In the 2022 budget, the Government of Canada introduced an Excise Duty on vaping liquids. This tax is designed to regulate the vaping market and aligns with the tax frameworks applied to tobacco, alcohol, and cannabis products. Below is a detailed guide to help you understand how this tax works and its implications.
What is an Excise Duty?
An excise duty is a tax applied at the manufacturing level. For vaping liquids, the duty must be paid when the product is ready for sale, regardless of whether it is sold or remains on the shelf. This means the tax is paid upfront, and sales tax (such as GST/HST) is then applied on top of the duty-included price (essentially, a "tax on tax").
Timeline of the Excise Duty
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January 1, 2023: The excise duty on vaping liquids came into effect.
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July 1, 2024: The federal government increased the tax rate by 12%. On the same date, the provinces of Quebec, Ontario, Nunavut, and the Northwest Territories joined the excise tax program.
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January 1, 2025: Alberta, Manitoba, Prince Edward Island, New Brunswick, and Yukon will also join the excise tax program.
Excise Tax Rates
The following tax rates will take effect on January 1, 2025:
For Residents of These Provinces/Territories:
Alberta, Ontario, Quebec, Manitoba, Prince Edward Island, New Brunswick, Yukon, Nunavut, and the Northwest Territories.
| Bottle Size | Federal Excise Tax (Per Bottle) | Provincial Excise Tax (Per Bottle) | Total Excise Tax (Per Bottle) |
|---|---|---|---|
| 60ml | $11.20 | $11.20 | $22.40 |
| 120ml | $17.92 | $17.92 | $35.84 |
For Residents of These Provinces:
British Columbia, Newfoundland & Labrador, Nova Scotia, Saskatchewan.
| Bottle Size | Federal Excise Tax (Per Bottle) | Provincial Excise Tax (Per Bottle) | Total Excise Tax (Per Bottle) |
|---|---|---|---|
| 60ml | $11.20 | $0.00 | $11.20 |
| 120ml | $17.92 | $0.00 | $17.92 |
Impact of the Excise Duty
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Consumers: The price of vaping liquids may increase, especially in provinces that have adopted the provincial excise tax.
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Retailers: Must ensure that the excise duty is paid and the appropriate tax stamp is applied before products are sold.
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Manufacturers: Are responsible for paying the excise duty at the production stage and ensuring compliance with regulations.
Frequently Asked Questions
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Why was the excise duty introduced?
The excise duty aims to regulate the vaping market, reduce youth vaping, and generate additional revenue for the government. -
How is the excise duty calculated?
The duty is calculated based on the volume of vaping liquid, with rates varying by province. -
Which provinces have joined the excise tax program?
As of January 1, 2025, the provinces and territories participating in the program include Alberta, Ontario, Quebec, Manitoba, Prince Edward Island, New Brunswick, Yukon, Nunavut, and the Northwest Territories.
Conclusion
The introduction of the excise duty on vaping liquids in Canada has significant implications for consumers, retailers, and manufacturers. Understanding how the tax is calculated and which provinces are participating can help you make informed decisions about purchasing and selling vaping products. If you have any questions about the excise duty, feel free to reach out to us!