Cannabis Excise Duty Framework
Cannabis Excise Duties and Reporting using SAGE X3
The Canada Revenue Agency (CRA) is responsible for administering and enforcing the Excise duty framework for cannabis products sold for both medical and non-medical uses in Canada. Cultivators, producers, and packagers of cannabis products are required to obtain a cannabis licence from the CRA before production. Once licensed, they are required to calculate the excise duty on their sales and report it to CRA. Sage X3 ERP system can easily cater to their requirements including calculation of excise duty on sales and data generation for reporting of the excise duties to CRA.
In this series, we will cover the following topics to briefly explain these requirements and how robust ERP systems like Sage X3 covers them:
- Cannabis Excise Duty Framework
- Calculation of Cannabis Excise duties in SAGE X3
- CRA Reporting
- Data extraction for CRA reporting in SAGE X3
Cannabis Excise Duty Framework
Excise duty needs to be paid by cannabis distributors who supply packaged cannabis products to their customers. The excise duty is calculated based on the sales price of product that is charged to customer. Any packaged cannabis product that can be classified within the following product types would be considered excise-dutiable at the time of product delivery:
- Cannabis Oils
- Edible cannabis
- Cannabis extracts
- Cannabis topicals
There are three components within the excise duty framework:
- Flat rate cannabis duty
- Flat rate additional cannabis duty
- Adjustment to additional cannabis duty
THC (Tetrahydrocannabinol) is the principal psychoactive constituent of cannabis. Whenever a cannabis product is delivered the THC content of the product needs to be measured and reported in milligrams. This THC content of the cannabis product would be used in calculation of the different components of excise duty.
Flat rate cannabis duty
Flat rate cannabis duty is calculated based on the Total THC content of the delivered product and a rate provided in the table below.
Flat rate additional cannabis duty
Flat rate additional cannabis duty is calculated based on the Total THC content of the delivered product and a rate provided in the table below. For province of Manitoba, there is no additional cannabis duty payable.
Rates of cannabis duty and additional cannabis dutyRates to be used for calculation of flat rate cannabis duty and flat rate additional cannabis duty are provided in the following table by Canada Revenue Agency.
|Cannabis product||Flat‑rate cannabis duty||Flat‑rate additional cannabis duty|
|Cannabis oil||$0.0025/mg of the total THC||$0.0075/mg of the total THC|
|Edible cannabis||$0.0025/mg of the total THC||$0.0075/mg of the total THC|
|Cannabis extracts||$0.0025/mg of the total THC||$0.0075/mg of the total THC|
|Cannabis topicals||$0.0025/mg of the total THC||$0.0075/mg of the total THC|
Adjustment to additional cannabis duty
Adjustment to additional cannabis duty would be calculated for the following provinces based the following rates:
Adjustment to additional cannabis duty = [(A − B) − C)] × [100% ÷ (100% + D)] Where: A = Sales price of the delivered cannabis product B = Flat rate cannabis duty of the delivered cannabis product C = Flat rate additional cannabis duty of the delivered cannabis product D = Adjustment rate
The three different components of excise duty are calculated as has been explained for every cannabis product sold. Over the next parts, I will explain the reporting requirements and how easily Sage X3 can be customized to manage them.
EDN55 Calculation of Cannabis Duty and Additional Cannabis Duty on Cannabis Products – Canada Revenue Agency -September 2018: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/edn55/calculation-cannabis-duty-additional-cannabis-duty-cannabis-products.html ↑ https://www.canada.ca/en/revenue-agency/campaigns/cannabis-taxation.html ↑ Firn, Richard (2010). Nature’s Chemicals. Oxford: Biology.: https://en.wikipedia.org/wiki/Tetrahydrocannabinol ↑ EDN60 Calculation of Cannabis Duty and Additional Cannabis Duty on Cannabis Oil, Edible Cannabis, Cannabis Extracts and Cannabis Topicals, April 2019 ↑