Hedges – Federal Court of Appeal finds that marihuana sales were not zero-rated drug supplies

The zero-rating of controlled drugs in Sched. VI, Part I, s. 2(d) would apply to dried marihuana if it is viewed as a drug which may only be sold to a consumer under an "exemption" from Health Canada. After noting the Crown’s concession that marihuana is a “drug,” Rennie JA found that "Authorizations to Possess" (ATPs) issued by Health Canada were not such exemptions, so that marihuana did not come within this carve-out for drugs which could only be sold with an exemption. He also was not impressed by the “illogic” of arguing that over-the-counter drugs were taxable because they could be legally sold without exemption (or prescription), whereas sales of marihuana were zero-rated because exemptions were required – even though in the case before him of an unlicensed and illegal producer, no ATPs (incorrectly argued to be “exemptions”) had in fact been obtained.

The findings in this case suggest that licensed (as contrasted to illegal) producers also are required to charge GST or HST to consumers with ATPs.

Neal Armstrong. Summary of Hedges v. The Queen, 2016 FCA 19, under ETA, Sched. VI, Part I, s. 2.