Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 176329
Dear [Client]:
Subject: EXCISE INTERPRETATION
Prescribed package for raw leaf tobacco
Thank you for your letter of January 29, 2016, concerning the application of the Excise Act, 2001 to the packaging of raw leaf tobacco.
All legislative references are to the Excise Act, 2001 (Act) and the regulations therein, unless otherwise specified.
We understand:
1. […][ACo] […] [sells] whole leaf tobacco products.
2. [ACo] sells the whole leaf tobacco in two types of packaging. One type of packaging consists of a single leaf. The other type of packaging has more than one leaf.
INTERPRETATION REQUESTED
You would like to know if raw leaf tobacco, single leaf or multiple, once packaged, fit into the definition of a prescribed package according to paragraph 2(a) of the Stamping and Marking of Tobacco Products Regulations (Regulations).
DEFINITIONS
Definitions found in section 2 of the Act:
“Tobacco product” to mean manufactured tobacco, packaged raw leaf tobacco or cigars.
“Raw leaf tobacco” means unmanufactured tobacco or the leaves and stems of the tobacco plant.
“Packaged” means, in respect of raw leaf tobacco or a tobacco product, packaged in a prescribed package.
“Manufactured tobacco” means every article, other than cigar or packaged raw leaf tobacco, that is manufactured in whole or in part from the raw leaf tobacco by any process.
“Manufacture” in respect of a tobacco product, includes any step in the preparation or working up of raw leaf tobacco into the tobacco product. It includes packing, stemming, reconstituting, converting or packaging the raw leaf tobacco or tobacco product.
“Tobacco Product” means manufactured tobacco, packaged raw leaf tobacco or cigars.
The Stamping and Marking of Tobacco Products Regulations (Regulations) describes “prescribed package” for the purpose of paragraph (a) of the definition "packaged" in section 2 of the Act as:
(a) raw leaf tobacco is packaged in a prescribed package when it is formed into a hand for sale or when a hand of raw leaf tobacco or broken portions of the leaf are packed for sale; and
(b) a tobacco product is packaged in a prescribed package when it is packaged in the smallest package — including any outer wrapping that is customarily displayed to the consumer — in which it is normally offered for sale to the general public.
INTERPRETATION GIVEN
A single tobacco leaf folded and placed in a re-sealable plastic package would constitute “manufactured tobacco” as defined by the Act and require the application of an excise stamp in the proper denomination.
The excise stamp to be applied to this tobacco product is the stamp type “Tobacco”. The stamp is available in 50 grams, 100 grams, 150 grams, 200 grams, 250 grams, and 400 grams denominations. The tobacco product weight may vary; however, the excise duty payable is calculated in increments of 50 grams.
All tobacco products to be entered into the Canadian duty-paid market must be packaged in a prescribed package and must be stamped with the appropriate excise stamp. In the case of imported tobacco products, the product must be packaged in a prescribed package, stamped before release under the Customs Act for entry into the domestic duty-paid market. The excise stamp indicates that the appropriate duty has been paid.
As stated in the Regulations, a prescribed package for raw leaf tobacco is a “hand”. A hand of raw leaf tobacco comprises 5 to 30 tobacco leaves and is considered to be formed into a “hand” when tied together at the butt end (with a tie, leaf, string or raffia). Raw leaf tobacco is considered packaged in a prescribed package when it is formed into a hand for sale or when a hand of raw leaf tobacco or broken portions of the leaf are packed for sale.
The act of packing a single leaf of tobacco constitutes a manufacturing process and as a single tobacco leaf does not constitute a “hand of tobacco” the product in question cannot be considered packaged raw leaf tobacco as defined in the Act or its regulations. Consequently, a single tobacco leaf folded and placed in a re-sealable plastic package would constitute “manufactured tobacco” as defined by the Act and require the application of an excise stamp in the proper denomination and payment of the appropriate duty. The current rate of duty for manufactured tobacco is $6.57188 per 50 grams or fraction of 50 grams contained in any package.
A package containing a quantity greater than a “hand of tobacco” is not packaged raw leaf tobacco that is in a prescribed package. Consequently, only a tobacco licensee or a licensed tobacco dealer can purchase or sell raw leaf in this quantity.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the Act, regulations, or the CRA’s interpretive policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5899.
Yours truly,
Matthieu Emery
Excise Duty Operations - Tobacco Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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