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New Excise Tax Puts Canada’s Black-Market Cannabis Producers on Notice

May 18, 2018
Just in time for Canadian legalization, the Liberal government has set up an excise tax stamp system for cannabis similar to the one it has in place for tobacco.

Under the Excise Tax Act, illicit cannabis producers could face huge fines or five years of imprisonment—on top of the potential 14-year prison terms they already face under the Cannabis Act.

Under the country’s amended Excise Tax Act, illicit cannabis producers could face huge fines or five years of imprisonment—on top of the potential 14-year prison terms they already face under the Cannabis Act.

Through the new system, the Canadian government is imposing a 10% excise tax on both medical and non-medical cannabis products. That’s on top of sales tax that consumers and patients across the country will pay on their cannabis at the check-out aisle. Customers won’t see a direct added cost from the excise tax, which is paid by producers before sale, but there’s nothing stopping producers from increasing their retail prices in accordance with their costs.

How it works: All producers and processors of cannabis in Canada must apply for an excise tax license and report to the Canadian Revenue Agency the amount of duty they owe, based on the amount of cannabis that was produced or processed. The CRA will then send excise stamps to the company, which will affix one stamp to each and every cannabis product that leaves their doors. End consumers will know that the production of their cannabis product complied with the excise stamp regime by the presence of the stamp affixed to it.


Canada Wants to Tax Medical Cannabis. Get Ready for a Fight

The amended Excise Tax Act would make it a crime to package cannabis without an excise stamp and to possess counterfeit excise stamps. A third provision, establishing an offence for producing cannabis without an excise tax, could be particularly troublesome for producers of illicit cannabis. The Act establishes a fine of 200% of the excise tax duty owed, as well as a possible five-year prison term.

It’s not inconceivable that we’ll see cannabis offenders charged under both the Excise Tax Act and the Cannabis Act.

While federal prosecutors would likely be most comfortable charging illicit cannabis producers under the Cannabis Act, they are also tasked with prosecuting any offences that come to their attention under the Excise Tax Act–so it’s not inconceivable that we’ll see cannabis offenders charged under both acts. It’s worth noting that being charged with multiple offences often gives prosecutors extra leverage or when it comes to securing a plea deal.

And this is all on top of any provincial or municipal offences  set up by lower levels of government across the country as it legalizes non-medical cannabis.

Legalization just doesn’t look fun for illicit growers, does it?

The good news is that the act contains a number of exemptions, including for cannabis that is grown by individuals through legal personal and designated Health Canada licenses, as well as any cannabis that is grown for personal use under the Cannabis Act.


Canada’s Cannabis Tax Plan: Good for Provinces, Bad for Patients

Medical cannabis patients may be happy to find out that the excise tax won’t apply to cannabidiol (CBD) products with under 0.3% of THC. However, while high-CBD, low-THC products currently sold in current medical cannabis system contain a small amount of THC, many times it is not as low as 0.3%. That may force producers to re-adjust product formulations so that they come in under 0.3% THC, which would avoid the imposition of the excise tax and passing on to the consumer excise tax costs they don’t have anymore. Prescription cannabis products such as Sativex would also be exempted, although not the cannabis products generally sold by licensed producers.

Organizations such as Canadian for Fair Access to Medical Marijuana have been fighting to remove the excise tax on all medical cannabis. While they may have some success on that front, it’s pretty much a bygone conclusion that the Excise Tax offences will be implemented. Will that mean prosecutors charge cannabis offenders under both acts? Time will tell.

Harrison Jordan's Bio Image

Harrison Jordan

Harrison Jordan is a graduate of Osgoode Hall Law School in Toronto and enjoys reading and writing about the regulatory affairs of cannabis in Canada and around the world.

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  • Natacha Lalande

    I’ve listened to the senate committees regarding C-45, C-46 and C-74. I came to an understanding that they would not put an excise tax on medical cannabis.. what happened?! I am mad right now, i can barely afford 1/3 of my medical cannabis prescription per month and it’s gonna have an excise tax on top of it?! i feel like crying right now… to top it off, my province (QC) banned home production (except medical with permit). I need to get my permit ASAP.

    • Bob Carter

      If you are a medical patient, the ban on growing doesn’t apply to you, The courts have ordered Health Canada to license all patients that wish to grow for their self or have a designated grower produce for them with a Doctors Document. This is the law, Apply for a grow license and you don’t have to pay outrages money to Government sanctioned growers, the provincial grow ban is only for personal Recreational growing, and at that, you all should be challenging this regulation in court, that is the only way to beat the Government. I warned LP patients of this crap 3 years ago and yet they have supported these fat wallet corporations with your licenses and Cannabis Healthcare money, What did you all expect??

      • Natacha Lalande

        I know but the private clinic where i go don’t offer growing and a center said they would offer me the registration for production permit. Even then, it takes currently 5-6 months to receive a permit, then about 6 months for growing/drying/curing. So i’d still have to buy weed and oils while i wait.

        Some of us prefer not to risk court or even jail, we try to stay legit and remain with LP until we can grow. Am i not also allowed to worry about those who don’t have access to ACMPR in provinces where growing will be banned.. My neighbor smoke weed without a card, i have mine, i’ll be able to grow, he won’t.. how fair is that? it’s a friggin plant that grows in the soil.

        • Bob Carter

          Did you smoke weed before you had your “Card” (LP), and Where did you buy it from? I have been warning LP patients actively for years, and the biggest excuse is “I need to be legal, I have Kids, I have a important Job, and I say If you sign and Support the Government sanctioned Corporations with your license and money, that is all you get, I was a rec user for 35 years, since the 70’s, 2012 diagnosed, 8 months it took to get my license, I called a Toronto Illegal dispensary the day I sent my HC app, and had access within one day all illegal,

          Today I have 2 grow licenses 0ne Court protected, and still to this day I am forced to buy my seed strain for my illness illegally because these fat wallet corporations do not have access to any worth while Genetics, Legalization or rather Prohibition 2.0 won’t change this, if you are serious about using cannabis you won’t find it with government weed.