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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 178973
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
Application of GST/HST to supplies of medical marihuana
Thank you for your letter of July 29, 2016, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to sales of medical marihuana made by […] (the Business). We apologize for the delay in our response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
FACTS
Based on your letter of July 29, 2016, and our phone conversations […], we understand the facts to be:
1. The Business is a non-profit marihuana dispensary incorporated in […][City], British Columbia. The Business began operating in [mm/dd/yyyy], and is registered for GST/HST.
2. The Business sells marihuana, cannabidiol oils and other products for medical purposes to […] [individuals who hold a medical document]. […]
3. At the time of your incoming letter, the legal sale of dried marihuana and other cannabis products for medical purposes in Canada was governed by the (former) Marihuana for Medical Purposes Regulations, SOR/2013-119 (MMPR) from April 1, 2014 to August 23, 2016. However, on August 24, 2016, these regulations were replaced by the Access to Cannabis for Medical Purposes Regulations SOR/2016-230 (ACMPR), which remain in effect today.
Both the MMPR and the ACMPR were created under the Controlled Drugs and Substances Act, S.C. 1996, c. 19 (CDSA) and were established to legalize the sale of dried marihuana and other cannabis products by a producer of marihuana licensed by Health Canada to a registered client of that licensed producer.
4. Under subsection 108(2) of the (former) MMPR and subsection 130(1) of the ACMPR, a client of a licensed producer must provide the licensed producer with a medical document to become a client of a licensed producer and be eligible to purchase dried marihuana or other cannabis products from that licensed producer.
In accordance with subsections 129(1) and (4) of the (former) MMPR and subsections 8(1) and (4) of the ACMPR, the medical document must be completed and signed by a health care practitioner.
A medical document must indicate
(a) the practitioner’s given name, surname, profession, business address and telephone number, facsimile number and email address, if applicable, the province in which the practitioner is authorized to practise their profession and the number assigned by the province to that authorization;
(b) the person’s given name, surname and date of birth;
(c) the address of the location at which the person consulted with the practitioner;
(d) the daily quantity of dried marihuana to be used by the person, expressed in grams; and
(e) the period of use.
5. The Business is not licensed by Health Canada to sell fresh and dried marihuana, cannabis oil or marihuana seeds and is not listed on Health Canada’s website as a licenced producer.
RULING REQUESTED
You would like to know whether the Business is required to collect GST/HST on sales of medical marihuana it makes to clients who hold a medical document.
INTERPRETATION GIVEN
Chapter 1.4 of the GST/HST Memoranda Series, Excise and GST/HST Rulings and Interpretations Service, describes the circumstances in which the Canada Revenue Agency (CRA) will issue a ruling or an interpretation. A ruling is a written statement the CRA provides to a taxpayer that sets out the CRA's position on how the relevant provisions of the legislation apply to a clearly defined fact situation of the taxpayer. An interpretation is a written statement which sets out the CRA's view on how the ETA applies to a generic fact situation. The CRA will issue a ruling only when all of the relevant facts, contracts and other documentation pertaining to a particular transaction or series of transactions are provided. Therefore, we are providing you with an interpretation in respect of your ruling request.
Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Exempt supplies are not subject to the GST/HST and are included in Schedule V. Zero-rated supplies are included in Schedule VI.
Part I of Schedule VI contains provisions that zero-rate a broad range of drugs and substances that are regulated under federal legislation. Section 2 of Part I of Schedule VI is relevant in this […][Interpretation].
Paragraph 2(d) of Part I of Schedule VI zero-rates
a drug that contains a substance included in the schedule to the Narcotic Control Regulations, other than a drug or mixture of drugs that may, pursuant to the Controlled Drugs and Substances Act or regulations made under that Act, be sold to a consumer with neither a prescription nor an exemption by the Minister of Health in respect of the sale,
but not including a supply of a drug or substance when it is labelled or supplied for agriculture or veterinary use only.
Section 1 of Part I of Schedule VI defines the term “prescription” to mean
a written or verbal order, given to a pharmacist (Footnote 1) by a medical practitioner or authorized individual, directing that a stated amount of a drug or mixture of drugs specified in the order be dispensed for the individual named in the order.
Based on the above legislation, a supply of a drug containing cannabis is zero-rated unless it may be sold to a consumer without a prescription or an exemption from the Minister of Health. It is the CRA’s view that although the medical document required for the purchase of dried marihuana and other cannabis products under the (former) MMPR and the ACMPR is a document containing information that may be similar to that found on a prescription, a medical document is not a prescription for GST/HST purposes. The CRA’s conclusion is based, in part, on the fact that there is no provision in the (former) MMPR or the ACMPR that authorize a pharmacist to sell or dispense dried marihuana, fresh marihuana or cannabis oil for medical purposes to an individual consumer, regardless of whether or not a physician is authorized by its regulatory body to prescribe these products. Given that the definition of prescription requires a written order be given to a pharmacist for purposes of dispensing a stated amount of dried marihuana or other cannabis product, a medical document cannot be a prescription.
Paragraph 2(d) of Part I of Schedule VI also zero-rates sales of dried marihuana sold with an exemption under the CDSA by the Minister of Health. However, there is no exemption granted by the Minister of Health under the CDSA applicable to the sale of dried marihuana and other cannabis products by a licensed producer to a registered client.
As dried marihuana, fresh marihuana, and cannabis oil can be sold to a consumer without a prescription or an exemption from the Minister of Health, sales of these products are not zero-rated under paragraph 2(d) of Part I of Schedule VI. Therefore, sales of dried marihuana and other cannabis products made under the (former) MMPR or the ACMPR are subject to GST/HST.
Illegal sales of dried marihuana and other cannabis product
Please note, in keeping with the decision of the Federal Court of Appeal in Gerry Hedges v. The Queen 2016, FCA 19, supplies of dried marihuana and other cannabis products made by a business outside of the licensed system provided under the (former) MMPR and the ACMPR are also subject to the GST/HST, provided the supplier is a registrant for GST/HST purposes. This includes sales made by marihuana dispensaries, compassion clubs and other similar businesses as these businesses are not licensed producers under the (former) MMPR or the ACMPR.
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 CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) 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 613-670-7934. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Alison Jones
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 Section 1 of Part I of Schedule VI also defines a pharmacist to mean a person who is entitled under the laws of a province to practise the profession of pharmacy.
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