Excise Tax in Canada: How to Register, File, and Pay

An excise tax in Canada is a federal levy imposed on specific goods and services, unlike the broad-based Goods and Services Tax (GST). This tax targets a narrow list of products and is typically applied at the point of manufacture or importation, meaning the producer or importer is responsible for paying it. The tax is administered by the Canada Revenue Agency (CRA) and is governed by the Excise Tax Act and the Excise Act. This structure embeds the tax in the cost of goods before they reach the final consumer, which differs from retail sales taxes added at the point of sale.

Goods and Services Subject to Excise Tax

Federal excise levies in Canada cover a range of products and services. The Excise Tax Act imposes a tax on items like fuel, vehicles, and insurance premiums. A separate framework of excise duties, a specific form of tax, applies to spirits, wine, tobacco, cannabis, and vaping products, while the Excise Act governs the duty on beer.

• Fuel: Certain petroleum products, including gasoline and diesel fuel, are subject to an excise tax applied at a set rate per litre.
• Alcohol and Tobacco Products: Excise duties are applied to alcohol and tobacco products. For spirits, the duty is calculated based on the volume of absolute ethyl alcohol. Wine is taxed based on its alcohol content and total volume, while beer is taxed at different rates depending on whether it is brewed in Canada or imported. Tobacco products also have a per-unit duty applied.
• Cannabis Products: Cannabis products, including fresh and dried cannabis, oils, and edibles, are subject to excise duties. The duty structure often combines a flat rate per gram and a rate based on the sale price. The federally licensed producer is generally responsible for remitting the duty at the time of packaging.
• Vaping Products: A federal excise duty applies to vaping substances, with or without nicotine. The duty is $1.12 per 2 millilitres for the first 10 mL and $1.12 for each additional 10 mL. In several provinces and territories, a coordinated taxation agreement applies an additional duty at the same rate, effectively doubling the cost. The manufacturer or importer pays this duty.
• Certain Vehicles and Air Conditioners: A tax is levied on new, fuel-inefficient automobiles, station wagons, and vans, based on the vehicle’s fuel consumption. A separate flat-rate tax is imposed on automobile air conditioners, payable by the manufacturer or importer.
• Select Insurance Premiums: An excise tax is charged on premiums for insurance contracts with insurers not licensed in Canada. This applies to coverage for risks located in Canada, and the tax is a percentage of the net premium paid by the insured party.
• Air Travellers Security Charge: The Air Travellers Security Charge (ATSC) is collected by air carriers from passengers to fund the national air travel security system. The charge varies by destination. For travel within Canada, the charge is $9.94 for a one-way trip, for flights to the U.S., it is $16.89, and for other international flights, it is $34.42.

Registration and Licensing Requirements

Businesses that manufacture, import, or wholesale goods subject to excise tax or duty must register with the Canada Revenue Agency (CRA). The specific type of registration or license depends on the products and business activities. For example, manufacturers under the Excise Tax Act need an excise tax licence, while producers of beer, spirits, wine, tobacco, or cannabis require different licenses under their respective frameworks.

A Business Number (BN) is a prerequisite for registration. The business’s legal name, address, and a description of its operations are also necessary. For specialized products like cannabis, additional licensing from Health Canada is required before the CRA can grant an excise licence.

The application for a licence is a formal process. To obtain an excise tax licence, a business may need to complete a specific form. Depending on the type of licence, the CRA may also require the business to post security to ensure compliance with its tax obligations. This is common for businesses dealing in high-tax goods like alcohol and tobacco.

Some exceptions to registration exist. A small manufacturer with annual sales of taxable goods under $50,000 may not need a licence. Similarly, wholesalers may qualify for a “W” licence, which allows them to purchase goods for resale without paying the excise tax at the time of purchase; instead, they collect and remit the tax when they sell the goods.

Calculating and Reporting Excise Tax

The calculation of excise tax varies by product. For some goods, the tax is a per-unit rate, like the amount per cigarette or litre of gasoline. For others, such as fuel-inefficient vehicles, the tax is a percentage of the sale price. Cannabis products often use a combined approach, such as the higher of a flat rate per gram or a percentage of the sale price.

To report the tax, businesses must use specific forms from the Canada Revenue Agency. The most common is Form B200, Excise Tax Return, which is used for goods under the Excise Tax Act. This form requires reporting total sales of taxable goods, calculating the tax payable, and accounting for any adjustments. Different forms are used for duties on alcohol, tobacco, and cannabis.

To complete the return, a business must determine the total quantity of taxable goods sold during the reporting period. The gross tax is calculated using the applicable rates, and then any allowable deductions are subtracted to find the net tax payable.

Businesses must maintain detailed records of production, inventory, sales, and deliveries to support the figures on their returns. These records are subject to audit by the CRA, and errors can lead to penalties and interest.

Filing and Payment Procedures

Excise tax returns must be filed with the Canada Revenue Agency by the specified deadline. Filing periods are typically monthly or quarterly, with the return due by the end of the month following the reporting period. Businesses can file electronically through the CRA’s My Business Account portal.

Alternatively, businesses can mail a paper copy of their completed return. The mailing address depends on the type of excise levy, with different tax centres handling specific returns. Using the correct address is important to avoid delays.

Payment is a separate step from filing. The CRA offers several electronic payment options, including online banking, the CRA’s My Payment service with a debit card, or a pre-authorized debit agreement. These methods are quick and provide a digital record of the transaction.

A business can also pay in person at a Canadian financial institution using a remittance voucher provided by the CRA. Payments can be made by mailing a cheque or money order, payable to the Receiver General for Canada, along with the remittance voucher. The business number should be written on the cheque to ensure the payment is applied correctly.