Government proposes cannabis tax plan

The proposed federal excise duty rate would be 50 cents per gram of cannabis, or 5% of the producer’s sale price of that product. An additional rate would apply for an agreeing province or territory.

Today the federal government announced their plans for a tax on cannabis to not exceed $1 a gram or 10% of the price of the product, splitting the excise duty rate at 50 cents a gram to the federal government and 50 cents to the provinces/territories.

The proposed duty would apply to all cannabis products available for legal sale, including fresh and dried cannabis, cannabis oils, as well as seeds and seedlings for home cultivation. The rate will also apply to the sale of medical cannabis, which is tax deductible.

Cannabis products that are produced by an individual or a designated grower for an individual’s own medical purposes in accordance with the proposed Cannabis Act will not be subject to the excise duty. Seeds and seedlings used in this production will be subject to the duty.

As examples, one gram of dried cannabis, at a pre-duty price of $8 a gram would have an excise tax of $1, plus GST/HST of $1.17, bringing the total cost to $10.17 a gram. A $130 bottle of cannabis oil would have excise duty of $13 and GST/HST at $18.59, for a total of $161.59.

The government says their aim to to set a level of taxation low enough to compete with the black market while being high enough to both discourage the use of cannabis and provide government revenue to manage the program.

All these measures are still pending Parliamentary approval.

An illustration of this proposed excise framework within the cannabis supply chain, and the types of products captured in the base, can be seen in the figure below:

Illustration of Proposed Cannabis Duty Framework

Illustration of Proposed Cannabis Duty Framework

More information available here.

Table 5.1: Proposed Federal-Only Excise Duty Rates on Cannabis
The Higher of the Two Rates Applies

Cannabis Plant Product Flat Rate Ad Valorem Rate
Flower $0.50 / gram 5 per cent of the sale price of a cannabis product packaged by a federal licensee to a purchaser.
Trim $0.15 / gram
Seed for home cultivation $0.50 / seed
Seedling for home cultivation $0.50 / seedling
Table 5.2: Potential Combined Federal and Additional Excise Duty Rates on Cannabis
The Higher of the Two Rates Applies

Cannabis Plant Product Flat Rate Ad Valorem Rate
Flower $1.00 / gram 10 per cent of the sale price of a cannabis product packaged by a federal licensee to a purchaser.
Trim $0.30 / gram
Seed for home cultivation $1.00 / seed
Seedling for home cultivation $1.00 / seedling

For illustrative examples of potential applicable excise duty rates for certain cannabis products (i.e., how the duty flat rate and ad valorem rate interact in practice), please see Table 5.3 for potential federal-only excise duty liabilities and Table 5.4 for potential combined federal and additional excise duty liabilities.

Table 5.3: Examples of Proposed Federal-Only Excise Duty and GST/HST Liabilities on Certain Cannabis Products
Product Quantity of Dried Cannabis Flower Used1(g) Total Flat Duty at $0.50/g ($) Sale Price Pre-Duty ($)2 Total Ad Valorem Duty at 5% of Sale Price ($) Duty Type Applicable GST/HST (e.g.,13%) ($) Final Price ($)
Dried cannabis 1 0.50 8.00 0.40 Flat 1.11 9.61
0.50 11.00 0.55 Ad Valorem 1.50 13.05
Cannabis oil (60 ml bottle) 10 5.00 130.00 6.50 Ad Valorem 17.75 154.25
Cannabis oil (soft gels) 5 2.50 52.50 2.63 Ad Valorem 7.17 62.30
* Totals may not add due to rounding.
1 Assuming the use of only the flower portion of the cannabis plant. Quantities are illustrative and may not  necessarily reflect the actual quantity of cannabis used in the products detailed here.
2 Prices are illustrative and assume direct sale from a federal licensee to a final consumer.
Table 5.4: For Illustrative Purposes Only–Examples of Proposed Combined Federal and Potential Additional Excise Duty Liabilities, and GST/HST Liabilities, on Certain Cannabis Products
Product Quantity of Dried Cannabis Flower Used1(g) Total Flat Duty at $1/g ($) Sale Price  Pre-Duty ($)2 Total Ad Valorem Duty at 10% of Sale Price ($) Duty Type Applicable GST/HST (e.g.,13%) ($) Final Price ($)
Dried cannabis 1 1.00 8.00 0.80 Flat 1.17 10.17
1.00 11.00 1.10 Ad Valorem 1.57 13.67
Cannabis oil (60 ml bottle) 10 10.00 130.00 13.00 Ad Valorem 18.59 161.59
Cannabis oil (soft gels) 5 5.00 52.50 5.25 Ad Valorem 7.50 65.25
* Totals may not add due to rounding.
1 Assuming the use of only the flower portion of the cannabis plant. Quantities are illustrative and may not necessarily reflect the actual quantity of cannabis used in the products detailed here.
2 Prices are illustrative and assume direct sale from a federal licensee to a final consumer.

 

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5 comments

  1. Barbara Reply

    Please don't! I'm on odsp n can't afford groceries every week in order to make sure I have enough for cannabis prescription. How can we stop this?

  2. Maxcatski Reply

    These tax calculations are based on black market prices approaching $10 a gram. A flat rate tax on cannabis is simply wrong. $1 a gram is 10% of a $10 price. What happens if market forces drive the cost down to $2 a gram? A one dollar flat tax would then be 50% of the value. Sin taxes on cannabis are not appropriate if we wish to eliminate the black market.

    A reasonable approach is to apply sales tax like any other product and to exempt any taxes for consumers with a medical authorization.

    1. Jason Reply

      I'm sorry to say, but the problem with your comment is that you're using reasoning, logic and rationality...

      Sorry, but that's just unacceptable in our politics. 😉

      1. Maxcatski Reply

        And then I smoked pot. What was I saying again?

  3. Dan Reply

    Will this effect medicinal cannabis as well?