The report goes on to say…
Lawyers say new tax rules in the recently released federal budget provide clarification around some of the uncertainty faced by new cannabis businesses and medical cannabis users.
Finance Minister Bill Morneau tabled the 2019 budget plan on March 19, which included a section adjusting the rules of cannabis taxation.
Whitney Abrams, an associate at Minden Gross LLP in Toronto, says the 2019 budget contained two main changes that will impact lawyers working with clients in the cannabis industry or personal tax advisors.
Firstly, she says, the budget changes the way excise tax is calculated now: the greater of either a flat rate tax based on a cannabis product’s weight or quantity in its packaging or a rate calculated based on the cannabis product’s sale price.
The government will determine federal tax “on the quantity of tetrahydrocannabinol — or THC — contained in a final product” for cannabis products to be legalized later this year (edible cannabis, cannabis extracts and cannabis topicals,) as well as already-legal cannabis oils, the budget plan said.
The goal of the new rules, scheduled to take effect May 1, is to “simplify the excise duty calculation for specific cannabis products and ease compliance issues,” according to the budget plan.
“Cannabis oils are treated slightly differently under the current regime, where the flat-rate tax is based on the amount of cannabis material used in the production process,” said Abrams.
“Lawyers who are advising licensed producers or anyone looking to get into the cannabis edible, topical or extract market, once available, should be aware of these changes and know how to advise their clients accordingly on this aspect.”
Zvi Halpern-Shavim, a partner at Blake Cassels & Graydon LLP in Toronto, says the excise tax change could come as a surprise for clients that have built existing tax schemes into prices in contracts, especially for products that are high in THC.