The Canadian Government has recently announced plans to implement an excise tax on vape products beginning October 1, 2022. The proposal was put forth as part of Budget 2022 on April 7th, 2022.
Vaping products, as they are so relatively new, are not included in the Excise Act of 2001, which serves as the current legislative framework for the taxation of products like alcohol, cannabis, and tobacco.
The only federal tax that is taken on vaping products under the current legislation is the standard federal sales taxes that apply to any item sold in Canada. The new excise tax will have a significant impact on the price of all e-liquids, pods, and disposable vapes.
We’ve read the proposal so you don’t have to. Check out our summary of the excise tax proposal and what it will mean for consumers like you.
What is Excise Tax?
All vaping substances manufactured in or imported to Canada would be subject to an excise tax and require proper markings on their packaging. The tax itself would only apply to e-liquids and devices that contain e-liquid; it would not be applied to devices such as mods and pod system batteries. Each container would be taxed in two parts.
The first 10 mL of an e-liquid would be subject to a tax of $1 for every 2 mL so a total of $5 for the first 10 mL of any product. Any amount above 10 mL would be taxed at a rate of $1 per each additional 10 mL. This means that a 30 mL bottle of e-liquid would have $7 worth of taxes added to the price, which is an average increase of approximately 30%.
On its own, the increase in price from say a $20 bottle of 30mL e-liquid to now a $27 bottle doesn’t seem overly extreme, but this is only the federal portion of the tax. The rate of additional provincial taxes has been proposed at the same rate as the federal tax which would effectively double the amount of tax on each item.
Should a provincial tax using the same structure be added on top of this price your $20 bottle suddenly becomes a $34 bottle. In addition to the tiered tax on bulk e-liquids, pods and disposables would also be taxed at the minimum rate of $1 for individually packaged items.
What It Means for Consumers
First and foremost, it means that vape products that contain e-liquid are going to be more expensive. However, while the proposed tax would take effect on October 1, 2022, there is a grace period to allow retail locations to continue selling vaping products without excise tax until December 31, 2022, if the products are produced or imported prior to Oct 1, 2022.
While the implementation of taxes on these products is certainly not shocking, the obvious concern is that this tax could potentially disincentivize cigarette smokers from using vaping products as a tool to help them become smoke-free.