The Ontario Ministry of Finance has threatened to turn the Ontario cigar industry upside down, by beginning to assess vendors selling cigars and other non-cigarette tobacco to status indians on federal indian reserves, for Ontario provincial tobacco tax (PTT). Previously most industry insiders would have assumed - just from Ontario's acquiescence to wide-spread industry practice of exempting all sales of non-cigarette tobacco sold to Indians that sales of cigars, pipe tobacco and chewing tobacco to status Indians on federal Indian reserves was exempt of PTT.

Not so, perhaps, based on recent Ontario assessment activities.

What makes this so troubling is that there is a special exemption for just these kinds of sales, provided for the exclusive use of the Indian purchaser, and found in section 23(2) to a Regulation under the Tobacco Tax Act.

This change in policy position - if that is what this represents - will be a major thorn in the side of virtually any vendor of non-cigarette tobacco on reserve, as they would seem to risk similar audit and assessment if not beginning to treat their sales as subject to PTT.  Not to mention an imposition for status Indians who would presumably feel entitled to protection from government taxation and molestation under sections 87 and 89 of the Indian Act.

Licensed wholesalers and designated wholesalers on the receiving end of a Notice of Assessment for Ontario tobacco tax (issued under the Ontario Tobacco Tax Act) should consider obtaining independent legal advice, as there are a number of reasons why Ontario's position may not be supportable at law.

Millar Kreklewetz LLP practices in this area, and Rob Kreklewetz and John Bassindale have recent file experience with this particular issue.

Please consider calling on us for advice on this subject:

Rob Kreklewetz (

John Bassindale (