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According to the Liquor Control Board of Ontario, which regulates pricing in the province, wine made from 100 per cent Canadian ingredients is exempt from federal excise tax, and Ontario’s small brewers can save up to 90 per cent on their federal tax bill depending on their size.

Fred Lum/The Globe and Mail

Ontario craft distillers say they feel they're being unfairly singled out by Prohibition-era laws that don't apply to their fellow beer and winemakers.

While it's a relatively straightforward process for small breweries and vineyards to set up shop and sell small-batch, specialized products to consumers, those looking to do the same for spirits face a thicket of complicated regulations and taxes, according to distiller Barry Bernstein.

To produce whisky and vodka at his Still Waters distillery in the suburb of Concord, Ont., north of Toronto, Bernstein has to pay fees and excise taxes to both the federal and provincial governments.

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According to the Liquor Control Board of Ontario, which regulates pricing in the province, wine made from 100 per cent Canadian ingredients is exempt from federal excise tax, and Ontario's small brewers can save up to 90 per cent on their federal tax bill depending on their size.

Companies that make whisky, vodka and other spirits aren't eligible for such exemptions or rebates.

Bernstein said at least part of the inequality stems from a prejudice against spirits compared with wine and beer, despite the fact that all three contain the same amount of alcohol in a standard drink.

"There isn't parity with wine and beer and there should be," Bernstein said.

He said another challenge is the fact that the building housing his 450-litre still has to meet the same level of fire standards as those housing the 15,000-litre stills of international producers such as Diageo Inc.

"Our fire suppression and the fire rating of walls is specified way, way above what it practically should be given what our production is," he said. "There was enormous cost for us to do that."

At least once a week, Bernstein said, he hears from someone who wants advice on how to open a small artisanal distillery, and yet by his count there are only about half a dozen in Ontario.

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"When you put together that business plan, it's no wonder that there are very few craft distilleries," he said.

Hanna Murphy said preparing her recent application for a provincial licence to open a small craft distillery in her hometown of Perth, Ont., was the hardest thing she has ever done.

She cited one Ontario law that bans selling on the premises for distilleries with stills smaller than 5,000 litres, although it does not seem to be enforced in the case of the existing small distilleries.

Murphy said her challenges in building a small distillery, even with the help of an outside consultant and support from the municipality, show the need to rewrite the laws.

Joe Kim, a spokesman for the Alcohol and Gaming Commission of Ontario, said the agency is in the middle of a wholesale review to update the rules for alcohol production.

"The beverage alcohol is complex and dynamic and much different than it was years ago," he said. "We're committed to these ongoing conversations with those in the spirits industry or beer and wine industry to examine ways to modernize the rules."

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