Alcohol Taxes and Duties
MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in alcohol tax and duty matters, including alcohol tax and duty issues arising under the Excise Act, 2001.
The following is a short introduction to alcohol taxes and duties in Canada.
Alcohol Taxes and Duties
Alcohol Taxes and Duties Legislative Framework
Generally, alcohol was previously taxed pursuant to the Excise Act. However, a new regime in Canada for the federal taxation of certain alcohol, including spirits and wines, was introduced in the Excise Act, 2001, which was implemented effective July 1, 2003.
Excise duties on beer (and malt liquor) continue to be imposed under the Excise Act.
Generally, different excise duty treatment applies to alcohol for non-beverage use.
Alcohol Taxes and Duties Definitions
Spirits, as defined in the Excise Act, 2001, means any material or substance containing more than 0.5% absolute ethyl alcohol by volume other than wine, beer, vinegar, or denatured alcohol. Also excluded from the definition is any product containing or manufactured from a material or substance mentioned above that is not consumable as a beverage.
Wine is defined in the Excise Act, 2001as a beverage containing more than 0.5% but not more than 22.9% of absolute ethyl alcohol by volume that is produced by the alcoholic fermentation of an agricultural product, a plant or a plant product, other than grain. It also includes a product wholly or partially derived from such an agricultural product or plant or plant product, as well as sake.
Beer (or malt liquor), for the purposes of the Excise Act, is defined as all fermented liquor brewed in whole or in part from malt, grain or any saccharine matter without any process of distillation, but does not include wine.
Alcohol Taxes and Duties Licensing Requirement
A licence is required authorizing certain alcohol operations under both the Excise Act, 2001, and the Excise Act.
Currently, the following operations require a spirits or wine licence: the production or packaging of spirits or wine, the importation, exportation, denaturation, or transportation of bulk spirits or wine, the storage of non-duty-paid packaged spirits or wines, and the use of spirits for the purposes of fortifying wine. However, a wine licence is not required for the production or packaging of wine by an individual for their personal use, or the packaging of wine from a bottle-your-own premises.
For beer, a licence is only required under the Excise Act for the commercial operation as a brewery (i.e., place where beer is manufactured).
All spirits and brewery licensees are required to post and maintain security with the Canadian government. The amount of security is set at a minimum of $5,000, and for spirits licensees, a maximum of $2,000,000. However, for a wine licensee, there is no requirement to provide security as a condition of licence.
Alcohol Taxes and Duties - Rates
Generally, spirits, wine, and beer are all subject to an excise duty that is imposed and becomes payable during the production process.
Different rates of excise duty apply to wine containing: (1) not more than 1.2% absolute ethyl alcohol by volume; (2) more than 1.2% but not more than 7% absolute ethyl alcohol by volume; and (3) wine containing more than 7% absolute ethyl alcohol by volume. (In the case of wine that contains more than 7% of absolute ethyl alcohol by volume, the rate of excise duty is $0.5122 per litre.) However, excise duty does not apply to wine produced and packaged by individuals for their personal use.
The rate of excise duty on spirits is levied on a per litre of absolute ethyl alcohol basis. (Currently, the rate of excise duty on spirits is $11.066 per litre of absolute ethyl alcohol contained in the spirits.) However, the rate of duty on spirits containing not more than 7% absolute ethyl alcohol by volume is a much lower rate. As well, an excise duty on imported spirits delivered to or imported by a licensed user will apply.
Different rates of duty applies to beer containing: (1) more than 2.5% absolute ethyl alcohol by volume; (2) more than 1.2% but not more than 2.5% absolute ethyl alcohol by volume; and (3) less than 1.2% absolute ethyl alcohol by volume. (For all beer containing more than 2.5% absolute ethyl alcohol by volume, the rate of excise duty is currently $27.985 per hectolitre.) However, excise duties are not imposed on beer provided it is brewed by a person for personal or family use or to be given away without charge and is not for sale commercially.
Further Help with Alcohol Taxes & Duties
Millar Kreklewetz LLP is well-placed to provide assistances with all tax and excise duty related matters, and persons in need of further assistance with the taxes and duties on alcohol are encouraged to use the form on this page to contact us for specific legal advice applicable to their unique fact situation.