The Canadian Government has recently announced plans to implement an excise tax on vape products beginning October 1, 2022. The proposal was put forth as part of Budget 2022 on April 7th, 2022.
While the formal proposal was submitted in 2022, the Government of Canada had already stated its intentions in Budget 2021 to build a system of taxation targeting vaping products for the purposes of reducing youth access and, overall, encouraging vape users to quit completely.
After the initial proposal, The Government of Canada held a period of consultation from April 19, 2021, to June 30, 2021, where members of the industry and other concerned parties could submit feedback.
Vaping products, as they are so relatively new, are not included in the Excise Act of 2001, which serves as the current legislative framework for the taxation of products like alcohol, cannabis, and tobacco.
The only federal tax that is taken on vaping products under the current legislation is the standard federal sales taxes that apply to any item sold in Canada. The new excise tax will have a significant impact on the price of all e-liquids, pods, and disposable vapes.
We’ve read the proposal so you don’t have to. Check out our summary of the excise tax proposal and what it will mean for consumers like you.
What is Excise Tax?
All vaping substances manufactured in or imported to Canada would be subject to an excise tax and require proper markings on their packaging.
Manufacturers would need to obtain vaping product licences and importers would need to register with the CRA. Both manufacturers and importers would also need to register for the stamp regime to receive the appropriate excise stamps to apply to their packaging as a way to indicate that the duties have been paid.
The tax itself would only apply to e-liquids and devices that contain e-liquid; it would not be applied to devices such as mods and pod system batteries. Each container would be taxed in two parts.
The first 10 mL of an e-liquid would be subject to a tax of $1 for every 2 mL so a total of $5 for the first 10 mL of any product. Any amount above 10 mL would be taxed at a rate of $1 per each additional 10 mL. This means that a 30 mL bottle of e-liquid would have $7 worth of taxes added onto the price, which is an average increase of approximately 30%.
On its own, the increase in price from say a $20 bottle of 30mL e-liquid to now a $27 bottle doesn’t seem overly extreme, but this is only the federal portion of the tax. The rate of additional provincial taxes has been proposed at the same rate as the federal tax which would effectively double the amount of tax on each item.
Should a provincial tax using the same structure be added on top of this price your $20 bottle suddenly becomes a $34 bottle. In addition to the tiered tax on bulk e-liquids, pods and disposables would also be taxed at the minimum rate of $1 for individually packaged items.
So what will this mean for you, the consumer?
What It Means for Consumers
First and foremost, it means that vape products that contain e-liquid are going to be more expensive. However, while the proposed tax would take effect on October 1, 2022, there is a grace period to allow retail locations to continue selling vaping products without excise tax until December 31, 2022, if the products are produced or imported prior to Oct 1, 2022.
This means you still have plenty of time to stock up on your favourite products, like STLTH Original and STLTH X pods available in 4 nicotine strengths including our STLTH Bold line. Or, better yet, make a plan to leave your vaping habit behind and start 2023 completely nicotine free.
While the federal tax has passed, the question of additional provincial taxes remains uncertain. Considering that every province has an additional tax on cigarettes and all except Manitoba have an additional tax on cannabis products, it is quite likely that we will see provincial taxes on vape products across most of Canada.
While the implementation of taxes on these products is certainly not shocking, the obvious concern is that this tax could potentially disincentivize cigarette smokers from using vaping products as a tool to help them become smoke free. Check out our blog for more on How to Switch from Smoking to Vaping.