Cannabis Tax Canada

Will Canada Tax Cannabis Based on THC Content?

Everyone who has watched the changes to the country’s medical marijuana program over the years knew that the Cannabis Act would face some changes sooner rather than later. It appears that the first change may be upon us.

As it stands, recreational dried flower and cannabis oils are taxed at a rate of $1 per gram (10 per cent). With edibles, beverages, extracts, and topics slated to join their ranks later this year, taxation has been a major talking point.

Right now, the federal government’s 2019 Budget suggests that the next slate of cannabis products to hit the market should be tax based on their THC content. The rules would also apply to cannabis oils, which are the only form of extract already on the market.

Why Tax Based on THC Content?

According to the proposed budget, taxing based on THC content will better reflect the information and advice given by the cannabis industry and the Task Force on Cannabis Legalization and Regulation. It should also make taxing edibles, extracts, and topicals easier. Lastly, THC-based taxation may help licensed producers with compliance by streamlining the taxation process.

While individuals who consistently seek high-THC products may be upset by this change, it may actually serve to make medical cannabis more affordable for patients.

What Products May Be Affected?

Of the products already on the market, THC-based taxation would only affect cannabis oils. Oils with a low THC content (namely CBD oils or high-CBD oils) will be taxed at a lower rate, thus making them more affordable. If all goes as planned, this revised excise tax will be in place on May 1st. The lower taxation threshold may help medical patients access less expensive, lower THC medications (though, as with any legislation or taxation changes, only time will tell whether the intended effect comes to fruition).

Once edibles, beverages, additional extracts, and topicals hit the shelves, they’ll be subject to THC-based taxation unless additional changes are made before then.

Average THC Content for Items Taxed

Health Canada is still mulling over proposed regulations for edibles and beverages. The information they released for public comment includes a proposed THC limit of 10 mg for all edibles and beverages. Extracts would be limited to 10 mg per unit (such as a capsule) and 1000 mg per package or container. Topicals would also have a 1000 mg of THC limit per container.

For edibles and beverages, then, an excise tax of ten cents would be enacted. Extracts and topicals would be taxed one cent for every milligram of THC in their package or container ($10 for 1000 mg container, for example).

More Changes to Come?

The Cannabis Act will be subject to changes over the next few years—whether it’s changes to taxation, product regulations, or just amendments at the provincial level, as the nation adapts to legal cannabis, the Cannabis Act will be revised accordingly. We look forward to seeing how a lower tax on cannabis oils and other items plays out!