ET/SL 7

March 25, 1994

This notice provides information which supplements the excise tax information provided in the notice Changes in Excise Levies on Tobacco Products dated February 8, 1994, and relates particularly to sales of tobacco products in Prince Edward Island.

The federal government has introduced further reductions in the excise taxes on tobacco products destined for sale in Prince Edward Island. This is because the Province of Prince Edward Island has announced a reduction in its tobacco tax rates.

NEW EXCISE TAX RATES

Effective March 26, 1994, excise taxes payable on tobacco products that are clearly marked or stamped for retail sale only in Prince Edward Island will apply at the following rates:

NOTE: Throughout this notice the term "manufactured tobacco" refers to manufactured tobacco other than cigarettes and tobacco sticks.

Since Prince Edward Island does not currently have a marking or stamping system in place to identify tobacco products destined for sale only in Prince Edward Island, the excise tax rates on tobacco products will for now remain as announced in the notice of February 8, 1994.

INTERIM CREDIT SYSTEM

However, for the next three months, an interim credit system will ensure that the full extent of the reduction in taxes is given effect in Prince Edward Island. The credit system will function as follows:

Wholesale vendors licensed by Prince Edward Island to sell tobacco products in Prince Edward Island must take a count of their stock of cigarettes, tobacco sticks and manufactured tobacco destined for final sale in Prince Edward Island, on hand at the beginning of March 26, 1994;

• Wholesale vendors licensed by Prince Edward Island who sell manufactured tobacco, cigarettes or tobacco sticks to retail vendors licensed by Prince Edward Island, will be eligible to claim a credit from their manufacturer or supplier, in an amount up to:
  
  • 2.175 cents per cigarette ($4.25 per carton of 200 cigarettes),
    
  • .9 cents per tobacco stick ($1.80 per carton of 200 sticks), and
  • .19 cents per gram of manufactured tobacco, other than cigarettes or tobacco sticks ($0.38 per 200 gram container).
    
• The licensed tobacco manufacturer will be entitled to deduct amounts credited to wholesalers from excise taxes owing to the federal government.
  
• This credit will end as of June 25, 1994, or when a marking system has been put in place in Prince Edward Island.

The credits available to licensed wholesale vendors will be limited by two factors: the quantity of tobacco products which they sell to retail vendors licensed by Prince Edward Island; and the quantities of those products which they held in inventory on March 26, 1994, for resale to retail vendors licensed by Prince Edward Island.

The quantity of tobacco products on which a licensed wholesale vendor may claim a credit is to be calculated as follows.

Cigarettes: The quantity of cigarettes sold to licensed retail vendors that exceeds the lesser of:

(i) the quantity of cigarettes held in the inventory of the licensed wholesale vendor at the beginning of March 26, 1994, for resale to licensed retail vendors in Prince Edward Island, and

(ii) the greater of

(A) 5,000 cartons of 200 cigarettes, and

(B) the number of cigarettes obtained by multiplying 1,000 cartons of 200 cigarettes by the number of separate retail establishments of the licensed wholesale vendor in Prince Edward Island.

Tobacco sticks and manufactured tobacco: The quantity of tobacco sticks and manufactured tobacco, sold to licensed retail vendors on or after March 26, 1994 and before June 26, 1994, that is in excess of the quantity of tobacco sticks and manufactured tobacco held in the inventory of the licensed wholesale vendor at the beginning of March 26, 1994, for resale to licensed retail vendors.

More information on these tax reductions and the credit system for Prince Edward Island vendors is available from any Excise/GST district office.

The form on which wholesale vendors will claim their credit from manufacturers and suppliers will be supplied directly to known manufacturers and wholesalers. It will also be available from Excise/GST district offices.