What is Changing with the Federal Tax?

In a recent announcement by the CRA on May 14th, 2024, it was declared that all vaping products with federal excise stamps will undergo a 12% tax increase starting July 1st, 2024. This adjustment will affect the current federal excise tax rate and will also be applicable to any upcoming provincial tax rates.

The federal excise stamps will remain the same, so there will be no impact on your sellable inventory. However, you should familiarize yourself with these changes to maintain your margins and so that you can keep your customers informed.

Source: Excise Duty Notice EDN95

What is the Provincial Excise Tax?

The provincial excise tax is a new tax implemented on vaping products, containing e-liquid, by the Federal government with invitation for provinces to join. Ontario, Quebec, Nunavut, and the Northwest Territories have chosen to participate. This tax will be applied in addition to the new federal excise tax pricing structure on vaping products.

Tax Structure Breakdown

The provincial excise tax rate is equal to the federal rate, effectively doubling the tax in participating provinces. The 12% increase recently announced will impact both the federal and the provincial tax rate.

To provide clarity on the tax structure, let's break it down:

1. For the first 10 milliliters (mLs), the new tax rate is $1.12 per 2mL.
2. For each additional 10mL, $1.12 is applied.

Timelines and PSI (Pacific Smoke International) Preparedness:

Starting July 1st, 2024, PSI will be releasing updated federally and provincially stamped products making them available for order on our website. July 1st also marks the start of the 12% increase to all excise tax structures. You will see an change in our product pricing to reflect the increase.

Retailers will have a 90-days grace period to adjust to these new changes, meaning retailers can continue to sell both federally and provincially stamped products in the affected provinces until September 30th, 2024. After that, retailers in the affected provinces must sell only province-specific stamped products.

All Ontario and Quebec retailers must exclusively sell province-specific stamped products to consumers in the participating provinces by October 1st, 2024. They may purchase federally stamped products for selling to consumers outside of the participating provinces.

What is the Enforcement Process?

Effective October 1st, 2024, retail enforcement will involve the Royal Canadian Mounted Police (RCMP Excise Officers) as they will oversee monitoring, handling complaints, enforcing illicit activities and raising criminal charges. Prior to engaging in online sales, retailers must verify compliance with federal and provincial regulations which may vary by province. Retailers should be aware the RCMP is now responsible for retail enforcement and retailers should know the consequences for selling federally stamped products in Ontario or Quebec to consumers after the coming to force date.

What are the Next Steps for Retailers?

Retailers in the affected provinces and territories are advised to manage inventory levels carefully. Please wait for announcements from PSI regarding updates to our website which includes website restructure and product pricing changes. Compliance with the new excise tax regulations is crucial to avoid penalties and maintain operations smoothly.

You may choose to increase your prices on July 1st, 2024 to reflect the 12% increase in federal and provincial tax rates, to maintain your margins. Be prepared to train your staff and inform customers of these changes to stay compliant with the new regulations.