In Canada, all rules and regulations regarding the sales of alcoholic beverages are maintained and enforced by the Government. These rules and regulations are lined out in what is known as the Excise Act.
What is the Excise Act?
The Excise Act governs all regulations surrounding beer, wine, and spirit products in Canada. It covers a variety of things like excise duties and excise taxes. Let’s take a closer look.
What are Excise Taxes?
Excise taxes are taxes that the government imposes on specific goods and services. Alcoholic beverages fall within these goods, as do tobacco products and fuel. These taxes are applied to products before HST/GST is added on.
Why are Excise Taxes Charged?
Excise duties generally hold two purposes. Firstly, and most obviously, they help to raise revenue. Secondly, they help to discourage particular behaviors associated with certain items (like alcohol).
How does Excise Tax Work in Canada?
In Canada, Excise Taxes are charged primarily to businesses. As consumers, we are unlikely to notice these taxes directly. With that being said, many merchants increase the cost of their products in order to cover the additional cost of the taxes.
Beer, spirits, and wines are all subject to excise duty in Canada. This duty is to be paid out during the production process.
Excise duties are placed on wine depending on how much absolute ethyl alcohol is in the wine and is paid per liter. These duties are adjusted annually to account for inflation. With that being said, there are some exceptions to the excise duties placed on wines in Canada.
More specifically, duties do not apply when the wine is produced in Canada and made of Canadian-grown agricultural products. Duties also do not apply to Canadian wine producers who produced and package their wines in Canada and whose wine did not exceed $50 000 in the previous year. Wine packaged for personal use is also exempt.
Spirit duties are also based on how much absolute ethyl alcohol is contained within them and are also paid by the litre. They are subject to an annual excise duty with inflation rates and an additional duty of $0.12 per liter.
In terms of beer, these duties vary depending on where it is brewed and packaged. Excise duties are based on the amount of absolute ethyl alcohol they contain and are priced per hectolitre. In some circumstances, domestic producers have reduced excise duties.
Did you know?
Many alcoholic beverages are marketed based on Geographical Indications (GI’s). For example, you may see “Napa Valley” wines or “Canadian Whiskeys”. These indications are used to help consumers establish the quality of products and to help marketers promote their products better. More information on GI’s can be found on the CIPO website.
A Word on Licencing
Under the Excise Act, you must have a license to sell alcoholic beverages legally. Different types of alcohol have different laws surrounding their sales and licensing.
In Canada, you require a wine or spirits license to produce or package spirits or wines, import, export, or transport spirits and wines, or store spirits or wine. You also require a license to use spirits to fortify wine. You do not require a license to package wine for personal use.
In terms of beer, licensing is required for any commercial operations or manufacturing processes. Distilleries also require licensing from the Government of Canada.
Did you know?
The Government of Canada requires all alcoholic beverages being sold to be labeled in a specific manner. You can find the labeling requirements for Spirits and Wines under Regulations Respecting the Information to be Displayed on Alcohol Containers and their Packaging. Labeling requirements for the packaging and labelling of beer can be found in Brewery Regulations.
In conclusion, the Excise Act in Canada is a document that outlines the rules and regulations surrounding the sales and taxes placed on alcoholic beverages. For more information, you can check out the Excise Act itself.
In addition to the taxes placed on alcoholic beverages, the excise act also covers taxes to be placed on tobacco and cannabis products. Failure to comply with the rules and regulations within the act could result in severe penalties by the Canadian Government.