Excise Taxes and Special Levies Memoranda Series

From: Canada Revenue Agency

X2.2 Small Manufacturers

January 1997


This section explains who is a small manufacturer for purposes of Parts III, IV and VII of the Excise Tax Act and sets out the conditions a person must meet to be exempt from obtaining a licence under the Excise Tax Act as a small manufacturer.


This section of Chapter 2 supersedes Excise Memorandum ET 104, Small Manufacturers. Due to the number of revisions, the changes have not been side-barred.

Who is a small manufacturer?

Definition of small manufacturer
ss 64(2)

1. Persons who are small manufacturers are not required to be licensed under the Act. There are four classes of manufacturers who qualify as small manufacturers. These are:

Value of sales less than $50,000

(a) persons who sell taxable goods of their own manufacture, or who manufacture taxable goods for their own use if the value of these taxable goods does not exceed $50,000 in a calendar year; and

Designated small manufacturer - Small Manufacturers or Producers Exemption Regulations

(b) the following three classes of manufacturers who are designated small manufacturers regardless of the value of taxable sales in a calendar year:

(i) cider millers who produce cider for a customer from the customer's own apples;

Persons who produce cider from their own apples are not designated small manufacturers. These manufacturers are required to operate under an excise licence unless their sales value does not exceed $50,000 in a calendar year.

Craft persons

(ii) persons who design and produce goods from basic materials and through skillfull use of their hands and hand tools only, but not including goods that

  • are made wholly or in part of precious metals,
  • are made wholly or in part of precious or semi-precious stones, and
  • are made in a repetitive manner through the use of jigs, templates, moulds, dies or other similar devices except that such devices may be used to produce the original or first unit; and

(iii) persons who

Highway vehicles

  • purchase or import new motor vehicles designed for highway use, or the chassis therefor, and
  • have the vehicles or chassis further manufactured on their behalf

(A) by licensed manufacturers who are liable to pay any applicable excise tax on the charge made for the further manufacture, and

(B) for their own use or for sale or lease to consumers or users.

Optional licensing of small manufacturers

Electing to operate under licence

2. Persons who qualify as small manufacturers because the dollar value of their annual sales does not exceed $50,000 may elect to operate under licence. When this option is exercised, they no longer qualify as small manufacturers. They are subject to the same conditions as other licensees and are responsible for the filing of returns and the payment of taxes on taxable sales.


When sales value of taxable sales exceeds $50,000

3. Manufacturers of taxable goods who are unlicensed and who have qualified as small manufacturers (i.e., the dollar value of their taxable sales has not exceeded the $50,000 threshold) are required to be licensed when the sales value of these taxable goods exceeds the $50,000 threshold during any calendar year. They must apply for a manufacturer's excise tax licence and account for tax on their taxable sales and/or appropriations for their own use commencing the day the annual sales exceed $50,000. More detailed information on licensing is available in Section 2.1, Licences, of this chapter.

Purchases of raw materials by small manufacturers

Raw materials

4. Articles and materials that are in themselves subject to excise tax and are for use in the manufacture of goods subject to excise tax must be purchased or imported excise tax paid by all small manufacturers.

Eligibility of small manufacturers to receive refunds

s 68 and 69, and
ss 81.1(6)

5. Small manufacturers who have acquired, on an excise-tax-paid basis, articles and materials that are subsequently incorporated into taxable goods sold or used under excise-tax-exempt conditions may apply for a refund of the excise tax paid on the articles and materials provided the conditions respecting refunds are met. More information on refunds is found in Excise Memorandum ET 313, Application for Refund (to be re-issued in Chapter 3, Tax Application, of the Excise Tax and Special Levies Memoranda Series).

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