April 2021

In this publication, all legislative references to the “Act” are to the Excise Act, 2001. The information included in this publication is for reference purposes only and does not replace the Act or its regulations. Should there be any discrepancy between this information and that contained in the Act, the legislative provisions apply.

If the information in this publication does not completely address your particular situation, you may wish to refer to the Act or relevant regulation, or contact any Canada Revenue Agency (CRA) regional excise office for additional information. These offices are listed at Contact Information – Excise Duties, Excise Taxes, Fuel Charge and Air Travellers Security Charge.

General

On April 19, 2021, the Minister of Finance tabled Budget 2021 and announced proposed amendments to the Excise Act, 2001 to impose a tax on duty-paid and special duty-paid cigarettes held in inventory at 12:01 a.m. on April 20, 2021. Therefore, most persons who own duty-paid or special duty‑paid cigarettes at the beginning of April 20, 2021 will be subject to the cigarette inventory tax. More specifically, this inventory tax applies to the following:

• duty-paid and special duty‑paid cigarettes, that is cigarettes on which excise duty has been paid as indicated by Duty Paid Canada Droit Acquitté on the affixed tobacco stamp
• imported unstamped cigarettes on which special duty was paid by a duty-free shop

Cigarette includes any roll or tubular construction intended for smoking, other than a cigar or a tobacco stick.

Rate

The cigarette inventory tax for April 20, 2021 is $0.02 per cigarette ($4.00 per carton of 200 cigarettes).

Determining inventories

All persons who, at 12:01 a.m. on April 20, 2021, own cigarettes that will be for sale in the ordinary course of their business must determine their inventory of cigarettes in order to calculate the amount of tax.

Inventories must be determined in a fair and reasonable manner. They may include a physical count and must be supported by appropriate books and records.

Persons who must pay the cigarette inventory tax

Persons who hold more than 30,000 cigarettes are liable to pay the cigarette inventory tax. They must complete and file Form B273-1, Excise Return – Cigarette Inventory Tax. However, GST/HST registrants who elected to file returns as separate branches or divisions may also file Form B273-1 returns separately.

Both the completed Form B273-1 and payment of the cigarette inventory tax are due no later than June 30, 2021.

Note that 30,000 cigarettes equates to 150 cartons of 200 cigarettes per carton.

Persons who hold 30,000 cigarettes or less in a separate retail establishment are not liable to report or pay the cigarette inventory tax.

A separate retail establishment means a shop or store of a person that satisfies all of the following conditions:

• it is geographically separate from other places of business of the person
• it is where the person regularly sells cigarettes to consumers attending the shop or store
• it is a retail establishment for which separate records are maintained. The records do not need to be physically kept on site at the shop or store

First Nations

Section 87 of the Indian Act provides that the personal property of an Indian or an Indian band situated on a reserve is exempt from tax. If an Indian individual (or a partnership of Indian individuals, or an Indian band) owns cigarette products that are situated on a reserve, they are not required to pay the cigarette inventory tax.

However, if the owner of the cigarettes is a corporation situated on a reserve, the tax exemption does not apply and the cigarette inventory tax is payable.

Further information