Over the last few weeks, our members have noticed that certain licence holders have been distributing samples of cannabis products to retailers which did not include an excise stamp. This is primarily related to the AGLC’s recent changes to their policy on cannabis samples: https://aglc.ca/bulletins/cannabis-samples

Today, we are providing important clarification on the topic of excise stamp application on cannabis products. This article specifically addresses scenarios where fully-packaged cannabis products may or may not require an excise stamp, according to information from the Canada Revenue Agency (CRA).

Firstly, it's crucial to comprehend the Excise Act, 2001. According to section 158.34, excise stamps are typically affixed to indicate that a product's duty has been paid. This understanding is fundamental to the scenarios we will discuss.

Cannabis Samples to Retailers

Should a fully-packaged cannabis product be provided to a provincially-authorised retailer as a "sample", the product is still required to be stamped and duty-paid. Even in cases where the product is made available to the person not by means of a purchase, such as samples, the Fair Market Value (FMV) is used to calculate the adjustment to the additional duty.

In addition, all standard Health Canada requirements for packaging and labelling are still in place, including the position and size of the THC logo, cannabinoid levels, etc. Essentially, the samples should look exactly the same as any product sold into the province, plus any additional provincial requirements such as a sticker noting it as a sample.

Cannabis Samples to Testing Laboratories

The requirement for excise stamps becomes more nuanced when it comes to sending a fully-packaged cannabis product to a federally-licensed cannabis laboratory for testing purposes. According to Section 158.3 (a) (iii) of the Excise Act, 2001, such a product does not require an excise stamp. The Act states that duty is not payable on a cannabis product that is "taken for analysis by a cannabis licensee in a manner approved by the Minister." As such, this product is relieved of cannabis duties and does not need to be stamped.

Cannabis Products for Research and Development

Lastly, let's consider when a fully-packaged cannabis product is sent to a federally-licensed research licence holder for research and development purposes. Here, under paragraph 158.01(d) of the Act, research licence holders are excluded from Part 4.1 of the Act. As such, unless they hold another type of licence (such as cultivation or processing), they are not licensed with the CRA and cannot be in possession of non-duty paid (unstamped) cannabis products.

If a product is being delivered to a research license holder that is not licensed under the Excise Act, 2001, these products are required to be duty-paid and stamped. If it is being delivered to a listed specified province, then we would use the FMV to calculate the adjustment to the additional duty since the product is made available to the person not by means of a purchase.

Conclusion

As we navigate the emerging and evolving cannabis industry, regulatory clarity is vital. Knowing when to apply excise stamps is an important facet of compliance, whether for retail distribution, testing, or research and development. The above explanations are invaluable for our industry in maintaining legal and regulatory compliance. As always, the C45 Quality Association is committed to providing the necessary guidance for quality and regulatory professionals in the Canadian Legal Cannabis Industry.

Below you will find the verbatim email sent to the CRA (LPCANNABISG@cra-arc.gc.ca) on May 30, 2023:

Hello,

I am inquiring as to when fully-packaged cannabis products do NOT require an excise stamp affixed to them? 

These are the following scenarios I am looking for clarity on:

• A fully-packaged cannabis product is provided to a provincially-authorized retailer as a “sample”; for example, related to the recent AGLC guidance (https://aglc.ca/bulletins/cannabis-samples)

• A fully-packaged cannabis product is sent to a federally-licenced cannabis laboratory for testing purposes

• A fully-packaged cannabis product is sent to a federally-licenced research licence holder for research and development purposes

I would appreciate clarity on this matter, including references to the Excise Act or other applicable regulations, if possible.

Thank You,

Tom Ulanowski

Below is the verbatim response provided by the CRA on May 31, 2023:

Good morning,

With regards to cannabis samples, the product would still have to be stamped and duty-paid. If it is being delivered to a listed specified province, then we would use the FMV (Dutiable amount provision per 158.34 of the Excise Act, 2001) to calculate the adjustment to the additional duty since the product is made available to the person not by means of a purchase.

With regards to a fully-packaged product being sent to a laboratory for testing purposes, it does not have be stamped. Section 158.3 (a) (iii) of the Act states that “Duty is not payable on a cannabis product that…is taken for analysis by a cannabis licensee in a manner approved by the Minister”. Since the product is relieved of cannabis duties, it does not need to be stamped to indicate that duty has been paid on the product.

With regards to a fully-packaged product being sent to a research licence holder for research and development purposes, under paragraph 158.01(d) of the Act, research licence holders are excluded from Part 4.1 of the Act. So unless they have some other type of licence from HC (i.e., cultivation, processing, etc.), they would not be licensed with us and cannot be in possession of non-duty paid (unstamped) cannabis products. For product that is sent to a research licence holder that is not licensed under the Excise Act, 2001, those products are required to be duty-paid and stamped. If it is being delivered to a listed specified province, then we would use the FMV (Dutiable amount provision per 158.34 of the Excise Act, 2001) to calculate the adjustment to the additional duty since the product is made available to the person not by means of a purchase.

 

Thank you.

N.V. 

Excise Duty Operations – Cannabis

Excise Duties and Taxes Division