ET/SL 9

April 18, 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 Nova Scotia.

The federal government has introduced further reductions in the excise taxes on cigarettes and manufactured tobacco destined for sale in Nova Scotia. This is because the Province of Nova Scotia has announced a reduction in its tobacco tax rates.

NEW EXCISE TAX RATES

Effective April 15, 1994, excise taxes payable on cigarettes and manufactured tobacco that are clearly marked or stamped for retail sale only in Nova Scotia will apply at the following rates:

Note: Throughout this notice the term "manufactured tobacco" refers to manufactured tobacco other than cigarettes and tobacco sticks. The rate of federal excise tax on tobacco sticks remains as announced in the notice of February 8, 1994.

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

INTERIM CREDIT SYSTEM

However, an interim credit system will ensure that the full extent of the reduction in taxes is given effect in Nova Scotia. The credit system will function as follows:

• Wholesale vendors licensed by Nova Scotia to sell tobacco products in Nova Scotia must take a count of their stock of cigarettes and manufactured tobacco destined for final sale in Nova Scotia, on hand at the beginning of April 15, 1994;
  
• Wholesale vendors licensed by Nova Scotia who sell cigarettes and manufactured tobacco to retail vendors licensed by Nova Scotia, will be eligible to claim a credit from their manufacturer or supplier, in an amount up to:
  
  • 1 cent per cigarette ($2 per carton of 200 cigarettes),
    
  • .27 cents per gram of manufactured tobacco, other than cigarettes or tobacco sticks ($0.54 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 1, 1994, or when a marking system has been put in place in Nova Scotia.

The credits available to licensed wholesale vendors will be limited by two factors: the quantity of cigarettes and manufactured tobacco which they sell to retail vendors licensed by Nova Scotia; and the quantities of those products which they held in inventory on April 15, 1994, for resale to retail vendors licensed by Nova Scotia. This inventory is not to include cigarettes in packages of less than 20 cigarettes.

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 April 15, 1994, for resale to licensed retail vendors in Nova Scotia, 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 Nova Scotia.

Manufactured tobacco: The quantity of manufactured tobacco, sold and delivered to licensed retail vendors in Nova Scotia on or after April 15, 1994 and before June 1, 1994, that is in excess of the quantity of manufactured tobacco held in the inventory of the licensed wholesale vendor at the beginning of April 15, 1994, for resale to licensed retail vendors in Nova Scotia.

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.

Tobacco products for sale to Indian band councils or on reserves

The reduced rates of excise tax announced on the first page of this notice will apply to non-marked cigarettes and manufactured tobacco that are sold to vendors authorized by the Nova Scotia Provincial Tax Commission to sell non-marked cigarettes and manufactured tobacco to Nova Scotia Indian band councils or retailers located on reserves in Nova Scotia.

This means that if you have such an authorization from the Nova Scotia Provincial Tax Commission, you will be entitled to obtain non-marked cigarettes and manufactured tobacco for resale to Nova Scotia Indian band councils or on-reserve retailers at the excise tax rates of $0.08388 per five cigarettes or fraction of five cigarettes in any package or $7.948 per kilogram of manufactured tobacco on and after April 15, 1994.

If you obtain non-marked cigarettes and manufactured tobacco at the reduced rates of excise tax, you will be able to sell them to Nova Scotia Indian band councils and on-reserve retailers in amounts that do not exceed the quantities that you are authorized by the Nova Scotia Provincial Tax Commission to sell to the particular bands or retailers.

If you sell these non-marked cigarettes or manufactured tobacco to persons other than bands or on-reserve retailers to whom you are authorized to sell non-marked cigarettes and manufactured tobacco, or sell non-marked cigarettes or manufactured tobacco to on-reserve retailers in quantities that exceed the quantities that you are authorized to sell to the band or on-reserve retailer, you will be liable for payment of an excise tax of $2 per carton of 200 cigarettes and $0.54 per 200-gram package of manufactured tobacco.

Persons liable for payment of this excise tax will be required to self-assess and remit the tax to the federal government. Failure to do so will make those persons liable for assessment, by Revenue Canada officers, of not only the tax but also of penalty and interest.

The Excise Tax Act, under which the excise tax is imposed, makes it an offence to not pay excise taxes, as required. Persons convicted of the offence of failure to pay excise taxes are subject to court-imposed fines of up to $1,000, plus an amount equal to the unpaid taxes or, on default of payment of the fine, for a term of imprisonment of not more than twelve months.

Anyone who sells these non-marked cigarettes to persons other than Indian band councils, on-reserve retailers or Indian consumers in Nova Scotia will be guilty of an offence and liable for a fine of the greater of $1,000 and triple the difference between the excise tax applicable to marked and unmarked cigarettes and manufactured tobacco.

In order to obtain non-marked cigarettes and manufactured tobacco at the reduced rate of excise tax on and after April 15, 1994, authorized persons will have to provide the manufacturer from whom they purchase the cigarettes with a signed certificate worded as on the opposite page.

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

Certificate to Purchase Unmarked Cigarettes
for Resale to Indian Band Councils and
On-Reserve Retailers in Nova Scotia

I certify that (Name of company, firm, etc.):

• is currently authorized, by the Nova Scotia Provincial Tax Commission to purchase non-marked cigarettes and manufactured tobacco for sale to Nova Scotia Indian band councils or to retailers on Indian reserves in Nova Scotia; and
  
• is purchasing the non-marked cigarettes for resale to Indian band councils or on-reserve retailers in Nova Scotia;

and therefore qualifies for the reduced rate of excise tax applicable to cigarettes that are clearly marked to indicate that they are intended for retail sale in the Province Nova Scotia.

Name: ...................................................

Position: ...............................................

Signature: .............................................
Date: ....................................