March 2017

1. Will the Canada Revenue Agency (CRA) send me an information package regarding the cigarette inventory tax?

The CRA will provide information about the cigarette inventory tax to retailers and wholesalers. However, the CRA does not have information about the particular products they sell. If you do not have any cigarettes for sale, please disregard the information package. If you do not receive the information package or the form, please contact any CRA regional excise duty office to obtain a copy. All regional excise duty offices are listed in Excise Duty Memorandum EDM1.1.2, Regional Excise Duty Offices.

2. What products are subject to the cigarette inventory tax and how much is the tax?

The cigarette inventory tax will apply to "taxed cigarettes", that is cigarettes on which excise duty has been paid as indicated by "DUTY PAID CANADA DROIT ACQUITTÉ" on the affixed tobacco stamp.

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

The cigarette inventory tax is $0.00265 per cigarette ($0.53 per carton of 200 cigarettes).

3. Who will pay the cigarette inventory tax?

The tax is payable by most persons who own taxed cigarettes at the beginning of March 23, 2017, which are for sale in the ordinary course of a business of the person. Certain retailers who do not hold more than 30,000 taxed cigarettes in a separate retail establishment are not liable to report or pay the cigarette inventory tax for that establishment.

4. What is a separate retail establishment?

A "separate retail establishment" means a shop or store of a person that is:

• geographically separate from other places of business of the person,
• where the person regularly sells cigarettes to consumers attending the shop or store, and
• a retail establishment for which separate records are maintained.

For a shop or store to qualify as a "separate retail establishment", all of the conditions described above must be satisfied.

5. For purposes of determining whether or not a shop or a store is a "separate retail establishment", do separate records need to be kept on site at the shop or store?

There is no requirement for separate records to be physically kept on site at the shop or store.

6. Will persons subject to the cigarette inventory tax have to take a physical count to determine their liability?

The inventory of taxed cigarettes must be determined in a fair and reasonable manner, which may include a physical count, and be supported by appropriate books and records.

7. Who is required to file a return to report the cigarette inventory tax?

Every person who is liable to pay the cigarette inventory tax must complete and file Form B273, Excise Return – Cigarette Inventory Tax. However, GST/HST registrants who elected to file returns as separate branches or divisions may also file Form B273 return separately.

8. When is a person required to determine their inventory of cigarettes in order to calculate the amount of the tax?

The cigarette inventory tax is calculated on taxed cigarettes held in inventory at the beginning of March 23, 2017 (12:01 a.m.).

9. When is the cigarette inventory tax to be reported and remitted to the Canada Revenue Agency?

The deadline for reporting and paying the cigarette inventory tax is May 31, 2017.

10. Does the cigarette inventory tax apply to an Indian individual (or a partnership of Indian individuals, or an Indian band) situated on a reserve?

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

Note: If the owner of the cigarettes is a corporation situated on a reserve, the tax exemption described above is not applicable.

11. I have an old Form B273 from 2014. Can I use it to report the cigarette inventory tax on May 31, 2017?

No, you will have to use the new Form B273, since the rate differs from 2014.

12. Will I be audited?

As part of our regular activities, the CRA selectively audits tax returns. Our objective is to ensure the fairness and integrity of our self-assessment tax system. We do this by making sure that tax returns are prepared properly.

For more information about audit, see Pamphlet RC4188, What you should know about audits.

13. Who can I contact if I have questions concerning the cigarette inventory tax?

You may contact any CRA regional excise duty office if you have questions concerning the cigarette inventory tax. All those offices are listed in Excise Duty Memorandum EDM1.1.2, Regional Excise Duty Offices.

Further information