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: 222351
Business Number: […]
Dear [Client]:
Subject: EXCISE INTERPRETATION
Stamping Packages that Contain Tobacco Leaves
Thank you for your letter of March 26, 2021, and subsequent telephone conversations concerning the application of the Excise Act, 2001 to packages that contain tobacco leaves.
All legislative references are to the Excise Act, 2001 (the Act) and the regulations therein, unless otherwise specified.
We understand […][Company A] has been issued a tobacco licence for the purposes of paragraph 14(1)(d) of the Act authorizing them to manufacture tobacco products.
[Company A] intends to purchase raw leaf tobacco from a tobacco grower located in […][Province X]. [Company A] will pile the raw leaf tobacco into groups consisting of a combination of 5 to 30 whole tobacco leaves or naturally broken pieces of tobacco leaves and place them into packages. The tobacco leaves will not undergo any other process prior to being packaged including that the stems will remain intact and no modifications will occur to change the leaves’ appearance or other qualities.
[Company A] will offer the packages containing tobacco leaves for sale to the general public in Canada […].
INTERPRETATION REQUESTED
You would like to know the type of excise stamp to affix to the packages containing 5 to 30 whole tobacco leaves or naturally broken pieces of tobacco leaves piled together and placed in packages to be offered for sale to the general public in Canada […].
ANALYSIS
[…].
Section 2 of the Act explains that “packaged”, in respect of raw leaf tobacco means packaged in a prescribed package.
Paragraph 2(a) of the Stamping and Marking of Tobacco and Cannabis Products Regulations (Regulations) specifies that, for the purpose of paragraph (a) of the definition of "packaged" contained in section 2 of the Act, raw leaf tobacco is packaged in a prescribed package when it is either formed into a hand for sale or is packed for sale as a combination of a hand of raw leaf tobacco or naturally broken portions of the leaf.
Both options for packaged raw leaf tobacco make reference to a hand of tobacco, which is 5 to 30 unmanufactured tobacco leaves that are piled together and normally tied at the butt end with a tie, leaf, string or raffia. The second option permits naturally broken portions of 5-30 leaves or a combination of a total of 5-30 naturally broken leaves and whole leaves to be packaged together for sale. We understand that [Company A]’s packages will consist of a combination of a total of 5-30 naturally broken leaves and whole leaves packaged together for sale. Although the leaves will be piled together and placed in a package for sale, they will not be tied with a tie, leaf, string or raffia.
To qualify as packaged raw leaf tobacco, a tobacco product must be packaged in a prescribed package in one of the two manners described above, in accordance with section 2 of the Regulations.
Section 42 imposes duty on tobacco products manufactured in Canada at the time they are packaged, at the rates specified in Schedule 1 to the Act.
Schedule 1 contains excise duty rates for five categories of tobacco products (cigarettes, tobacco sticks, manufactured tobacco other than cigarettes and tobacco sticks, cigars, and packaged raw leaf tobacco).
According to section 2 of the Act, "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.
Manufactured tobacco means every article, other than a cigar or packaged raw leaf tobacco that is manufactured in whole or part from raw leaf tobacco from any process.
If the raw leaf tobacco is not packaged in one of the two manners described above it is not specifically excluded from the definition of manufactured tobacco in section 2 of the Act as it does not qualify as packaged raw leaf tobacco. Therefore, to the extent that the tobacco leaves have been manufactured (as defined in the Act), the packaged product would be considered manufactured tobacco and not packaged raw leaf tobacco and would be subject to different treatment under the Act.
The rate of excise duty that applies to a particular tobacco product, and the type of excise stamp that must be affixed to the product, depends on the category that the product falls under in Schedule 1.
INTERPRETATION GIVEN
Based on the information provided, the product the you are proposing to manufacture for sale to the general public in Canada […] would be considered “packaged raw leaf tobacco” under the Act and as such, is required to be stamped with a “raw leaf” stamp and is subject to excise duty at the rate of $1.572 per kilogram.
[…].
Please contact the provincial/territorial jurisdictions you intend to supply, for any additional stamping and marking conditions and requirements.
To obtain excise stamps for the purpose of stamping packaged raw leaf tobacco, please contact the CRA Excise Stamp Order Desk at 1-866-330-3304.
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 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 343-553-3450.
Yours truly,
Kuljit Dhami
Tobacco Operations Unit
Excise Duties & Taxes Division
Excise and GST/HST Rulings Directorate
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