The B.C. Liquor Control and Licensing Branch is cracking down on charities that use donated wine for their fundraisers.

The Belfry Theatre in Victoria says it had to cancel its fine wine auction and gala dinner after the LCLB forbade them from auctioning any privately donated wines at their fundraiser.

The branch says groups cannot resell alcohol, and wines must be bought at a B.C. liquor store or approved vendor.

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The B.C. Liquor Control and Licensing Branch says charities can only auction off wines purchased at a B.C. liquor store or approved vendor. (CBC)

"We filled out that application exactly the same and carried it out exactly the same for two years previous without any concern or consideration, so that's the first I've heard of that," says Belfry Theatre general manager Ivan Habel.

The move has outraged B.C. wine producers who frequently donate wine to charitable auctions as a way to give back to their communities.

Crackdown could cost charities millions

John Skinner, the owner of Painted Rock Estate Winery in Penticton, has donated a basket of wine to the event for the past three years.

"It's laughable. It's another one of these situations where I wish the government would get ahead of the curve and not behind it. I mean this is just about philanthropy, it's culture, it's art, it's charity, why would they stand in the way?"

Liquor lawyer Mark Hicken believes the crackdown will be a big financial blow to charities.

"By making this change, what they're going to do is they're going to short-change charities on their private fundraising.  I mean, we're talking millions of dollars," said Hicken.

The LCLB says the policy is needed to ensure product authenticity and that the appropriate taxes have been paid.

With files from the CBC's Lisa Cordasco