Understanding Vape Excise Tax

Since October 2022, Canada’s vaping scene has faced a major change, with the introduction of a federal vape excise tax. On top of that, provinces are either rolling out their own taxes or gearing up for a federal-provincial tax system from July 1, 2024, until January 1, 2025. 

Whether you're a vaper or a business owner in the industry, you need to understand these new tax rules. What does this excise tax vape mean? Let’s break down the vape excise tax in Canada, showing you how it’s calculated and everything you need to know. 

Excise tax is a special tax levied on specific goods, often to regulate consumption and generate revenue. In Canada, this includes vaping products, which now fall under this federal tax umbrella introduced in October 2022. Effective July 1, 2024, there’s an additional vaping duty of 12% on vaping products manufactured in Canada or imported for consumption, use, or sale.

So, why vaping products? The rationale behind the vape excise tax is multifaceted. First, it's a regulatory move aimed at curbing the rapid rise in vaping. Additionally, the tax is intended to contribute to government revenues, which can fund public health initiatives and support regulating the vaping industry.

In Canada, the excise tax for vaping products is structured to ensure uniform taxation across all provinces, with additional charges for specific regions. Here’s how it works:

• Base Rate: The excise tax on vape juice is $1 per 2 milliliters (mL), or part thereof, for the first 10 mL contained in the device or its immediate container.
• Additional Volume: The tax is $1 per 10 mL or part thereof for amounts exceeding the initial 10 mL.

For Ontario, Quebec, Northwest Territories, and Nunavut, the tax on excess volume beyond the initial 10 mL is $1 per 10 mL or any part of 10 mL. The same tax rates are applied to vaping solids, calculated per gram.

These rules ensure that while a baseline tax applies nationwide, specific provinces with higher taxation needs will charge additional costs for vaping products.

In April 2024, the federal budget raised the tax rate by 12%, increasing it from $1 to $1.12. In provinces that are part of the coordinated tax system, the tax on a capsule up to 2 ml, for example, rose from $2 to $2.24.

According to Budget 2024, the excise duty rates increase as follows: 

• Vaping Duty: $1.12 per 2 mL for the first 10 mL and $1.12 per 10 mL for amounts over the first 10 mL.
• Additional Vaping Duty: $1.12 per 10 mL or gram for quantities exceeding 10 mL or grams.

When calculating the final duty, amounts are rounded up to the nearest mL or gram. To give you an idea of how the excise tax works, check the table below: 

Note: The total excise tax for specified provinces is the sum of the current, additional duty, and own taxes imposed by the province. 

The taxation on vaping products varies across Canadian provinces. Here are some current provincial tax rates:

• British Columbia: Applied 20% Harmonized Sales Tax (HST), which applies to vaping devices and liquids, replacing the standard Provincial Sales Tax (PST).
• Nova Scotia: Applied $0.50 per milliliter of vaping liquids and 20% tax on devices. Specific tax on liquids combined with a percentage tax on devices.
• Newfoundland and Labrador: 20% Sales Tax (in addition to HST) and an additional 20% sales tax to vaping products on top of the HST.
• Saskatchewan: Applied 20% Sales Tax (replacing a previous 6% sales tax)

Consumers and retailers must adjust their strategies with the recent vape tax changes. For consumers, it’s important to stay vigilant about pricing. 

• Shop around to find the best deals and consider buying in bulk to save on costs.
• Alternatives like generic brands or different vaping devices can also help manage expenses. 
• Keep up with tax rate changes to ensure you know how they impact pricing.

Retailers should focus on adjusting their pricing strategies to reflect the new tax rates while maintaining competitiveness. 

• Effective inventory management is crucial, as is working with suppliers to negotiate better terms and mitigate cost increases. 
• Staying informed about market trends and educating customers about price adjustments will also help smooth the transition to the new tax landscape.

As Canada’s vaping market adjusts to the new federal excise tax, which took effect in July 2024, it’s vital to grasp how this impacts consumers and businesses. The tax calculation, which increased to $1.12 per 2 milliliters for the first 10 mL and $1.12 per 10 mL for amounts beyond, with additional provincial taxes, signifies a shift in how vaping products are priced.

Awareness of these changes will help you manage your expenses more effectively and allow businesses to navigate pricing and inventory adjustments. Staying updated on tax regulations is crucial for making informed decisions and maintaining financial balance. To be updated on vaping trends and popular devices, browse WAKA CA today!