EDN55 Calculation of Cannabis Duty and Additional Cannabis Duty on Cannabis Products

September 2018 

The purpose of this notice is to provide information on the calculation of the amounts of cannabis duty and additional cannabis duty to be imposed on packaged cannabis products, as per legislative changes to the Excise Act, 2001.

The information included in this notice is for reference purposes only and does not replace the Excise Act, 2001 or its regulations. Should there be any discrepancy between the information in this notice and that contained in the Act or its regulations, the legislative provisions apply. If the information in this publication does not completely address your particular situation, you may wish to refer to the Act or its regulations, or contact your CRA regional excise duty office for additional information. These offices are listed in Excise Duty Memorandum EDM1-1-2, Regional Excise Duty Offices.

To make a general enquiry on the application of excise duty to cannabis products, call 1-866-330-3304 or send an email to cannabis@cra-arc.gc.ca. Please do not include any confidential information in your email. To request a ruling or interpretation on the application of excise duty on cannabis products, contact your regional excise duty office.

The information provided in this notice is based, in part, on amendments to the Excise Act, 2001 under Bill C-74, Budget Implementation Act, 2018, No. 1, which received Royal Assent on June 21, 2018 and, in part, on the draft Excise Duties on Cannabis Regulations announced by the Department of Finance Canada on September 17, 2018.

In this publication, all legislative references to the Act are to the Excise Act, 2001 unless otherwise specified, and all references to the draft Regulations are to the draft Excise Duties on Cannabis Regulations unless otherwise specified.

Overview

As part of the Government of Canada’s efforts to legalize, regulate and restrict access to cannabis products, the Canada Revenue Agency (CRA) is responsible for administering and enforcing the new excise duty framework for cannabis products. This framework includes amendments to the Act and related regulations to impose duties, which generally apply to all cannabis products sold for both medical and non-medical purposes.

Producers who are packaging cannabis products should carefully review the information included in this notice. It provides information on how the excise duties imposed on cannabis products must be calculated.

Definitions

The following terms are used in this notice:

Additional cannabis duty means a duty imposed under section 158.2 or 158.22 of the Act, in respect of a specified province. This duty is in addition to the cannabis duty imposed under section 158.19 or 158.21 of the Act.

Base amount means, in respect of a cannabis product and a listed specified province,

  • if the cannabis product is delivered or made available to a person that obtains it otherwise than by means of a purchase, the fair market value of the cannabis product;
  • in any other case, the amount determined by the formula

[(A – B) – C)] × [100% ÷ (100% + D)]

where

A  is the total determined for A in the definition of dutiable amount;

B  is the flat-rate cannabis duty determined under section 1 of Schedule 7 to the Act;

C  is, in respect of the listed specified province, the amount determined under section 1 of the applicable Schedule  to the draft Regulations for the particular listed specified province; and

D  is the adjustment rate in respect of a listed specified province, as set out in section 5 of the applicable Schedule to the draft Regulations for the particular listed specified province (see the section “Rates of the adjustment to the additional cannabis duty in listed specified provinces”, in this publication).

Cannabis duty means a duty imposed under section 158.19 or 158.21 of the Act.

Dutiable amount, in respect of a cannabis product, means, other than an amount determined in a prescribed manner in prescribed circumstances, the amount determined by the formula 

A × [100% ÷ (100% + B + C)]

where

A  is the total consideration (generally the sales price) as determined for GST/HST purposes, which the purchaser is liable to pay to the vendor for the cannabis product, the container in which the product is packaged, plus any other amount, whether payable at the same time or any other time, charged for, or to make provision for, advertising, financing, commissions, or any other matter;

B  is the ad valorem cannabis duty rate (2.5%) set out in section 2 of Schedule 7 to the Act;

C  is,

  • in respect of a listed specified province, the additional cannabis duty rate set out in section 2 of the applicable Schedule to the draft Regulations that applies to the province plus the adjustment rate set out in section 5 of the applicable Schedule to the draft Regulations that applies to the particular province;
  • in respect of a specified province that is not a listed specified province, the additional cannabis duty rate set out in section 2 of the applicable Schedule to the draft Regulations that applies to the province; and
  • in any other case, 0%.

Listed specified province means Alberta, Nunavut, Ontario or Saskatchewan, for the purposes of this notice.

Specified province means a province or territory prescribed by section 4 of the draft Regulations that has entered into an agreement with the Government of Canada for the coordination of cannabis taxation. All provinces and territories, with the exception of Manitoba, have entered into such agreements.

Imposition and payment of duty on cannabis

Cannabis duty

There are two points of imposition of cannabis duty on cannabis products produced in Canada:

  • under subsection 158.19(1) of the Act, a flat-rate cannabis duty imposed at the time the cannabis products are packaged; and
  • under subsection 158.19(2) of the Act, an ad valorem cannabis duty imposed on packaged cannabis products at the time the products are delivered to a purchaser (for example, a provincially-authorized distributor or retailer, or a final consumer)

The flat-rate cannabis duty is determined based on the inputs used to produce the cannabis product. For more information, see “Step 1 – Determine the flat-rate cannabis and additional cannabis duties”.

The ad valorem cannabis duty is determined based on the dutiable amount of the cannabis product. For more information, see “Step 2 – Determine the ad valorem cannabis and additional cannabis duties”.

Pursuant to subsection 158.19(3) of the Act, the cannabis duty is payable by the cannabis licensee that packaged the cannabis products, at the time of delivery to a purchaser. The cannabis duty payable is the greater of the flat-rate and the ad valorem cannabis duty, with the lesser of the flat-rate and ad valorem cannabis duty being relieved at the time the greater cannabis duty becomes payable.

Under subsection 158.19(4) of the Act, if the amount of the flat-rate cannabis duty imposed is equal to the amount of the ad valorem cannabis duty imposed, then the flat-rate cannabis duty amount is payable by the cannabis licensee that packaged the cannabis products at the time of delivery and the cannabis products are relieved of the ad valorem cannabis duty (in other words, the ad valorem cannabis duty is not payable by the cannabis licensee in this circumstance).

Additional cannabis duty

Section 158.2 of the Act provides that an additional cannabis duty on cannabis products produced in Canada is imposed in respect of specified provinces. Subsection 5(1) of the draft Regulations prescribes that the additional cannabis duty is imposed on cannabis products produced in Canada if they are for consumption, use or sale to consumers in a specified province.

For specified provinces, the amount of additional cannabis duty payable is the greater of the flat-rate and the ad valorem additional cannabis duty, with the lesser of the flat-rate and ad valorem additional cannabis duty being relieved at the time the greater additional cannabis duty becomes payable. Under subsection 158.2(2) of the Act, the additional cannabis duty is payable by the cannabis licensee that packaged the cannabis products at the time of delivery to a purchaser (for example, a provincially-authorized distributor or retailer, or a final consumer).

If the amount of the flat-rate additional cannabis duty imposed is equal to the amount of the ad valorem additional cannabis duty imposed, then the flat-rate additional cannabis duty amount is payable by the cannabis licensee that packaged the cannabis products at the time of delivery and the cannabis products are relieved of the ad valorem additional cannabis duty.

For listed specified provinces, there is a further amount payable, referred to as an adjustment to the additional cannabis duty. The adjustment rate for a listed specified province is provided in sections 5 or 6 of the applicable Schedule to the draft Regulations that applies to the province. Therefore, for listed specified provinces, subsection 5(2) of the draft Regulations provides that the additional cannabis duty payable is the sum of:

  • the greater of the flat-rate additional cannabis duty and the ad valorem additional cannabis duty; and
  • the adjustment to the additional cannabis duty.

The adjustment to the additional cannabis duty is determined under section 5 of the applicable Schedule to the draft Regulations for the province where the flat-rate additional cannabis duty is greater than the ad valorem additional cannabis duty. In any other case, the adjustment to the additional cannabis duty is determined under section 6 of the applicable Schedule to the draft Regulations for the province. The current adjustment rates are the same in either case.

Rates of cannabis duty and additional cannabis duty

The cannabis duty rates imposed under section 158.19 can be found in section 1 (flat-rate duty) and section 2 (ad valorem duty) of Schedule 7 to the Act.

With the exception of Manitoba, all provinces and territories have agreed to the coordinated cannabis taxation framework. The draft Regulations set out the additional cannabis duty rates in section 1 (flat‑rate duty) and section 2 (ad valorem duty) of the Schedules to the draft Regulations that apply to each particular specified province. For Manitoba, there is no additional cannabis duty payable.

The rates of cannabis duty and additional cannabis duty are indicated in the following table and apply to all provinces and territories.

Rates of cannabis duty and additional cannabis duty
Cannabis product Flat‑rate cannabis duty Ad valorem cannabis duty Flat‑rate additional cannabis duty Ad valorem additional cannabis duty
Flowering material included in the cannabis product or used in the production of the cannabis product $0.25 per gram 2.5% of the dutiable amount for the cannabis product $0.75 per gram 7.5% of the dutiable amount for the cannabis product
Non‑flowering material included in the cannabis product or used in the production of the cannabis product (this includes flowering material that is industrial hemp by‑product) $0.075 per gram 2.5% of the dutiable amount for the cannabis product $0.225 per gram 7.5% of the dutiable amount for the cannabis product
Viable seed included in the cannabis product or used in the production of a cannabis product $0.25 per viable seed 2.5% of the dutiable amount for the cannabis product $0.75 per viable seed 7.5% of the dutiable amount for the cannabis product
Vegetative cannabis plant included in the cannabis product or used in the production of the cannabis product $0.25 per vegetative cannabis plant 2.5% of the dutiable amount for the cannabis product $0.75 per vegetative cannabis plant 7.5% of the dutiable amount for the cannabis product

Adjustment rates for the additional cannabis duty in listed specified provinces

The adjustment rates for the additional cannabis duty required when packaged and stamped cannabis products are delivered to a purchaser in a listed specified province are the following:

  • Alberta, 16.8%;
  • Nunavut, 19.3%;
  • Ontario, 3.9%;
  • Saskatchewan, 6.45%.

For more information on how these rates apply, see “Step 4 – Determine the adjustment to the additional cannabis duty if the cannabis products are delivered to a purchaser in a listed specified province".

Calculation of cannabis duty and additional cannabis duty payable

For each cannabis product delivered to a purchaser, the flat‑rate and ad valorem cannabis duty must be calculated to determine the greater amount that becomes payable upon delivery to a purchaser under subsection 158.19(3) of the Act. The flat‑rate and ad valorem additional cannabis duty must also be calculated, with the greater amount becoming payable under subsection 158.2(2) of the Act upon delivery to a purchaser. For the province of Manitoba, the additional cannabis duty calculation is not required. For listed specified provinces, a further adjustment to the additional cannabis duty must be calculated.

The following example will be used throughout this notice to illustrate the calculations required.

Example 

The following activities occur in a particular calendar month.

A cannabis licensee uses 30 grams of dried cannabis to produce 10 packages, each containing 3 grams of flowering material.

In addition, the cannabis licensee uses 50 grams of flowering material and 25 grams of industrial hemp flowering material, as well as 425 grams of carrier oil to produce a batch of 500 grams of cannabis oil. The 500 grams of cannabis oil are packaged in 10 bottles, each containing 50 grams.

Cannabis products are delivered as follows:

  • 5 packages of dried cannabis are delivered to a purchaser in Manitoba for a sales price of $85;
  • 5 packages of dried cannabis are delivered to a purchaser in Saskatchewan for a sales price of $75;
  • 4 bottles of cannabis oil are delivered to a purchaser in British Columbia for a sales price of $250; and
  • 4 bottles of cannabis oil are delivered to a purchaser in Ontario for a sales price of $300.

It is assumed that the cannabis products have been stamped with the jurisdictional stamp of the province of delivery.

Step 1 – Determine the flat-rate cannabis and additional cannabis duties

For purposes of determining the amounts of flat-rate cannabis and additional cannabis duties in respect of a cannabis product, the following rules apply:

  • the quantity of flowering material and non-flowering material included in the cannabis product or used in the production of the cannabis product is determined at the time the flowering and non-flowering materials are so included or used; and
  • if a quantity of flowering material included in the cannabis product or used in the production of the cannabis product is an industrial hemp by-product, the particular quantity that is industrial hemp by-product is considered to be non-flowering material.

In other words, the flat-rate cannabis and additional cannabis duties are imposed on the inputs included in the cannabis product or used in the production of the cannabis product.

Example (continued) 

Based on the information already provided in the example, 30 grams of dried cannabis consisting of flowering material are packaged. This is the input on which the flat-rate cannabis and additional cannabis duties are imposed.

The calculation of the flat-rate cannabis and additional cannabis duties on the packages of dried cannabis is as follows:

  • the flat-rate cannabis duty on the cannabis products for delivery to the purchasers in Manitoba and Saskatchewan is $3.75 per purchaser (5 packages containing 3 grams each × $0.25 per gram);
  • the flat-rate additional cannabis duty on the cannabis products for delivery to the purchaser in Saskatchewan is $11.25 (5 packages containing 3 grams each × $0.75 per gram). The flat-rate additional cannabis duty does not need to be calculated for the cannabis products delivered to the purchaser in Manitoba, because it is not a specified province.

Also, 50 grams of flowering material and 25 grams of industrial hemp flowering material are used in the production of the cannabis oil. These are the inputs on which the flat-rate cannabis and additional cannabis duties are imposed.

In order to determine the flat-rate cannabis and additional cannabis duties applicable to the transactions for the bottles of cannabis oil in British Columbia and Ontario, the flat-rate cannabis and additional cannabis duties applicable to each bottle must first be calculated. Please note that each type of cannabis input used in the production of the cannabis oil (that is, flowering material and industrial hemp flowering material) is subject to a different rate of duty. The calculations are as follows:

  • the flat-rate cannabis duty is $14.38 [(50 grams of flowering material × $0.25 per gram) + (25 grams of industrial hemp flowering material × $0.075 per gram)] for the full batch of oil produced. Therefore, the flat-rate cannabis duty for each packaged bottle of 50 grams is $1.44 ($14.38 ÷ 10 bottles);
  • the flat-rate additional cannabis duty is $43.13 [(50 grams of flowering material × $0.75 per gram) + (25 grams of industrial hemp flowering material × $0.225 per gram)]. Therefore, the flat-rate additional cannabis duty for each packaged bottle of 50 grams is $4.31 ($43.13 ÷ 10 bottles).

Next, the flat-rate cannabis and additional cannabis duties applicable to the transactions are calculated as follows:

  • the flat-rate cannabis duty on the cannabis products for delivery to the purchasers in British Columbia and Ontario is $5.76 per purchaser (4 bottles × $1.44 per bottle);
  • the flat-rate additional cannabis duty on the cannabis products for delivery to the purchasers in British Columbia and Ontario is $17.24 per purchaser (4 bottles × $4.31 per bottle).

The flat-rate cannabis and additional cannabis duties imposed on the transactions are summarized in the following table.

Flat-rate cannabis and additional cannabis duties
Province Flat-rate cannabis duty Flat-rate additional cannabis duty
Manitoba $3.75 n/a
Saskatchewan $3.75 $11.25
British Columbia $5.76 $17.24
Ontario $5.76 $17.24

Step 2 – Determine the ad valorem cannabis and additional cannabis duties

The ad valorem cannabis and additional cannabis duties are imposed on packaged and stamped cannabis products at the time of delivery to a purchaser (for example, a provincially-authorized distributor or retailer, or a final consumer).

The amounts of the ad valorem cannabis and additional cannabis duties are obtained by multiplying the dutiable amount (A × [100% ÷ (100% + B + C)]) by the applicable ad valorem cannabis and, where applicable, ad valorem additional cannabis duty rates.

Example (continued) 

Based on the information provided in the example, the calculations and amounts of ad valorem cannabis and additional cannabis duties are provided below for each province.

Manitoba

The ad valorem cannabis duty is calculated as follows:

A × [100% ÷ (100% + B + C)] (dutiable amount) × 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act), where

A  is $85 (sales price)

B  is 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act)

C  is 0% (Manitoba is not a specified province)

Therefore, the ad valorem cannabis duty is $2.07 ($85 × [100% ÷ (100% + 2.5% + 0%)] × 2.5%).

There is no ad valorem additional cannabis duty for the province of Manitoba.

Saskatchewan (a listed specified province)

The ad valorem cannabis duty is calculated as follows:

A × [100% ÷ (100% + B + C)] (dutiable amount) × 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act), where

A  is $75 (sales price)

B  is 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act)

C  is 13.95% (ad valorem additional cannabis duty rate of 7.5% for Saskatchewan, as set out in section 2 of Schedule 8 to the draft Regulations + adjustment rate of 6.45% for Saskatchewan, as set out in section 5 of Schedule 8 to the draft Regulations)

Therefore, the ad valorem cannabis duty is $1.61 ($75 × [100% ÷ (100% + 2.5% + 13.95%)] × 2.5%).

The ad valorem additional cannabis duty is calculated as follows:

A × [100% ÷ (100% + B + C)] (dutiable amount) × 7.5% (ad valorem additional cannabis duty rate in section 2 of Schedule 8 to the draft Regulations), where

A  is $75 (sales price)

B  is 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act)

C  is 13.95% (ad valorem additional cannabis duty rate of 7.5% for Saskatchewan, as set out in section 2 of Schedule 8 to the draft Regulations + adjustment rate of 6.45% for Saskatchewan, as set out in section 5 of Schedule 8 to the draft Regulations)

Therefore, the ad valorem additional cannabis duty is $4.83 ($75 × [100% ÷ (100% + 2.5% + 13.95%)] × 7.5%).

British Columbia (a specified province)

The ad valorem cannabis duty is calculated as follows:

A × [100% ÷ (100% + B + C)] (dutiable amount) × 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act), where

A  is $250 (sales price)

B  is 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act)

C  is 7.5% (ad valorem additional cannabis duty rate for British Columbia, as set out in section 2 of Schedule 5 to the draft Regulations).

Therefore, the ad valorem cannabis duty is $5.68 ($250 × [100% ÷ (100% + 2.5% + 7.5%)] × 2.5%).

The ad valorem additional cannabis duty is calculated as follows:

A × [100% ÷ (100% + B + C)] (dutiable amount) × 7.5% (ad valorem additional cannabis duty rate in section 2 of Schedule 5 to the draft Regulations), where

A  is $250 (sales price)

B  is 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act)

C  is 7.5% (ad valorem additional cannabis duty rate for British Columbia, as set out in section 2 of Schedule 5 to the draft Regulations).

Therefore, the ad valorem additional cannabis duty is $17.05 ($250 × [100% ÷ (100% + 2.5% + 7.5%)] × 7.5%).

Ontario (a listed specified province)

The ad valorem cannabis duty is calculated as follows:

A × [100% ÷ (100% + B + C)] (dutiable amount) × 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act), where

A  is $300 (sales price)

B  is 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act)

C  is 11.4% (ad valorem additional cannabis duty rate of 7.5% for Ontario, as set out in section 2 of Schedule 1 to the draft Regulations for Ontario + adjustment rate of 3.9% for Ontario, as set out in section 6 of Schedule 1 to the draft Regulations).

Therefore, the ad valorem cannabis duty is $6.58 ($300 × [100% ÷ (100% + 2.5% + 11.4%)] × 2.5%).

The ad valorem additional cannabis duty is calculated as follows:

A × [100% ÷ (100% + B + C)] (dutiable amount) × 7.5% (ad valorem additional cannabis duty rate in section 2 of Schedule 1 to the draft Regulations), where

A  is $300 (sales price)

B  is 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act)

C  is 11.4% (ad valorem additional cannabis duty rate of 7.5% for Ontario, as set out in section 2 of Schedule 1 to the draft Regulations for Ontario + adjustment rate of 3.9% for Ontario, as set out in section 6 of Schedule 1 to the draft Regulations).

Therefore, the ad valorem additional cannabis duty is $19.75 ($300 × [100% ÷ (100% + 2.5% + 11.4%)] × 7.5%).

The ad valorem cannabis and additional cannabis duties imposed on the transactions are summarized in the following table.

Ad valorem cannabis duty and additional cannabis duty
Province Ad valorem cannabis duty Ad valorem additional cannabis duty
Manitoba $2.07 n/a
Saskatchewan $1.61 $4.83
British Columbia $5.68 $17.05
Ontario $6.58 $19.75

Step 3 – Determine which of the flat-rate and ad valorem cannabis and additional cannabis duties are greater

For each transaction, it must be determined which of the flat-rate and ad valorem cannabis duty is greater and which of the flat-rate and ad valorem additional cannabis duty is greater.

Example (continued) 

Based on the information provided in the example for steps 1 and 2, the following table summarizes, for each province, all the flat-rate cannabis and additional cannabis duties calculated, all the ad valorem cannabis and additional cannabis duties calculated, as well as the duty payable (that is, the greater of the flat-rate and ad valorem cannabis and additional cannabis duties).

Cannabis duty and additional cannabis duty payable
Province Flat-rate cannabis duty calculated Ad valorem cannabis duty calculated Cannabis duty payable* Flat-rate additional cannabis duty payable Ad valorem additional cannabis duty Additional cannabis duty payable**
Manitoba $3.75 $2.07 $3.75 n/a n/a n/a
Saskatchewan $3.75 $1.61 $3.75 $11.25 $4.83 $11.25
British Columbia $5.76 $5.68 $5.76 $17.24 $17.05 $17.24
Ontario $5.76 $6.58 $6.58 $17.24 $19.75 $19.75

*The greater of the flat-rate and ad valorem cannabis duty.

**The greater of the flat-rate and ad valorem additional cannabis duty.

Step 4 – Determine the adjustment to the additional cannabis duty if the cannabis products are delivered to a purchaser in a listed specified province

If the cannabis products are delivered to a purchaser in a listed specified province, a further calculation must be completed to determine the adjustment to the additional cannabis duty. This calculation will differ depending on whether the flat-rate or the ad valorem additional cannabis duty is determined to be payable.

If the flat-rate additional cannabis duty is payable, the adjustment to the additional cannabis duty is determined by multiplying the base amount ([(A – B) – C] × [100% ÷ (100% + D)]) by the adjustment rate set out in section 5 of the applicable Schedule to the draft Regulations for the particular listed specified province.

If the ad valorem additional cannabis duty is payable, the adjustment to the additional cannabis duty is determined by multiplying the dutiable amount (A × [100% ÷ (100% + B + C)]) by the adjustment rate set out in section 6 of the applicable Schedule to the draft Regulations for the particular listed specified province.

Example (continued) 

In the example, an adjustment to the additional cannabis duty is required for the cannabis products delivered to the purchasers in Saskatchewan and Ontario because these provinces are listed specified provinces. No further calculation is required for the cannabis products delivered to the purchasers in Manitoba and British Columbia because these provinces are not listed specified provinces.

Determining the adjustment to the flat-rate additional cannabis duty – Saskatchewan

Since the flat-rate additional cannabis duty is greater than the ad valorem additional cannabis duty for cannabis products delivered to Saskatchewan, the adjustment to the flat-rate additional cannabis duty is calculated as follows:

[(A – B) – C] × [100% ÷ (100% + D)] (base amount) × 6.45% (the adjustment rate for Saskatchewan set out in section 5 of Schedule 8 to the draft Regulations), where

A  is $75 (sales price)

B  is $3.75 (the flat-rate cannabis duty determined in Step 1 under section 1 of Schedule 7 to the Act)

C  is $11.25 (the flat-rate additional cannabis duty determined in Step 1 under section 1 of Schedule 8 to the draft Regulations for Saskatchewan)

D  is 6.45% (the adjustment rate for Saskatchewan set out in section 5 of Schedule 8 to the draft Regulations).

The adjustment to the additional cannabis duty payable on the delivery to the purchaser in Saskatchewan is $3.64 ([($75 – $3.75) – $11.25] × [100% ÷ (100% + 6.45%)] × 6.45%).

Determining the adjustment to the ad valorem additional cannabis duty – Ontario

Since the ad valorem additional cannabis duty is greater than the flat-rate additional cannabis duty for cannabis products delivered to Ontario, the adjustment to the ad valorem additional cannabis duty is calculated as follows:

A × [100% ÷ (100% + B + C)] (dutiable amount) × 3.9% (the adjustment rate for Ontario set out in section 6 of Schedule 1 to the draft Regulations), where

A  is $300 (sales price)

B  is 2.5% (ad valorem cannabis duty rate in section 2 of Schedule 7 to the Act)

C  is 11.4% (ad valorem additional cannabis duty rate of 7.5% for Ontario, as set out in section 2 of Schedule 1 to the draft Regulations + adjustment rate of 3.9% for Ontario, as set out in section 6 of Schedule 1 to the draft Regulations).

The adjustment to the ad valorem additional cannabis duty payable on the cannabis products delivered to the purchaser in Ontario is $10.27 ($300 × [100% ÷ (100% + 2.5% + 11.4%)] × 3.9%).

Step 5 – Determine the amounts payable to be reported in Part 5 of Form B300, Cannabis Duty and Information Return

The duties on cannabis products are payable by the cannabis licensee that packaged the cannabis product at the time of delivery to a purchaser.

Example (continued) 

The amounts of cannabis duty, additional cannabis duty and, if applicable, adjustment to the additional cannabis duty that are payable based on the example and the information in all the steps above are summarized in the following table:

Cannabis duty, additional cannabis duty and adjustments payable
Province Flat‑rate cannabis duty calculated Ad valorem cannabis duty calculated Cannabis duty payable* Flat‑rate additional cannabis duty calculated Ad valorem additional cannabis duty calculated Additional cannabis duty payable** Adjustment to additional cannabis duty calculated and payable***
Manitoba $3.75 $2.07 $3.75 n/a n/a n/a n/a
Saskatchewan $3.75 $1.61 $3.75 $11.25 $4.83 $11.25 $3.64
British Columbia $5.76 $5.68 $5.76 $17.24 $17.05 $17.24 n/a
Ontario $5.76 $6.58 $6.58 $17.24 $19.75 $19.75 $10.27

*The greater of the flat-rate and ad valorem cannabis duty.

**The greater of the flat-rate and ad valorem additional cannabis duty.

***The adjustment to the additional cannabis duty only applies to listed specified provinces.

The cannabis duty and total additional cannabis duty payable must be reported by the licensee in Part 5 of Form B300, Cannabis Duty and Information Return, in the appropriate cannabis product section.

For each province or territory where cannabis products are stamped for that particular jurisdiction and are delivered to a purchaser, the following information must be entered in the appropriate columns on Form B300:

  • under Sales ($), the total sales in dollar amount;
  • under Sales (kilograms), the total sales in kilograms;
  • under Cannabis duty ($), the total amount of cannabis duty payable; and
  • under Additional cannabis duty ($), the total amount of the additional cannabis duty and, where applicable, the adjustment to the additional cannabis duty.

Example (continued) 

The amounts to be reported based on our example and the information in all the steps above are summarized in the following table. Each column reflects the exact information required on Form B300.

Sales and duty payable to be reported
Province or territory Sales ($) Sales (kilograms) Cannabis duty ($) Additional cannabis duty ($)
Manitoba $85 0.015 $3.75 n/a
Saskatchewan $75 0.015 $3.75 $14.89*
British Columbia $250 0.200 $5.76 $17.24
Ontario $300 0.200 $6.58 $30.02**

* $11.25 additional duty + $3.64 adjustment to additional duty

** $19.75 additional duty + $10.27 adjustment to additional duty

Maintaining records and filing returns

Keeping records

Every cannabis licensee is required, under subsection 206(1) of the Act, to maintain all records that are necessary to determine whether they are in compliance with the Act.

Records to be maintained

Subsection 206(2.01) of the Act states that every cannabis licensee is required to retain records relating to the amount of cannabis product produced, received, used, packaged, re-worked, sold and disposed of by the licensee. Books and records must be maintained in an appropriate form and contain sufficient information to allow for the verification of a person's compliance with the Act, including the person's liabilities and obligations with respect to cannabis duties and additional cannabis duties, or the amount of any refund the person has claimed.

With respect to the calculation of duties payable, the licensee must retain sufficient documentation to substantiate the cannabis duty and additional cannabis duty that are payable on each delivery of a cannabis product to a purchaser. This would include documentation detailing the quantities of flowering and non-flowering material in the cannabis product or used in the production of the cannabis product delivered to a purchaser, the sales price of the cannabis product delivered to a purchaser, the payment received and supporting documents to verify the place of delivery.

For more information on the requirement to maintain books and records, see Excise Duty Memorandum EDM9-1-1, General Requirements for Books and Records.

Filing returns

Under section 160 of the Act, every cannabis licensee is required to file Form B300, for each calendar month, calculate and report any cannabis duty and additional cannabis duty payable on that return, and pay any amount to the CRA.

Licensees are required to report total sales of cannabis products in dollars and quantities by province or territory on a monthly basis, as well as the cannabis duty and additional cannabis duty payable, which would include any adjustment to the additional cannabis duty.

Further information

For all technical publications related to the Excise Act, 2001 and its regulations, go to Excise Act, 2001 – Technical Information.

To make a general enquiry on the application of excise duty to cannabis products, call 1-866-330-3304 or send an email to cannabis@cra-arc.gc.ca. (Please do not include any confidential information in your email). To request a ruling or interpretation or to make a technical enquiry on the application of excise duty on cannabis products, contact your regional excise duty office, listed in Excise Duty Memorandum EDM1-1-2, Regional Excise Duty Offices.

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