Canada: Calculating ''CST'': Taxing Cannabis In Canada

Last Updated: October 17 2018
Article by Whitney Abrams

In December 2017, Finance Ministers across the country, at both the federal and provincial/territorial level, agreed to participate in a coordinated cannabis framework, which lead to Coordinated Cannabis Taxation Agreements ("CCTAs") being signed by most provinces and territories.

The CCTAs include an agreement that excise duties that come from the sale of cannabis and cannabis products will be shared - 75% will go to provincial/territorial governments and the remaining 25% will go to the federal government. This mandate was officially implemented when Bill C-7 4, the Budget Implementation Act, 2018, No.l (the "Act") received Royal Assent on June 21, 2018.


The Act implemented a new federal excise duty framework for cannabis products that:

  1. requires cannabis cultivators and manufacturers to obtain cannabis licences from the Canada Revenue Agency ("CRA");
  2. requires that all cannabis products that are removed from the premises of a cannabis licensee to be entered into the Canadian market for retail sale be affixed with an excise stamp;
  3. imposes excise duties on cannabis products to be paid by cannabis licensees;
  4. provides for administration and enforcement rules related to the excise duty framework;
  5. provides the Governor in Council with authority to provide for an additional excise duty in respect of provinces and territories that enter into a coordinated cannabis taxation agreement with Canada; and
  6. makes related amendments to other legislative texts, including ensuring that any sates of cannabis products that would have otherwise been considered basic groceries were subject to the GST/HST in the same way as sales of other types of cannabis products.

Under the Act, duty is not payable on: cannabis products taken for analysis or destruction (in a number of enumerated ways), cannabis products delivered by a cannabis licensee to another person for analysis or destruction in a manner approved by the Minister, low-THC cannabis products, prescription cannabis drugs, non-duty paid cannabis products removed from the premises of a cannabis licensee for export in accordance with the Cannabis Act, and to additional cannabis products of a prescribed class.


It is expected that in addition to the federal excise tax, provinces and territories will charge provincial sales tax on recreational cannabis purchases. An exception to this, so far, is Manitoba. Manitoba's Budget Implementation and Tax Statutes Amendment Act provides for an amendment to The Retail Sales Tax Act to provide an exemption, effective October 17, 2018, for cannabis used for non-medicinal purposes, saving Manitobans the 8% sales tax that would have otherwise applied. This is all part of a stated attempt to compete with and eliminate the black market. Sales tax will continue to apply to medical cannabis.

This does not mean that recreational cannabis in Manitoba will be without any additional fees. After a competitive RFP process, Manitoba selected four groups to run retail in the province. These retailers will be the ones required to pay additional fees to the government. Manitoba Liquor and Lotteries intends to charge retailers $0.75 per gram plus 9% to the retailers as a fee for managing and distributing cannabis from licensed producers to retailers. Retailers will similarly be required to pay back 6% of their revenues to the provincial government as a "social responsibility fee".


Months after the Act obtained Royal Assent, the Department of Finance Canada introduced a set of draft Regulatory and Legislative Proposals relating to the Taxation of Cannabis under the Excise Act, 2001 (the "Draft Proposals"). The Draft Proposals were released on September 17, 2018. The Draft Proposals, if adopted, will provide for additional excise duty rates for each province that has signed a CCTA with the Federal Government of Canada. The rates would come into effect on October 17, 2018, to coordinate with the recreational market becoming legal.

The CCTAs and the Draft Proposals are being introduced in an effort to have a similar pricing structure for recreational cannabis nationwide. In order to do so, the Draft Proposals set a formula for the calculation of excise tax. Two parts of the formula are province-specific and are designed to implement tax that is specific to the type of cannabis product and specific to either the production or importation of cannabis.

The Draft Proposals contain:

  • Draft Excise Duties on Cannabis Regulations
  • Draft amendments to the Regulations Respecting the Possession of To bacco Products or Cannabis Products that are not stamped
  • Draft Amendments to the Stamping and Marking of Tobacco and Cannabis Products Regulations
  • Draft Amendments to the Credit for Provincial Relief (HST) Regulations; and
  • Draft Amendments to the Excise Act, 2001

The most interesting aspect to come out of the Draft Proposals are three regulatory amendments which the Government is holding a consultation period for. These regulatory amendments are:

  • Exemptions for certain entities to allow the possession of cannabis products stamped for multiple jurisdictions, under certain conditions;
  • The ability for third parties to possess cannabis excise stamps for specific purposes; and
  • Exemptions from the proposed excise duty for certain cannabis ­ based products that are not intended for human co nsumption.

Exemptions for Possession of Cannabis Stamped for Multiple Jurisdictions

Under the current framework, all cannabis and cannabis products coming from Licensed Producers ("LPs") and destined for retail will be required to have an excise stamp. These stamps will be jurisdiction­specific and marked with specific colours and distinguishing marks. I n order to possess cannabis or cannabis products stamped for a jurisdiction other than the jurisdiction in which it operates, you will need a cannabis license issued by the CRA.

The Government recognizes the challenges for Health Canada licensees as well as some out-of­ province retailers to operate without obtaining the CRA's cannabis licenses. Without the CRA's license, LPs and retailers will not be able to operate in a way that they otherwise would have been able to by law. Accordingly, the Government has proposed, firstly, that LPs be permitted to possess cannabis and cannabis products in a jurisdiction other than the jurisdiction which the cannabis or cannabis product is stamped for.

Second, if a province or territory allows out-of-province retailers to make sales of cannabis to their residents, those retailers would be entitled to possess cannabis or cannabis products stamped for that jurisdiction, as well as being permitted to possess cannabis products stamped for the jurisdiction in which it operates.

If this is adopted, in order for a retailer to possess cannabis products stamped for a different jurisdiction, it will be required to possess documentation that provides evidence of its ability to sell cannabis or cannabis product in that jurisdiction.

Third Party Possession of Cannabis Excise Stamps

The Government recognizes that LPs, retailers, and others licensed to operate in the legal cannabis arena may utilize third parties to assist with packaging logistics. One part of this would be the addition of adhesives to the excise stamps so that they can be applied to packaged products. The proposal, therefore, is to allow these third parties to possess cannabis excise stamps for the purpose of applying adhesives for LPs. The liability/ responsibility for the stamps would remain with the LP while the stamps were in possession of the third party.

Exemption for Test Kits and Reference Standards

The Government recognizes that certain cannabis-based products are not intended for human consumption. These products are test kits and reference standards. "Test kits" are used to confirm the presence or concentration of a drug. Test kits are captured by the definition contained in the Cannabis Regulations. For any such test kit, a registration number will be issued under the Cannabis Regulations. If a registration number has been issued for a test kit, it is proposed that such a kit be exempt from the proposed excise duty framework.

Similarly, "reference standards" are designed for research purposes and not for human consumption. The idea is that the cannabis reference standard is a form of cannabis used as a measurement base to confirm the identity, strength, quality or purity of a substance. Given that reference standards are not likely to leave a laboratory or research facility, the proposal is that they too be exempt from the proposed excise duty framework.

The Government is seeking input on the Draft Proposals detailed above. The public consultation will remain open until October 17, 2018.

* Portions of this article were previously published on Canada Cannabis Legal.

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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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