefront into operation legally.

Besides the usual retail setup costs — leasing a location, furnishing it, purchasing inventory, utilities — there are also application and licensing fees.

To start, the Province of B.C. is charging $7,500 just to apply and, if you are successful, a $2,500 annual licence fee. Then, local communities get involved.

If you’re dealing with the City of Penticton, expect to shell out another $2,500 to apply to the city and a $5,000 yearly licence fee. Other businesses, including liquor stores, only pay $175 a year for their business licence.

Related: Proposed retail cannabis framework in front of Penticton city council

So that’s $10,000 in application fees plus $7,500 annually if you’re hoping to open a retail cannabis shop in Penticton.

Penticton isn’t alone in setting some high fees. According to planning manager Blake Laven, Vernon has set a $5,000 application fee, and a $2,000 licence. Summerland, however, decided on a $1,500 application and $400 licence. That’s still high compared to their normal $175 to $200 business licence. Only escort service and body rub businesses have more expensive licences — they have to pay $2,000 annually if they want to set up in Summerland.

“Our justification for that high of a fee is really the amount of work we are anticipating coming out of this,” Laven said. Those costs include additional work setting up the processes to deal with the business, inspection and enforcement, including dealing with any illegal stores that pop up.

Related: RCMP bust illegal B.C. cannabis lab

“We’ve incurred a lot of legal fees and other fees dealing with this use so far. We wanted to set the fee high at the beginning with the anticipation that there will be some costs to the city,” said Laven. “If, after a few years, we’ve determined this is a use like any other, we would look at putting it back down to a regular business licence fee.”

Laven said there is no concern the licence fee — almost 30 times the cost of a regular business licence — might be challenged.

“We’ve run the framework we’ve established through legal counsel and they don’t see any issues with the fees we have put together. I think we would welcome a challenge to that fee proposal,” said Laven. “This business is different from any other business, so I think that is why we have justified a higher licence fee.”

Coun. Jake Kimberly pointed out municipalities won’t be sharing in the tax income from cannabis retail higher levels of government are collecting, so they are bearing any extra costs alone.

“I too have a concern about the policing costs. And the only way the municipality can cover those additional costs … is through the licence fees,” said Kimberley. “If you read the reports on how much tax dollars governments are going to get from these operations, it is enormous and we as a municipality have to suffer the costs of that.

“There is definitely going to be a cost to the municipalities.”

Laven also said none of the prospective retailers —Penticton has received seven applications back from the province so far — have brought up any concerns with the fees.

“Maybe that happens after a few years when it could turn out to be a very benign use and they are paying a $5,000 fee when a liquor store isn’t,” said Laven. “Then I think we could have a little more legitimate challenge to the fee.”

Related: Council concerned about blocking cannabis retail from Main Street