One of the ways the Canadian federal government controls the consumption of alcohol in this country is through the tax and duties imposed on alcohol purchases. The taxes levied on the purchase of alcoholic beverages make alcohol less affordable for mass consumption. Tourists to Canada may think that they can bring in their own alcohol, but the Government of Canada restricts tourists’ personal supply to wine at 1.5 liters, spirits at 1.14 liters, or beer at 8.5 liters.

These alcohol tax and duties can also directly impact Canadian business owners. Exceeding these amounts can cost more than purchasing the equivalent amount of alcohol in Canada, even when considering the high taxes and duties on alcoholic beverages. To learn how to minimize Canadian alcohol tax or duties, consider contacting a tax lawyer at Jeremy Scott Law. You can arrange a confidential consultation by calling (902) 403-7201.

Is Alcohol Tax Free in Canada?

Alcohol is subject to substantial taxation throughout Canada. Federal taxes on alcohol are governed by the Excise Tax Act and Excise Tax Act, 2001. In addition to these federal taxes, there are also provincial and territorial taxes that are imposed on the purchase of alcohol.

Is Alcohol Cheaper in Canada than in the United States?

Canadians can expect to pay approximately twice as much for the same alcohol as their neighbors on the southern side of the border. In Canada, purchases of alcohol are subject not only to the excise tax but also frequently to sales tax and potentially other taxes and duties. The cumulative effect substantially increases the cost of alcohol over the cost of the product alone.

What Taxes Are Applied to Alcohol in Canada?

The combined amount of excise taxes and sales taxes for alcohol in Canada runs between 20% and 31% depending on the beverage in question and the alcohol quotient that beverage is expected to contain. The highest taxes are applied to spirits, with excise taxes accounting for the greatest proportion of the taxes applied to these sales. According to Statistics Canada, excise taxes contribute the following percentages to the final retail price of alcohol in Canada:

Spirits – 19.22%
Cider – 9.22%
Beer – 8.9%
Wine – 6.1%

The Canadian government establishes federal tax rates on alcohol in Canada. The tax rate applied depends on the type of alcohol and the percentage of absolute ethyl alcohol by volume, expressed as a percentage. Canada uses minimum alcohol pricing, which changes each year. According to the Canada Revenue Agency, the applicable federal alcohol tax rates are:

Spirits with no more than 7% alcohol – $0.33
Spirits with more than 7% alcohol – $13.042
Wine with no more than 1.2% alcohol – $.022
Wine with more than 1.2% but up to 7% alcohol – $.033
Wine with more than 7% alcohol – $.0688
Beer with no more than 1.2% alcohol – $2.89
Beer with more than 1.2% but up to 2.5% alcohol – $17.41
Beer with more than 2.5% alcohol – $34.82

All provinces and territories in Canada also add retail sales tax on the purchase of alcohol, as follows:

Prince Edward Island – 25%
Yukon – 12%
British Columbia – 10%
Saskatchewan – 10%
New Brunswick – 5%
Quebec – Beer: $0.36 per liter; Other alcoholic beverages: $.72 per liter

The Government of Ontario establishes the most complex structure for taxing alcohol in Canada. The tax rate depends on where the alcohol was made and purchased, as well as on the type of alcohol. Tax rates in Ontario for alcohol are:

6.1% for wine produced in Ontario that the consumer purchases at a retail establishment
20.1% for wine not produced in Ontario that the consumer purchases at a retail establishment
11.1% for wine produced in Ontario that the consumer purchases from a boutique
26.6% for wine not produced in Ontario that the consumer purchases from a boutique for
61.5% for spirits
$.7245 per liter for draft beer
$.8974 per liter for non-draft beer for beer manufactured in Ontario
$.3596 per liter for draft beer made by a microbrewer
$.3975 per liter for non-draft beer made by a microbrewer
$.3341 per liter for brewpubs
$.29 per liter for wine coolers
$.38 per liter for spirits
$.0893 for environmental tax on non-refillable containers

If you are an alcohol seller and need assistance in determining the appropriate classifications and calculating the applicable taxes as an alcohol sales licensee, you may wish to consider contacting a Canadian tax lawyer at Jeremy Scott Law to review your legal obligations. An experienced tax lawyer can assist you in ensuring that all of your alcohol taxes have been calculated and filed appropriately.

What Types of Alcoholic Beverages Are Subject to Canadian Alcohol Taxes and Duties?

Taxes and duties apply to beer, wine, and spirits. These beverages have specific definitions under the Canada Revenue Agency’s Excise Duty Memorandum EDM3-1-1.These definitions, updated in 2022, encompass other types of items that include alcohol that are not typically included in a conversational definition of the alcohol. The beer category includes beer, malt liquor, and beer concentrate. The definition of spirits incorporates the drinks sometimes referred to in conversation as spirits coolers.

Why Are Canadian Taxes on Alcohol So High?

High levels of habitual alcohol consumption are associated with a variety of adverse health outcomes. Canadian alcohol taxes are based on the alcohol content and strength. Therefore, a tax gradient that increases in direct proportion to the alcohol content (expressed as percentage by volume) of beverages constitutes a public health policy designed to reduce consumption of the most strongly alcoholic beverages, while maintaining a comparatively low barrier to access for beverages with a lower alcohol content associated with “social” drinking and restaurant dining.

Excise Duty Return

Licensees must complete an excise duty return by the last day of the licensee’s fiscal month and can be mailed or filed electronically. Payments should also be made at the time the licensee files the excise duty return. The licensee is responsible for accurately calculating the amount of tax owed and for maintaining appropriate documentation of all excise taxes collected.

Licensees who fail to file on time, do not accurately file the amount of tax owed, or do not pay the appropriate amount of tax are subject to stiff penalties, which may include:

A $250 fine
1% of the amount due and not paid for the applicable reporting period
0.25% of the amount due and not paid, multiplied by the number of complete months for which the return was not filed, subject to a maximum of 12 months

A knowledgeable tax lawyer can help explain your legal obligations and may give you specific tax advice regarding Canadian alcohol tax and duties.

Contact an Experienced and Knowledgeable Canadian Tax Lawyer for Help

If you have questions about Canadian alcohol tax or your tax obligations as a licensed alcohol vendor, or if you need assistance with filing your excise duty return, consider reaching out to a knowledgeable tax lawyer for help. A lawyer with Jeremy Scott Law may be able to assist you with these matters. You can set up a confidential consultation by calling our firm at (902) 403-7201.