An excise tax (sometimes called an excise duty, special tax, special duty or luxury tax or sin tax) is a type of tax charged on goods produced or on sale within the country (as opposed to customs duties, charged on goods from outside the country). Typical examples of excise duties are taxes on gasoline, tobacco and alcohol (sometimes referred to as sin taxes).
The Canadian Excise Act, 2001 has now become law, and was implemented effective July 1, 2003. Once it was implemented, duty free shops are the first to be affected. Excise duty licences were issued to a person or a business entity (e.g. individual, partnership, corporation, etc.) authorizing the person or business entity to carry on specific activities at one or more locations.
As a side note: Prostitution has been proposed to bear excise tax in separate bills in the Canadian Parliament in 2005. The reasons given by Canadian MPs entering the bill covered many of the above-mentioned areas, including extra funding for police protection and better healthcare for the prostitutes – however, so did many of the counterarguments.
Excise Duty Rate Summary on Tobacco Products – effective January 1, 2008
| Excise Duty | Additional Duty | |
|---|---|---|
| Cigarettes | $0.425 per five or fraction of five cigarettes | N/A |
| Tobacco sticks | $0.06325 per stick | N/A |
| Manufactured tobacco – other | $57.85 per kilogram | N/A |
| Raw leaf tobacco | $1.572 per kilogram | N/A |
| Cigars | $18.50 per 1,000 cigars | Greater of $0.067 or 67%* |
* 67% of the Canadian manufacturer’s sale price or of the duty paid value, if imported. (In reality, the additional duty would seldom be $0.067 per cigar, as the 67% rate will normally be the greater.)
Cigarettes, tobacco sticks, other manufactured tobacco – for duty free shops, ships’ stores or export markets
Canadian manufactured cigarettes
| For delivery to | Excise Duty (rates per five or fraction of five cigarettes) |
Special Duty (rates per cigarette) |
|---|---|---|
| Foreign or Canadian duty free shops, Customs bonded warehouses, or foreign or Canadian ships’ stores. | $0.374875 | N/A |
| Export markets (other than to foreign duty free shops or for use as foreign ships’ stores) if not more than 1.5% of previous calendar year’s production. | N/A | $0.075 |
| Export markets (other than to foreign duty free shops or for use as foreign ships’ stores) if greater than 1.5% of previous calendar year’s production. | $0.425 | $0.095724 |
Canadian manufactured tobacco sticks
| For delivery to | Excise Duty (rates per stick) |
Special Duty (rates per stick) |
|---|---|---|
| Foreign or Canadian duty free shops, Customs bonded warehouses, or foreign or Canadian ships’ stores. | $0.054983 | N/A |
| Export markets (other than to foreign duty free shops or for use as foreign ships’ stores) if not more than 1.5% of previous calendar year’s production. | N/A | $0.055 |
| Export markets (other than to foreign duty free shops or for use as foreign ships’ stores) if greater than 1.5% of previous calendar year’s production. | $0.06325 | $0.042 |
Canadian manufactured tobacco (other)
| For delivery to | Excise Duty (rates per kilogram) |
Special Duty (rates per kilogram) |
|---|---|---|
| Foreign or Canadian duty free shops, Customs bonded warehouses, or foreign or Canadian ships’ stores. | $49.983 | N/A |
| Export markets (other than to foreign duty free shops or for use as foreign ships’ stores) if not more than 1.5% of previous calendar year’s production. | N/A | $50.00 |
| Export markets (other than to foreign duty free shops or for use as foreign ships’ stores) if greater than 1.5% of previous calendar year’s production. | $57.85 | $46.002 |
Imported manufactured tobacco (payable when delivered to a Canadian duty free shop)
| Product Category | Excise Duty | Special Duty |
|---|---|---|
| Cigarettes | N/A | $0.075 per cigarette |
| Tobacco sticks | N/A | $0.055 per stick |
| Other manufactured tobacco (excludes cigars) | N/A | $0.05 per gram |
Unstamped Canadian and foreign tobacco products imported as “traveller’s tobacco”
| Product Category | Excise Duty | Special Duty |
|---|---|---|
| Cigarettes | N/A | $0.075 per cigarette |
| Tobacco sticks | N/A | $0.055 per stick |
| Other manufactured tobacco (excludes cigars) | N/A | $0.05 per gram |
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