November 2, 2018
On October 17, 2018, the federal government of Canada legalized the sale and recreational use of cannabis. Here is a brief summary of how sales and excise taxes are being applied to the various cannabis products sold in Canada.
The federal government along with the provincial and territorial governments have agreed to a tax structure to equitably share in the taxing of cannabis. This has been achieved through the Coordinated Cannabis Taxation Agreement ("CCTA"). The duty on cannabis will be shared 25/75 between the jurisdictions. The federal government will be responsible for the collection and enforcement of the taxes under the Act. The province of Manitoba at the time of this article has not signed on to this agreement.
.All cannabis products in Canada will be subject to an excise duty (referred to as the "Cannabis Duty"), the Goods and Services Tax/Harmonized Sales Tax ("GST/HST") as well as any additional provincial retail sales taxes and other fees, duties and/or mark-ups. The legislative authority for the Cannabis Duty is found in the Excise Act, 2001 ("Act") which is also the same legislation that applies duty rates to alcohol and tobacco products.
To better understand the taxation of cannabis, cannabis is defined as a cannabis plant and any of the following:
* any part of the plant (stem, trim), including phytocannabinoids sourced from the plant whether processed or unprocessed;
* any substance or mixture of substances that contain any part of the plant; and
* any substance that is identical to a phytocannabinoid produced or found in a plant regardless of how it is obtained.
Excluded from Ththis general definition excludes items such as non-viable seed(s) of a cannabis plant, the mature stalk, without leaf, flower, seed or branches, fibre from the mature stalk and the root of the plant. You can find further information in Schedule 1 and Schedule 2 of the Act.
In addition to certain portions of the cannabis plant not being subject to the duty, there are also exemptions from the duty that are detailed in the Act. A summary of these exemptions are plants that are:
* taken for analysis or destroyed by the Minister of National Revenue, or the Minister for the purposes of the Act;
* transferred to another person for analysis or destruction in a manner approved by the Minister;
* a low-THC cannabis product;
* a prescription cannabis drug;
* a prescribed cannabis product or a cannabis product of a prescribed class;