OTTAWA – The CBC is reporting that Saskatchewan’s marijuana legislators are still wrestling with the elephant in the room regarding taxation and on reserve dispensaries. Although some of the smaller details are still being sorted out, the big question has been answered, at least in Saskatchewan.
That has been the unspoken monkey-wrench in the plans to make medical and recreational marijuana legal across Canada. Since the whole purpose of legalization is to create a new tax revenue stream into the Federal and Provincial coffers as tobacco use declines, how are they going to handle the delicate tax issue?
The native cigarette trade is still fighting with the government over on-reserve taxation in light of the tax exempt status and it’s anybody’s guess what will be done about balancing aboriginal rights with Provincial law.
According to the CBC, both the federal and provincial governments at this point agree that, “First Nations people with a valid certificate of Indian Status card will be tax exempt when buying marijuana from a business located on reserve land.
The federal government has confirmed that any First Nations owned and operated business on reserve land will not have to pay GST/HST on any cannabis products.”
Although the Indian Act exemption will be honoured, but there will be excise duties on all cannabis products. That is similar to the situation Grand River Enterprises operates under for their tobacco products.
This duty is applied to the product at the point of packaging and not at point of sale, so all potential First Nations-owned dispensaries will have to pay the excise duty regardless of status.
Saskatchewan is the first province to make a definitive statement regarding the sale of marijuana in that province. Others are expected to present their plan for the transition expected to come in September of the year.
The Saskatchewan plan states that “the amount of excise duty proposed by the federal government is 50 cents per gram of cannabis or five per cent of the producer’s sale price. An additional rate would apply for an agreeing province or territory.”
The federal Department of Finance’s website explains how the purchase of one gram of dried cannabis looks for a non-status person who pays GST/HST. The example does not include what a retailer may add to the cost.
Pre-duty price: $8
Excise duty (per gram): $1
Subtotal: $9
GST/HST: $1.17
Total: $10.17
In this case, the Saskatchewan Liquor and Gaming Authority will be the issuer of permits to wholesalers who meet the federal and provincial criteria.
Seventy-five per cent of the revenue from the cannabis excise tax will go to provincial and territorial governments and 25 per cent to the federal government.
Each province will eventually weigh in on their own provincial plan regarding provincial taxation, but the federal have already declared they will not be imposing on-reserve taxation.
There are still many questions yet to be considered but the Saskatchewan template will likely stand as the standard across the country.
The CBC reports, “The government will announce further details about the excise duty framework and execution of the collection agreements with provinces and territories in the coming months.”
