Understanding the Impact of BC's Vape Tax on Consumers

Introduction

Sales tax on vape products soared from 7% to 20% in January 2020, with an additional 5% GST on top of the provincial sales tax (PST) and the subtotal. 

This tax increase already concerned consumers about the increase in the prices of vape products. However, the federal government further imposed an excise tax on vaping liquids in October 2022.  

The tax rate per 2 ml is $1 for every 10 ml of vaping liquids. An additional $1 tax rate applies per 10 ml or a portion of 10 ml. This rate also applies to vaping solids, like $1 per nicotine unit sold. 

This BC vape tax increase was based on the 2022 Budget Implementation Act. The federal government even invited other Canadian provinces and territories to adopt this new vaping taxation system. But it doesn’t end there. A new vape law aims to impose additional tax rates on vape products.  

What is the New Vape Law in BC?

A federal excise tax on vaping products has been in effect since October 2022. Some provincial governments have implemented their own vaping tax or announced plans to join the federal-provincial tax system. Implementing the new vape tax BC will begin on July 1, 2024, for some provinces, and January 1, 2025, for others.

The vape products included in the new taxation system include:

1. Vaping devices

• E-cigarettes
• E-hookahs
• Heat-not-burn devices
• Mods
• Vape pens
• Pod systems

2. Cartridges

• Parts
• Accessories

3. Vaping substances

• Nicotine
• Solvents
• Cannabis
• Pods
• E-juices

Changes to BC Vape Tax Laws

Details of the BC Vape Tax Implementation

New Tax Rates

The 20% tax rate on retail sales and leases of vape products will rise by 12%. This means the necessary billing and invoicing system changes to reflect the rate change from 7% to 20%, plus the 12%. 

Goods and Services Tax (GST)

Sellers can’t include the PST amount in the GST calculation when both GST and PST apply to a vape product. However, sellers can include the GST calculation for vapor products subject to the 20% PST rate. 

Under this new framework, an extra duty will be equal to the suggested federal tax rate. The federal and provincial or territorial governments will divide the revenues by 50/50. 

The authorities aim to view the total tax burden on vaping products regularly to ensure they meet important objectives. So, this would effectively double the tax rate in partaking regions. 

The 2022 Budget Implementation Act changed the Federal-Provincial Fiscal Arrangements Act to create the legal framework for the Coordinated Vaping Product Taxation Agreement.

The tax amount was increased by 12% in the April 2024 federal budget. For example:

• The $1 tax rate will increase to $1.12 for a capsule under 2 ml

Or, 

•  From $2 to $2.24 for a capsule under 2 ml in provinces participating in the coordinated tax system.

Purpose and Rationale Behind the BC Vape Tax

The new vape tax will bring in approximately $310 million to the Canadian government over the five-year forecast, according to a report from Global News. But this new vape law is not just about making profits—there’s a deeper reason behind implementing the excise tax. 

Reducing Vaping Rates Among Younger Canadians

The price hike, along with the increased tax rate, will regulate the increasing vaping rates among younger Canadians. According to Statistics Canada:

• One in 15 Canadians (between 15 and 19 years old) use vape daily. 
• Young adults vape more than teenagers. One in 10 Canadians (between 20 and 24 years old) vape every day.

Rob Cunningham, the Canadian Cancer Society’s senior policy analyst, believes the tax will help lessen the number of Canadian vapers.

Reduce Consumption

Taxation is an effective policy measure to reduce consumption, according to the Heart & Stroke Foundation of Canada. They believed that it is especially impactful among price-sensitive youth. One of the main goals of the new vape tax BC is to promote reduced consumption by:

• Flavor Restrictions: Limiting flavored vape products to reduce their appeal to youth.
• Limiting Nicotine Levels: Lowering nicotine content aims to prevent strong addiction, especially in young vapers.
• Sales and Advertising Regulation: Implementing stricter sales regulations and advertising restrictions may reduce youth access and exposure.
• Supporting Cessation Efforts: Providing resources and support for quitting will help users break nicotine addiction.

How Does BC’s Vape Tax Compare to other Canadian Provinces

British Columbia and three other Canadian provinces imposed excise taxes on vaping products even before the federal government's announcement. 

After the Coordinated Vaping Products Taxation Agreement announcement, other Canadian provinces expressed their intention to participate:

Other notable updates:

• December 2023 - PEI's Minister of Finance was authorized to enter into the agreement.
• February 2024 - Alberta responded to the coordinated system to implement the excise tax starting January 1, 2025.

Conclusion

Consumers anticipate an increase in the prices of vape products as the new BC vape tax implements a 12% increase on the initially set 20% in 2022. But on the bright side, implementing this new tax law will reduce vaping rates, especially among young adults.