The cannabis store tax in Canada can add a pretty penny to your customer's total purchase. In Ontario, there is a Harmonized Sales Tax (HST) that adds a 13 percent fee on virtually all products, cannabis included. But there are HST exemptions for certain populations in Ontario so long as they qualify and apply for a rebate. These exemptions allow “Status Indians” in Ontario to reduce their tax burden on medical cannabis, low THC cannabis products, and cannabis accessories.Ontario cannabis retailers should be ready to respond when a customer inquires about these cannabis tax rebates. In this blog, we’ll give you a brief overview of the HST cannabis tax exemptions and resources you can share with First Nations customers on how to qualify and apply.
What is a Harmonized Sales Tax?
Harmonized Sales Tax is a consumption tax that combines the federal goods and services tax and the provincial sales tax into one. In Ontario, the tax for retail cannabis is similar to HST (13 percent).
Consumers pay this tax at the dispensary POS system and it’s the responsibility of the retailer or service provider to pay the taxes owed to the government. In Ontario, the HST is 13 percent on virtually all goods and services in the province, including retail and medical cannabis, as well as cannabis accessories.
How does the HST Exemption in Ontario work?
There are some exemptions to the HST in Ontario. An HST exemption means the consumer will not be charged the provincial portion of the tax.
In Ontario, “Status Indians” can apply for HST exemption on a cannabis purchases from off-reserve retailers, including:
- Medical cannabis
- Cannabis with a THC concentration of lower than 0.3% THC
- Cannabis accessories (pipes, rolling papers, grinders, vaporizers)
This exemption lowers the HST from 13 percent to five percent. If any of the above items are bought on a reserve, an HST tax is not applied at all.
Who is Eligible for an HST Exemption
This HST exemption is applied on a limited basis. It can only be utilized by Status Indians who are Ontario residents, Status Indians who are Canadian residents and/or residents of Akwesasne Reserve, and Indian band or council of a band of an Ontario First Nations reserve. And it only applies to medical cannabis, not retail.
How to Claim the First Nations Tax Exemption for Medical Cannabis
The applicable cannabis or cannabis-related purchases are not eligible for a rebate at the point-of-sale. Instead, Status Indians must apply for the rebate through Ontario’s government. If accepted, the applicant will receive their rebate in the form of a direct deposit or check within 40 days.
According to Ontario’s government, medical cannabis purchases continue to be eligible for a rebate of the eight percent Ontario portion of the HST, as long as they meet all the rebate criteria.
To claim the HST exemption on cannabis, an eligible person must fill out the application form and include certain documentation, including:
- Completed and signed application;
- Original receipts in the purchaser’s name for qualifying off-reserve cannabis (this must show the 13% HST was paid);
- Photocopy of both sides of the Certificate of Indian Status card or a letter from the band or council certifying that the cannabis was bought and used exclusively by the person receiving the rebate.
For more information to help your customers lower their cannabis tax in Ontario, head to the province’s Ministry of Finance website. To learn more about retail cannabis, industry trends, and cannabis compliance, subscribe to our blog!