Sales and Excise Tax Measures
NewClasses of Cannabis Products: Edibles, Extracts, and Topicals
Edible cannabis, cannabis extracts and cannabis topicals will soon be legalized for recreational sale.
Cannabis excise duties are currently calculated either as a flat-rate tax, calculated based on a cannabis product’s weight/quantity at the time of packaging, or by an ad valorem rate, calculated based on the cannabis product’s sale price, whichever is greater. For processed cannabis products (i.e. cannabis oil), the flat-rate tax calculation is based on the amount of cannabis material used in the production process.
To address compliance difficulties cannabis producers face with tracking cannabis used in making cannabis oils, Budget 2019 proposes a new excise duty calculation method based on the quantity of THC contained in a product. This new THC-based calculation method will apply to edibles, cannabis extracts, cannabis oils and cannabis topicals. The THC-based duty rate will be $0.01 per milligram of total THC content, except in Manitoba. Manitoba continues to administer its own provincial cannabis tax regime parallel to the federal regime; accordingly, special rules apply to Manitoba.
The proposals do not affect current cannabis product exemptions or the Coordinated Cannabis Taxation Agreements in place between the federal and provincial or territorial governments (except for Manitoba). These new proposed rules apply to cannabis products packaged for final retail sale on or after May 1, 2019.
Previously Announced Measures
Budget 2019 confirms the Government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release:
- Proposed cannabis duty regulations, released on September 17, 2018 largely relating to implementing the cannabis duty rates agreed to with the Provinces;