How Canadian Cannabis Taxes will Affect Marijuana Dispensaries

As the first day of legalized recreational marijuana in Canada approaches, cannabis businesses across the country are preparing for a boom in sales. While there will certainly be a lot of profit to gain, marijuana dispensaries will also have to keep track of the Canadian cannabis taxes. The federal government has agreed that 75% of the tax revenue generated from the cannabis industry will be returned to the provinces and territories.

Cannabis retailers will be subject to several taxes and much of this cost will be included in the prices for consumers. We’ve compiled a break down of the Canadian cannabis taxes and how they will affect private marijuana dispensaries.

Cannabis Excise Tax

Fortunately, the cannabis excise tax in Canada only applies to cultivators, producers and packagers of marijuana products. This is a federal tax that is paid once the products have been purchased by a private retailer, government retailer, or authorized distributor.

Each Canadian province and territory have cannabis excise stamps that must be purchased by the packager and attached to the products. Marijuana dispensary customers can confirm they are buying legally produced cannabis products when they see a cannabis excise stamp on their purchased products. To calculate the cannabis excise tax review the table below.

Cannabis plant product              

Flat-rate duty           

Ad valorem duty

Flowering material

$0.25 per gram

2.5%

Non-flowering material

$0.075 per gram

2.5%

Viable seed/seedling

$0.25 per seed

2.5%

Social Responsibility Tax

Some provinces in Canada, such as Manitoba, have elected to implement a social responsibility tax that will apply specifically to cannabis retailers. Marijuana dispensaries will be required to pay 6% of their total annual revenue to the province. This money will be allocated for public education, safety, health and addictions associated with marijuana legalization.

Growth, Enterprise and Trade Minister Blaine Pedersen noted that, "The various health, safety, education and enforcement implications of legalized cannabis fall almost entirely to the provincial level of government. Our plan will help cover these provincial costs and also ensure fairness, recognizing the social responsibility retailers must share."

Goods and Services Tax (GST)

The goods and services tax is the federal tax on all goods and services that is the same for every province in Canada. The GST is the same tax percentage for every province and is set at 5% for all goods purchased in Canada. However, medication in the form of prescription drugs are considered zero-rated and as such are exempt from federal and provincial taxes.

Unfortunately, cannabis is not treated the same as prescription drugs and are subject to GST, PST and HST. Currently, patients prescribed for medical marijuana are not covered by the majority of private health insurance policies and certainly not government assisted health insurance. Marijuana dispensaries will be required to charge 5% GST to both medical and recreational cannabis customers.

Provincial Sales Tax (PST)

Provincial sales tax is levied by each province and the amount of tax charged differs from province to province. Some provinces such as Alberta, Nunavut, Yukon, and Northwest Territories have completely eliminated PST. Provincial Sales Tax will need to be calculated into the cost of all cannabis goods depending on where the dispensaries are operating.

PST percentages fluctuate ranging from 10% at the highest and 6% at the lowest for those provinces who have implemented provincial sales tax. Cannabis retailers can review the table below to see the current percentages for PST by province.

PROVINCE                                 RATE TYPE       PST            GST            TOTAL

Alberta

GST

0%

5%

5%

British Columbia (BC)

GST+PST

7%

5%

12%

Manitoba

GST+PST

8%

5%

13%

New-Brunswick

HST

10%

5%

15%

Newfoundland and Labrador          

HST

10%

5%

15%

Northwest Territories

GST

0%

5%

5%

Nova Scotia

HST

10%

5%

15%

Nunavut

GST

0%

5%

5%

Ontario

HST

8%

5%

13%

Prince Edward Island (PEI)

HST

10%

5%

15%

Québec

GST + QST

9.975%

5%

14.975%

Saskatchewan

GST + PST

6%

5%

11%

Yukon

GST

0%

5%

5%

 

Harmonized Sales Tax (HST)

Harmonized Sales Tax is essential the combination of the federal GST tax percentage and the provincial PST tax percentage. HST exists in Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island as noted in the table above. Marijuana dispensaries selling cannabis in these provinces will only need to charge the total harmonized sales tax percentage.

With so many Canadian cannabis taxes it is imperative for dispensaries to use a point of sale system that can calculate and track each tax individually. IndicaOnline POS system has developed an advanced tax tiers within the software that will automatically apply the correct percentage at checkout. Schedule a demo to learn more about setting up your Canadian cannabis taxes in our software so we can help you prepare for recreational marijuana.

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