Status First Nations to remain tax exempt on marijuana sales on reserve land
Both federal and provincial governments have said they will honour the Indian Act tax exempt policy
Saskatchewan's marijuana legislation was announced earlier this week and the province said in an email that it hasn't made any decision yet regarding a provincial sales tax on marijuana.
But according to both the federal and provincial governments, First Nations people with a valid certificate of Indian Status card will be tax exempt when buying marijuana from a business located on reserve land.
The federal government has confirmed that any First Nations owned and operated business on reserve land will not have to pay GST/HST on any cannabis products.
Although the Indian Act tax exemption will be honoured, the federal government has indicated that does not extend to the excise duties which will be applied to cannabis products.
Excise duties apply to spirits, wine, beer and tobacco products. A duty amount is applied to the product at the point of packaging rather than the point of sale, so all potential First Nations-owned retailers will have to pay the excise duty regardless of status.
The amount of excise duty proposed by the federal government is 50 cents per gram of cannabis or five per cent of the producer's sale price. An additional rate would apply for an agreeing province or territory.
Here is a sample breakdown from the federal Department of Finance's website of how the purchase of one gram of dried cannabis looks for a non-status person who pays GST/HST.
- Pre-duty price: $8
- Excise duty (per gram): $1
- Subtotal: $9
- GST/HST: $1.17
- Total: $10.17
In this example, if the customer has a status card and is buying cannabis from a business on reserve land, they would not pay the GST/HST. The example does not indicate what amount a retailer may add to the cost.
Much like tobacco sales in Saskatchewan where a wholesaler provides tobacco products to permitted businesses, wholesaling of cannabis will be done by private sector businesses.
The only difference between tobacco and marijuana is that the province's Saskatchewan Liquor and Gaming Authority will be the issuer of permits to wholesalers who meet the federal and provincial criteria.
Under an agreement made in December, 75 per cent of the revenue from the cannabis excise tax will go to provincial and territorial governments and 25 per cent to the federal government. The federal portion of the excise tax revenue will be capped at $100 million annually, with any federal revenue in excess of that going to the provinces and territories.
A Finance official said the government will announce further details about the excise duty framework and execution of the collection agreements with provinces and territories in the coming months.