WHEN IS CANNABIS, CANNABIS?
CRA TAXING TRIM LIKE CANNABIS
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Cannabis cultivators and producers will generally be aware of the two-tier flat tax that applies to the production of cannabis products, such as pre-rolls. That is, a higher tax rate of $0.25 per gram applies to flowering material, while a lower tax rate of $0.075 per gram applies to non-flowering material – putatively on the basis that it is far less potent in terms of cannabinoid content (THC and CBD).
The CRA has recently – and very quietly – revamped its administrative guidance to seemingly eliminate this distinction, leaving many producers facing huge assessment liability in this area, or just paying too much tax!
Flowering or Non-Flowering? It Matters
For cannabis producers, the distinction between "flowering" and "non-flowering" material is not just botanical – it is financial.
Cannabis duty is generally imposed by reference to the type of cannabis material used in a product. More specifically, for dried and fresh cannabis, Schedule 7 to the Excise Act, 2001 (“EA 2001”) applies different flat duty rates depending on whether the material is “flowering material” or “non-flowering.”
In practice, the real issue for many cannabis producers is "trim". The EA 2001 defines “flowering material” as the whole or any part of the inflorescence of a cannabis plant, while “non-flowering material” is defined residually. But “trim” is not defined in the legislation, even though it is commonly used in cannabis products such as pre-rolls, and known widely in the industry.
This leaves an important question for producers who use trim in their products: is trim properly treated as “flowering material” or does it fall within the lower-duty category of “non-flowering material”?
CRA’s Policy Shift on Trim
For years, CRA’s administrative publications appeared to treat trim as non-flowering material. For example, Excise Duty Notice 53 (“EDN53”) expressly identified trim as a "non-flowering material" and concluded that trim was subject to the lower flat-rate duty.
Our recent practice has seen CRA now shifting its administrative position. For example, in March 2025, CRA quietly replaced EDN53, and re-published it as Excise Duty Memorandum 6-1 (“EDM 6-1”). EDM 6-1 removed the prior wording treating trim as non-flowering material, suggesting to the contrary (that trim was now flowering material and subject to the higher flat-rate of duty!)
More problematically, CRA's policy shift now appears to be resulting in industry audits and assessments, creating significant additional duty exposure for cannabis producers who use trim in their products and who followed CRA’s prior guidance.
Cannabis Trim like high-duty Flowering Material.
That policy change may not stand up in Court
and Experienced Indirect Tax Counsel
can help in that fight.
Takeaways
Contrary to its past administrative guidance, CRA now appears to be treating cannabis trim as high-duty flowering material, resulting in audits and assessments in this area.
It is possible (if not likely) that CRA’s new policy position is incorrect and it should be challenged by anyone being assessed in this area. Experienced Indirect Tax Counsel can help in that fight.
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