Federal Excise Tax
Excise Tax 101
As the vaping industry continues to evolve and grow, the Canadian Government has decided to implement an excise tax on vaping products that contain vaping substances with or without nicotine. As your retailer, please find below some key information that will help you understand this new regulation and how it will impact us and you.
What is excise tax?
On April 7, 2022, the Federal Government announced excise duty on vaping products. This excise duty (or excise tax) applies to any vaping substances sold in Canada that are intended for use in a vaping device.
All vaping products that are meant for sale in the Canadian duty-paid market are required to have an excise stamp affixed to the product as proof that duties have been paid. Canadian manufacturers and importers are responsible for applying excise stamps to vaping products that are intended for sale in the Canadian duty-paid market and remit payments to the Canada Revenue Agency (CRA).
When will the excise tax be implemented?
Effective October 1, 2022, manufacturers and importers of vaping products sold at retail stores are required to be licensed or registered with the Canada Revenue Agency (CRA).
For retailers, the excise tax regulations will come into effect on January 1, 2023. As a retailer, we have a grace period to sell unstamped products until December 31, 2022. Starting January 1, 2023, all products containing vaping substances sold in our stores (including e-commerce sales) will require a vaping excise stamp affixed to the product. We will continue to sell unstamped products through the latter months of 2022. Our full transition to only excise stamped products will occur on January 1, 2023.
How much will the excise tax increase the prices, and how will they be calculated?
The duty is calculated based on the liquid volume of vaping substance contained in a single container (in mL). At this time, duties are charged and collected on the Federal level.
Federal Taxes Calculations
- For the first 10 mL of vaping substance, a duty is applied at a rate of $1.00 per 2 mL of the vaping substance.
- For each additional 10 mL of vaping substance thereafter, a duty is applied at a rate of $1.00 per 10 mL of the vaping substance.
- For a closed pod pack (3 pods cartridges), the duty payable will be CAD $1 per 2 mL, which equates to an increase of $3 per closed pod pack.
If a new Provincial/Territorial stamp will be applied on all products in the future, the duty payable will effectively double.
Using the example above, the same closed pod pack with 6 mL of vaping substance with Federal and Provincial/Territorial duties would be $2 per 2 mL, which equates to $6.
- A 60 mL bottle of e-liquid at Federal excise duties are $1 per 2 mL for the first 10 mL, which equates to $5. The remaining 50 mL are $1 per 10 mL which equates to another $5.
- The total Federal excise duties are $10. When Provincial or Territorial duties are implemented, this would effectively double to $20 of excise tax.
Frequently Asked Questions
1) What products are affected by excise tax?
Vaping products that are vaping devices that contain vaping substances or that are vaping substances in immediate containers. Any vaping hardware that is sold separately from the vaping substance will not be impacted.
- Taxed products: closed pods, disposable vapes, e-liquid bottles, or bottles containing any component intended for vaping (nicotine, VG, PG, flavouring).
- Products that will not be taxed: device/battery for closed pod systems and any vaping hardware or mods (including chargers, empty cartridges, tanks, and other accessories).
2) Will prices increase?
Yes, the MSRP will increase with the addition of the excise duty.
3) How is the total price calculated?
Product price + excise tax + any applicable provincial taxes and the Federal Goods and Services Tax (GST).
4) What about stores who still sell unstamped products from January 1, 2023 and onward?
The Government is ramping up enforcement and there will be penalties for distributors and retailers who do not comply.
Non-compliant businesses will potentially be charged up to 200% of the duty owed and have the products seized. (Excise Act 2022, c. 10, s. 73)
Businesses must prepare for this transition period as penalties can lead up to having our business licenses revoked and high penalty fees. This is a serious matter and the CRA will be involved.
5) Is there anywhere to report retailers who are in violation?
Yes, you can send an email to LPVAPINGG@cra-arc.gc.ca
7) Will the product and brand offerings remain the same?
We are working diligently to continue providing you with our most popular products in their new excise stamped versions. However, there will be some changes to the brands and products we offer, contingent on their ability to participate in the excise stamping process. More information on these changes will be provided at a later date.
The implementation of excise tax on vaping products will be a transition into the future. As your valued retailer, we are putting our full resources to ensure as smooth of a transition as possible. Please stay tuned for more updates related to the excise tax throughout the coming months. If you have any questions, please feel free to contact us.
1. Excise duty on vaping products
2. Duty on Vaping Products