EDN79 Obtaining and renewing a vaping product licence

Excise Duty Notice

November 2024

This version replaces the one dated July 2024. This notice has been updated to add information regarding the amendments to the Excise Duties on Vaping Products Regulations, including the addition of five additional specified vaping provinces and appliable transitional rules.

Amendments to the Regulations were published in the Canada Gazette, Part II on November 6, 2024. 

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Act, 2001. In addition, all references to the "Regulations" are to the Regulations Respecting Excise Licences and Registrations. The information in this publication does not replace the law found in the Act and its regulations.

If this information does not completely address your particular situation, you may refer to the Act or relevant regulation, or contact your CRA regional excise office for additional information. The offices are listed at Contact information – Excise and Specialty Tax Directorate.

Table of Contents

• Overview
• Definitions
• Requirement to obtain a vaping product licence
  • When a licence is not required
• Licensing conditions
• Eligibility for a licence
• Applying for a licence
  • Mandatory documents
  • More than one premises
  • Financial security requirements
    • Calculating financial security
    • Maintaining financial security
    • Increase in financial security required
  • Certification
• Registration for vaping stamping regime
• Authorized representative
• Email notification
• Effect and duration of licence
• Requirement to file monthly returns
• Notification of changes
  • Name change
  • Change of legal entity
• Facilities, personnel and equipment
• Licence renewal
• Refusal to issue or renew a licence
• Suspension of a licence
  • Notice of suspension and recourse
  • Reinstatement of a suspended licence
• Cancellation of a licence
  • Notice of cancellation and recourse

Overview

The Canada Revenue Agency (CRA) is responsible for administering and enforcing the excise duty framework for vaping products included in the Excise Act, 2001, including the coordinated vaping duty system with specified vaping provinces. The framework includes the imposition of excise duties that generally apply to vaping products manufactured in Canada or imported into Canada and intended for the duty-paid market. The vaping duty and additional vaping duty, as applicable, apply to vaping products whether or not they contain nicotine.

Definitions

The following terms, defined under the Act or related regulations, are used in this notice:

Additional vaping duty means a duty imposed under section 158.58 in respect of a specified vaping province. This is in addition to vaping duty imposed under section 158.57.

Coordinated vaping duty system means the system providing for the payment, collection and remittance of additional vaping duty imposed under any of section 158.58 and any related sections.

Manufacture includes, in respect of a vaping product, any step in the production of the vaping product, including inserting a vaping substance into a vaping device or packaging the vaping product. It does not include stamping a vaping product.

Person means an individual, a corporation, a partnership, a trust, the estate of a deceased individual, a government or a body that is a society, a union, a club, an association, a commission or another organization of any kind.

Specified vaping province means a prescribed province under the Excise Duties and Vaping Products Regulations. The following are prescribed provinces:

• Ontario
• Quebec
• New Brunswick
• Manitoba
• Prince Edward Island
• Alberta
• Yukon
• Northwest Territories
• Nunavut

Vaping duty means a duty imposed under section 158.57.

Vaping product means one of the following:

• a vaping substance that is not contained within a vaping device
• a vaping device that contains a vaping substance

It does not include a cannabis product or a tobacco product.

Requirement to obtain a vaping product licence

Unless otherwise specified in the Act, every person that manufactures vaping products in Canada must obtain a vaping product licence.

Effective January 1, 2024, a person must obtain a vaping product licence to import unstamped packaged vaping products for stamping in Canada.

The Act prohibits any person from possessing non-duty-paid vaping products without a vaping product licence, except under specific circumstances. Persons manufacturing vaping products, stamping imported packaged vaping products or possessing non-duty-paid vaping products without a vaping product licence may be subject to penalties, fines and imprisonment. 

When a licence is not required

Under subsection 158.35(3), a vaping product licence is not required when vaping products are manufactured in Canada by an individual strictly for their personal use. Personal use means the use of the good by the individual or by others at the individual's expense. It does not include the sale or other commercial use of the good.

In addition, a vaping product licence is not required if a person is strictly handling or selling stamped products (for example, a warehouse distributor of duty-paid products, or a retail outlet) or strictly transporting vaping products in accordance with the Act.

Licensing conditions

Under subsection 23(3), on issuing a licence or at any later time, the CRA may specify the activities that can be carried on under the licence and the premises where these activities may be carried on. In addition, other conditions may be imposed by the CRA with respect to the carrying on of activities under the licence.

Under section 24, a licensee must comply with the Act and its regulations when carrying on the activities specified under their licence.

Eligibility for a licence

A person must meet specific eligibility criteria to obtain a licence under the Act.

Under the Regulations, a person is eligible for a licence if the person:

• is not the subject of a receivership in respect of their debts
• has not failed, in the past five years immediately before the date of the licence application, to comply with any Act of Parliament (other than the Excise Act, 2001) or of a provincial or territorial legislature that deals with the taxation of or controls on alcohol, tobacco products, cannabis products or vaping products or with any regulations made under that act
• has not acted to defraud His Majesty in the past five years immediately before the date of the licence application

All individuals applying for, or as part of a partnership or unincorporated body that is applying for, a licence under the Excise Act, 2001, must be at least 18 years of age.

A person must demonstrate that they have sufficient financial resources to conduct their business in a responsible manner.

Applying for a licence

Under subsection 2(1) of the Regulations, every person that applies for a vaping product licence must complete Form L600, Vaping Product Licence Application, and submit it to their regional excise office.

There are no fees related to the application for or the issuance of a vaping product licence. A vaping product licence issued under the Act is valid for a period of up to three years, provided that it is not suspended or cancelled prior to expiration.

Effective January 1, 2024, under section 158.49, vaping products that are intended for export or sale to an accredited representative must be entered into the licensee's excise warehouse before the end of the second calendar month following the month of manufacture or import. Form L600 contains a section for an applicant to request an excise warehouse licence without submitting Form L63, Licence and Registration Application under the Excise Act, 2001.

If a person is already a vaping product licensee and requires an excise warehouse licence, they must complete and submit Form L63. For more information, refer to Memorandum EDM2-2-1, Obtaining and renewing a licence.

If a person already has an excise warehouse licence, they do not need to apply for a new one for vaping products. However, they must notify their regional excise office of their intention to use their existing excise warehouse licence for vaping products.

Mandatory documents

In addition to Form L600, the following must also accompany the application:

• a business plan (including a business overview)
• a sales and marketing plan
• a financial plan (including information on source of funds)
• a 12-month projection of manufacturing and vaping excise stamp usage
• financial security
• Form L601, Registration for Vaping Stamping Regime (only if stamping)

More than one premises

A vaping product licence authorizes a person carrying on their activities at a single premises or at several premises. Complete Form L600-A, Schedule A – Other Business Locations, and submit it with Form L600 to indicate all premises involved in vaping activities requiring authorization for the purposes of the vaping product licence. 

Financial security requirements

Under paragraph 23(3)(b) of the Act and paragraph 5(1)(b) of the Regulations, every person that submits an application to apply for or renew a vaping product licence must provide adequate financial security. The amount is determined in accordance with the Regulations and must be in a form and amount acceptable to the CRA.

The provision of financial security is a condition of the vaping product licence and must be provided, in Canadian funds, in the form of a bank draft, a certified cheque, a surety bond issued by an approved entity, or a Canada Post money order. If the applicant provides the financial security by means of a surety bond, Form L602, Surety Bond for Vaping Product Licensee, may be submitted with the application package.

Financial security must be posted before a vaping product licence is issued or renewed and must be maintained during the licensing period.

Calculating financial security

Vaping product licensees must calculate their financial security using the two methods below and post the greater amount.

Method A: Based on monthly liability

Under subsection 5(1) of the Regulations, financial security provided with an application for, or to renew, a vaping product licence must be in an amount of at least $5,000 and must be sufficient to ensure payment of duties payable on the vaping product licensee's excise duty return for any calendar month, up to a maximum of $5 million.

The amount of duties payable refers to duty payable on Form B600, Vaping Duty and Information Return. This amount includes both vaping duty and additional vaping duty, if applicable, and is net of deductions and refunds that are claimed on the return. For new applicants, financial security will be calculated using projections contained within the business plan.

Method B: Based on stamp possession

Under subsection 4.11(1) of the Stamping and Marking of Tobacco, Cannabis and Vaping Products Regulations, the financial security calculation is the greater of either:

• the total of:
  • $2 multiplied by the number of vaping excise stamps in respect of any specified vaping province that are either: 
    • in the possession of the vaping product licensee at the time of application for stamps
    • to be issued in respect of the application
  • $1 multiplied by the number of vaping excise stamps, not in respect of any specified vaping province that are either:
    • in the possession of the vaping product licensee at the time of application for stamps
    • to be issued in respect of the application
• $5,000

The maximum amount of financial security required is $5 million.

Vaping excise stamps considered to be in the possession of a vaping product licensee includes stamps:

• physically in the possession of the licensee that are not affixed to products
• affixed to products that have not yet been accounted for on their monthly information return
• purchased and currently in transit from the stamp provider

Anyone requiring assistance in determining the correct amount of financial security to be provided to the CRA may contact their regional excise office.

For detailed information on the changes to the excise duty rates on vaping products, refer to Notice EDN96, Budget 2024 - Changes to excise duty rates on vaping products effective July 1, 2024.

Maintaining financial security

Since the provision of adequate financial security is a condition of licensing, a licensee must ensure that the level of financial security provided remains sufficient for the term of the licence.

Failure to maintain a sufficient level of financial security may result in the suspension or non-renewal of the licence.

Increase in financial security required

A licensee that determines that the level of financial security has or may become inadequate must immediately contact their regional excise office to discuss the situation or to obtain assistance in determining the correct amount of financial security to be provided.

If the amount of financial security provided by a vaping product licensee is reviewed and it is determined that additional financial security is required, they must provide the additional security amount without delay.

Certification

An authorized person must sign the completed Form L600. If the applicant is a corporation, an association, or an organization that has duly elected or appointed officers, the authorized person is the president, vice-president, secretary or treasurer (or other equivalent officer). If the applicant is a sole proprietorship or partnership, the proprietor or a partner, respectively, must sign the application.

Registration for vaping stamping regime

Any person that stamps vaping products in Canada must hold a vaping product licence and must register under the vaping excise stamping regime by completing and submitting Form L601. For more information, refer to Notice EDN80, Overview of vaping excise stamps.

Authorized representative

A licensee may wish to authorize an individual (such as an accountant, a lawyer or an employee) or a firm as their representative related to their excise duty program account.

To authorize a representative to discuss their excise duty program accounts with the CRA, the licensee may use the "Authorize a representative" service in My Business Account.

A representative that wishes to request online access to a licensee's account information must follow the electronic authorization process under Represent a Client.

Email notification

A licensee may provide their email address on Form L600 if they would like to register to receive any CRA mail online.

To view CRA mail online, the licensee must be registered through My Business Account.

If the licensee has a representative, then the representative must be registered under Represent a Client and be authorized on the licensee's account.

All CRA mail available in My Business Account will be considered to have been received on the date that the email notification is sent. Any mail that is eligible for electronic delivery will no longer be printed and mailed.

Effect and duration of licence

Once a decision is made to issue a licence, a vaping product licence approval letter is issued by the regional excise office. The approval letter specifies:

• the legal name of the entity that holds the licence
• the entity's complete mailing address
• the premises authorized under the licence
• the licence number
• the account number
• the effective and expiry dates of the licence

The vaping product licence is effective from the date indicated on the licence approval letter and is generally valid until the expiry date indicated in that letter. Section 4 of the Regulations provides that a vaping product licence issued under the Act is valid for a maximum period of three years, provided that it is not suspended or cancelled prior to expiration.

The CRA may amend, suspend, cancel or impose additional conditions on a vaping product licence at any time. For more information on the grounds for suspending or cancelling a licence, refer to the "Suspension of a licence" and "Cancellation of a licence" sections of this notice.

Requirement to file monthly returns

Under section 160, every person that is licensed must file a monthly return no later than the last day of the first month following the reporting period (calendar month). This includes calculating any duties owing and paying the net amount to the Receiver General.

Notification of changes

Under section 6 of the Regulations, a licensee must notify their regional excise office, in writing, of any changes to their information, without delay. Such changes may include:

• a change of name or legal entity
• the discontinuance of the operations covered by the licence
• a change in the list of premises
• a change in activities
• a change in any other information provided on, or in support of, the licence application, including officers and directors
• a change in the address where the books and records are maintained

Name change

In the case of a name change, a vaping product licensee must notify their regional excise office in writing before the change occurs. If the name change is not the result of a change in legal entity, no new vaping product licence or excise duty program account number will be issued.

Change of legal entity

Where a change of legal entity occurs (for example, a proprietorship incorporates or a corporation merges with another corporation), the existing vaping product licence will be cancelled and the new legal entity must apply for a new licence by completing Form L600 and submitting it to their regional excise office. A copy of the new or revised certificate of incorporation or the certificate of amalgamation, along with a replacement form of financial security, must be sent with the form.

Facilities, personnel and equipment

Under section 13 of the Regulations, all licensees must provide the following at each premises listed in the licence:

1. adequate space for the examination of goods or records by an officer
2. the equipment and personnel necessary to ensure that the goods or records to be examined are made available to the officer
3. the personnel necessary to provide information to an officer, for audit purposes, with respect to the operations, inventory system and records of the licensee

Licence renewal

Licences are not renewed automatically. Vaping product licensees that wish to renew their vaping product licence must:

• complete Form L600
• submit it to their regional excise office at least 30 days before the expiry date of the current licence
• recalculate their financial security to ensure it is adequate
• continue to meet the requirements of the Regulations, as described in the "Eligibility for a licence" section of this notice.

Vaping product licensees that wish to renew their licence must provide any additional financial security that may be required with the renewal application when it is submitted to the CRA.

Refusal to issue or renew a licence

Under subsection 23(1), the decision to issue or renew a licence rests with the CRA. An application for a vaping product licence could be denied by the CRA in any of the following circumstances:

• if the eligibility requirements within the Regulations are not satisfied
• if there is reason to believe that access to the premises of the person will be denied or impeded by any person
• if it is not in the public interest to issue a licence

If an application for a vaping product licence is denied, the applicant is not prevented from submitting a subsequent application for a licence. The applicant could also apply to the Federal Court for a judicial review of the CRA's decision to not issue or renew a licence.

Suspension of a licence

Under subsection 23(2) of the Act and in accordance with the Regulations, the CRA may suspend a licensee's vaping product licence. The reasons for suspension may include, but are not limited to:

• access to the licensee's premises being denied or impeded by any person
• failure to meet the conditions of the licence, as outlined under subsection 23(3) of the Act and in the Regulations
• failure to notify the CRA of any changes in the licensee's licensing information, as required by legislation
• failure to maintain the eligibility requirements for a licence
• bankruptcy
• failure to comply with any Act of Parliament (other than the Excise Act, 2001) or of a provincial or territorial legislature that deals with the taxation of or controls on alcohol, tobacco products, cannabis products or vaping products or with any regulations made under that act
• the licensee acting to defraud His Majesty
• failure to provide at the premises adequate space, equipment or personnel required for the examination of goods and records by an officer

A licence may also be suspended if it is otherwise in the public interest to do so.

Notice of suspension and recourse

Under subsection 10(2) of the Regulations, if a licence is suspended, the CRA immediately sends written notice to the licensee to advise of the suspension and to provide all relevant information concerning the grounds for the suspension.

When a licence has been suspended, it means that, from the date of suspension, the person can no longer carry on any activities under that licence until it is reinstated.

Under subsection 10(3) of the Regulations, a person that receives notice that their vaping product licence is suspended may, within 90 days from the date of suspension, make representations to the CRA regarding why the licence should be reinstated.

Reinstatement of a suspended licence

When the grounds for the suspension of a licence no longer exist, the licence must be reinstated.

When a licence is reinstated, the CRA advises the licensee in writing. Reinstatement means that the licensee is permitted to carry on the activities allowed under the licence prior to suspension, unless the CRA places conditions on the licence.

Cancellation of a licence

Under subsection 23(2.1) of the Act and in accordance with subsection 12(1) of the Regulations, the CRA may cancel a vaping product licence. The reasons for cancellation may include, but are not limited to:

• the licensee requesting in writing that the licence be cancelled
• the licensee becoming bankrupt
• the licensee no longer meeting the eligibility requirements to maintain the vaping product licence
• the licensee ceasing to carry on the business or activities for which the licence was issued
• the licensee acting to defraud His Majesty
• the licensee failing to comply with any Act of Parliament (other than the Excise Act, 2001) or of a provincial or territorial legislature that deals with the taxation of or controls on alcohol, tobacco products, cannabis products or vaping products or with any regulations made under that act
• access to the premises of the licensee being denied or impeded by any person

A licence may also be cancelled if it is otherwise in the public interest to do so.

Notice of cancellation and recourse

Under subsection 12(2) of the Regulations, before a licence is cancelled, the CRA will send written notice to the licensee 90 days before the cancellation, along with all relevant information concerning the grounds for the cancellation. The CRA does not provide written notice if the licensee has requested that their licence be cancelled.

When a licence is cancelled, the licensee can no longer carry on any activities under that licence, or possess unstamped vaping products or vaping excise stamps.

Under subsection 12(3) of the Regulations, a person that has received notice of the cancellation of their licence may, within 90 days from the date of the notice, make representations to the CRA regarding why the licence should not be cancelled.

The CRA will review the representations. The licensee will be notified in writing of the CRA's decision following the review of the representations.

Upon cancellation of a licence, any financial security that has been posted by the licensee that is in excess of any liabilities of the licensee to pay duties will be returned to the licensee.

Further information