February 2019

The information included in this publication is for reference purposes only and does not replace the Excise Act, 2001 or its regulations. Should there be any discrepancy between the information in this publication and that contained in the Act or its regulations, 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 its regulations, 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.

In this publication, all legislative references to the “Act” are to the Excise Act, 2001, unless otherwise stated.

General

Under the Act, the rates of excise duty on tobacco products are adjusted annually every April 1 based on changes to the Consumer Price Index. In addition, under subsection 58.2(2) of the Act, an inventory tax applies to the following cigarettes that are held in inventory at 12:01 a.m. on April 1 of each year:

• 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; and
• 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.

The cigarette inventory tax for April 1, 2019 is $0.00262 per cigarette ($0.524 per carton of 200 cigarettes).

Determining inventories

The cigarette inventory tax is calculated on duty-paid and special duty‑paid cigarettes held in inventory at 12:01 a.m. of April 1, 2019. All persons who, at that time, 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 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; and
• 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.

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

Persons who hold more than 30,000 cigarettes MUST file the 2019 version of Form B273, Excise Return – Cigarette Inventory Tax, and pay the cigarette inventory tax. GST/HST registrants who elected to file returns as separate branches or divisions may also file Form B273 separately.

The completed Form B273 and payment of the cigarette inventory tax are both due no later than May 31, 2019.

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