Skip to Main Content

What’s the Deal with Vape Tax?

The newly released federal budget outlines a proposal that would increase the sales tax on vaping products. Luckily, since cannabis-based vaping products are already subjected to an excise tax they are exempt from this new tax, but that doesn’t mean vaping products are without their extra fees.

Keeping Tobacco Away from Youth

Most regulations around vaping devices and products have to do with keeping kids off of nicotine, and regulators had e-cigarettes and e-liquids containing nicotine in mind when the rules were made. Federally, certain more tempting flavours have already been banned in an attempt to make youth less likely to pick up the habit, and some provinces have taken it a step further, banning all flavour additives that don’t taste like tobacco.

According to the World Health Organization (WHO), in developed countries like Canada, a 10% tax hike on tobacco products can result in as much as a 5% decline in smoking. While this may be a worthy endeavour to some, cannabis vape products that don’t contain nicotine are getting caught in the crossfire.

What About Cannabis?

Amid the vaping crisis of 2019, just as Cannabis 2.0 products were preparing to launch, Quebec and Newfoundland & Labrador fully banned cannabis vape products, citing public health concerns, and since then a handful of provinces have proposed and implemented taxes to discourage their use.

The first province to do this was British Columbia, when its Provincial Sales Tax (PST) on vape products increased from 7% to 20% in January 2020, including cannabis products in this grouping. Shortly after this, Alberta announced its intention to do the same, however, in its recent budget, the province said it has put this initiative on hold for now and just charges the usual Goods & Services Tax (GST) of 5%.

Since the introduction of British Columbia’s tax, cannabis industry advocates have been hard at work trying to change political minds.

Saskatchewan was the most recent province to implement a vape tax, proposing a 20% tax on products in place of its usual 6% PST. Originally, the tax was meant to encompass all vaping products including liquids containing nicotine or cannabis, as well as the devices, but after hearing the immediate and reasonable arguments from the industry, Finance Minister Donna Harpauer conceded that cannabis vape cartridges should be excluded since they already have an associated excise tax. Some of the devices used to vape will still have the tax, but it’s a small victory for the industry. The change is said to be going into effect on September 1, 2021.

Nova Scotia has a similar system, where nicotine e-liquids are taxed at $0.50 per millilitre, but cannabis liquids are exempt. Devices, however, still command a 20% tax.

Is This the Best Way?

While the WHO may advocate for “sin” taxes as high as 70%, cannabis industry advocates disagree that increasing costs for customers is the way to go. In an industry like cannabis, more so than tobacco, price is a huge factor when it comes to competing with the illicit market—which, experts say, was likely to blame for the vaping crisis in 2019—and a higher price tag in stores is more likely to push customers back into the arms of their dealers and make it easier for youth to access.

“From seed to sale, everyone in this industry is trained in preventing youth access,” says George Smitherman, President and CEO of the Cannabis Council of Canada. “At the end of the day, we need to remind [regulators] that we are their partner in not only keeping these products out of the hands of kids but also in growing the pie and bringing more business from the legacy market.”