Canada: Task Force Report: Taxation And Pricing Of Cannabis

On June 30, 2016, the Minister of Justice and Attorney General of Canada, the Minister of Public Safety and Emergency Preparedness, and the Minister of Health announced the creation of a nine-member Task Force on Cannabis Legalization and Regulation (the "Task Force"). The Task Force was given a mandate to consult and provide advice to the government on the design of a new legislative and regulatory framework for legal access to cannabis, consistent with the government's commitment to "legalize, regulate, and restrict access", as announced in its December 2015 Speech from the Throne.

On November 30, 2016, the Task Force released its final report, "A Framework for the Legalization and Regulation of Cannabis in Canada" (the "Report"). To fulfill its mandate, the Task Force engaged with provincial, territorial and municipal governments, patients, advocates, Indigenous governments and representative organizations, employers and a wide spectrum of other industry stakeholders. The Task Force received nearly 30,000 public submissions from individuals and organizations in Canada and looked beyond Canada's boarders to learn from jurisdictions that have legalized cannabis for non-medical purposes such as Colorado, Washington State and Uruguay.

The Report sets out a series of guiding principles and values as important building blocks for making its recommendations. The following principles and values have been validated throughout its consultations:

  • protection of public health and safety as the primary goal of the new regulatory framework, which includes minimizing harms and maximizing benefits;
  • compassion for vulnerable members of society and patients who rely on access to cannabis for medical purposes;
  • fairness in avoiding disproportionate or unjustified burdens to particular groups or members of society and in avoiding barriers to participation in the new framework;
  • collaboration in the design, implementation, and evaluation of the new framework, including communication and collaboration among all levels of government and with members of the international community;
  • commitment to evidence-informed policy and to research, innovation and knowledge exchange; and
  • flexibility in implementing the new framework, acknowledging that there is much we do not know and much that we will learn over time.

Over the course of the coming weeks, we will be publishing a series of short articles where we will summarize the various recommendations made by the Task Force. In this article, we will consider the recommendations for the taxation and pricing of cannabis in a regulated regime.

Prime Minister Justin Trudeau has stated that tax revenue is not one of the principal reasons for the move towards legalization and regulation of cannabis. However, the taxation of cannabis sales has resulted in a boon for some state economies. For example, in their fiscal year ended May 2016, Colorado brought in a total of $157 million in state taxes, helping fund school programs, local government initiatives and additional spending. Therefore, the taxation and pricing of cannabis can have substantial implications for the government and society as a whole. The following are four key takeaways from the Task Force's recommendations relating to the taxation and pricing of cannabis.

1. Taxation and Pricing Objectives

The Report acknowledges that taxation and pricing policy decisions involve a trade-off between two of the government's primary policy objectives: (i) discouraging consumption; and (ii) reducing black market profits. Higher cannabis prices discourage consumption, but, if the price of legal cannabis exceeds black market prices, it increases the risk that the black market will continue to thrive. Accordingly, the Task Force recommends that cannabis be taxed and priced in such a way as to limit the growth of consumption, particularly with young individuals that are typically more price sensitive, while also keeping the price of cannabis low enough to discourage purchases from the black market. Additionally, the Report identifies putting public health concerns ahead of the generation of tax revenues as a crucial factor to the success of a regulated cannabis market. To specifically address public health and safety concerns, the Report recommends a tax and price scheme tied to THC potency. This means that products with higher levels of THC could be more expensive than those with a lower THC content.

The mechanism by which cannabis will be taxed and priced was not specified in the Report, but instead left to the federal and provincial governments to determine. However, examples were provided on how pricing objectives could be achieved, including:

  • fixing of prices—a set price for each cannabis product;
  • setting minimum/maximum prices—a range of prices that can be charged for each cannabis product;
  • per unit taxes—a tax on each specific quantity or product sold;
  • sales taxes—a percentage tax on the dollar value of every sale; and
  • limits on production amounts—a limit on the amount of product produced and sold to control price through market supply.

2. Use of Tax Revenue

While tax revenue may not be the primary goal of legalizing and regulating cannabis, the government has indicated that tax revenue should be used to fund various cannabis related programs and services such as addiction treatment, mental health support and education programs. The Report notes that stakeholders, such as substance-use experts, law enforcement and municipalities called on the government to use tax revenues to support prevention and treatment programs for individuals with cannabis dependence. Others suggested allocation of tax revenues to education programs, including targeted programs for youth, for Indigenous communities, and enforcement, as well as ongoing cannabis research. Accordingly, the Task Force recommends committing to using revenue from cannabis as a source of funding for administration, education, research and enforcement. Therefore, as the scope of programs and services which will qualify for government grants or other assistance subsidies becomes better defined, we expect to see new opportunities develop for existing cannabis related information and education platforms as well as the potential development of new cannabis industry verticals relating to the implementation and delivery such programs and/or services.

3. Medical vs. Non-Medical Taxation

Currently, medical cannabis purchased through a licensed producer under the Access to Cannabis for Medical Purposes Regulations is subject to a 5 percent Goods and Services Tax at the federal level as well as any other applicable provincial sales tax. Medical cannabis ds not benefit from any excise tax exemption under the Excise Tax Act as other prescription drugs do (for a more detailed discussion on this issue please see our previous thought piece on the Hedges case).

While the Task Force acknowledged the concerns of medical cannabis patients, including access and affordability issues, the Task Force did not take this opportunity to recommend distinct medical pricing including, for example, tax exemptions for medical cannabis. In fact, the Report recommends that the same tax system be applied to medical and non-medical cannabis products. The Report cites several considerations underlying the Task Force's recommendation including, continuing to provide medical cannabis patients with reasonable access to ensure they can acquire sufficient cannabis to meet their needs without facing undue constraints on cost and/or variety—the implication being that faced with an opportunity to sell lower priced medical cannabis or higher priced non-medical cannabis, cannabis producers and/or distributors will naturally favour selling to the non-medical market. Therefore, based on the Task Force recommendation, medical cannabis patients can expect to pay the same and be taxed the same as non-medical consumers.

4. Potential Patient Implications

Depending on how the government implements its taxation and pricing policy on cannabis, there exists a risk that some medical cannabis patients may experience an increase in the cost of their medicine. By failing to recommend that medical cannabis be exempt from taxation and recommending a potential tax and pricing scheme tied to THC potency, patients who rely on high THC cannabis products for their ailments may be subject to higher costs.

In addition, having one taxation and pricing policy for medical and non-medical cannabis may create additional hurdles for medical cannabis patients. Under a system where medical and non-medical cannabis costs the same, a positive aspect is that there may be a reduced incentive for recreational users to access the medical stream under false pretenses in an effort to obtain cost savings. However, this may also make it easier for physicians, who may already be reluctant to prescribe medical cannabis, to refuse to prescribe medical cannabis and simply refer patients to the non-medical stream instead. This could make it harder for medical patients to access certain ancillary benefits tied to medical cannabis such as tax deductibility, potential insurance coverage and employer accommodation relating to appropriate medical use in the workplace.

The above update provides a brief overview of the taxation and pricing recommendation provided by the Task Force in the Report. It is important to remember that cannabis law is complex and rapidly evolving. At Bennett Jones LLP we have a team of industry-leading professional advisors that can provide legal and strategic guidance to all industry participants as the Canadian cannabis industry continues to advance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions