Courtesy of Lift Magazine
Today the federal government announced their plans for a tax on cannabis to not exceed $1 a gram or 10% of the price of the product, splitting the excise duty rate at 50 cents a gram to the federal government and 50 cents to the provinces/territories.
The proposed duty would apply to all cannabis products available for legal sale, including fresh and dried cannabis, cannabis oils, as well as seeds and seedlings for home cultivation. The rate will also apply to the sale of medical cannabis, which is tax deductible.
Cannabis products that are produced by an individual or a designated grower for an individual’s own medical purposes in accordance with the proposed Cannabis Act will not be subject to the excise duty. Seeds and seedlings used in this production will be subject to the duty.
As examples, one gram of dried cannabis, at a pre-duty price of $8 a gram would have an excise tax of $1, plus GST/HST of $1.17, bringing the total cost to $10.17 a gram. A $130 bottle of cannabis oil would have excise duty of $13 and GST/HST at $18.59, for a total of $161.59.
The government says their aim to to set a level of taxation low enough to compete with the black market while being high enough to both discourage the use of cannabis and provide government revenue to manage the program.
All these measures are still pending Parliamentary approval.
Bill Blair on proposed cannabis excise tax: “It’s a matter of finding the right level of taxation & price” to compete w/ illicit market while not creating incentive to buy. pic.twitter.com/bfGPtomaCM
— CPAC (@CPAC_TV) November 10, 2017
An illustration of this proposed excise framework within the cannabis supply chain, and the types of products captured in the base, can be seen in the figure below:
Illustration of Proposed Cannabis Duty Framework
More information available here.
Table 5.1: Proposed Federal-Only Excise Duty Rates on Cannabis The Higher of the Two Rates Applies Cannabis Plant Product Flat Rate Ad Valorem Rate Flower $0.50 / gram 5 per cent of the sale price of a cannabis product packaged by a federal licensee to a purchaser. Trim $0.15 / gram Seed for home cultivation $0.50 / seed Seedling for home cultivation $0.50 / seedling Table 5.2: Potential Combined Federal and Additional Excise Duty Rates on Cannabis The Higher of the Two Rates Applies Cannabis Plant Product Flat Rate Ad Valorem Rate Flower $1.00 / gram 10 per cent of the sale price of a cannabis product packaged by a federal licensee to a purchaser. Trim $0.30 / gram Seed for home cultivation $1.00 / seed Seedling for home cultivation $1.00 / seedling
For illustrative examples of potential applicable excise duty rates for certain cannabis products (i.e., how the duty flat rate and ad valorem rate interact in practice), please see Table 5.3 for potential federal-only excise duty liabilities and Table 5.4 for potential combined federal and additional excise duty liabilities.
Table 5.3: Examples