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Edibles Update: High Taxes in 2019 Federal Budget

Canada's 2019 federal budget (the "Budget") includes additional insight into the hotly anticipated regulatory regime for cannabis edibles, which is set to come into force in the fall of 2019. The Budget provides for a change to the current cannabis excise taxes for edibles, cannabis beverages and similar products that are set to become legal in October of this year.

The rate of tax on edible products will be determinate by the total tetrahydrocannabinol (THC) contained in a final product.

At the end of the day, the more THC in an edible product the more tax you will be required to pay.

The new edible tax rate equates to $0.01 per milligram of total THC per package and will come into effect on May 1, 2019.

With the proposed edible regulations capping the amount of THC in an edible to 10 mg of THC per package, users can expect to pay tax equal $0.10 per edible package.

The current excise tax for dried flower products is $1.00 per gram and is not expected to be changed.

The 2019 federal budget included forecasts for tax revenue derived from cannabis excise taxes. However, in the 2018 federal budget, the federal government said it anticipated that cannabis legalization would generate $35 million in tax revenue from cannabis in 2018, growing to $100 million in the fiscal 2019 year. Overall, the budget estimated that annual spending in the legal cannabis market is estimated to be $1.2 billion for 2018.

The proposed cannabis edibles regulation, which are expected to come into force later this year, provide some insight on what the cannabis edibles regulatory regime will look like. Some of the key provisions of the proposed cannabis edible regulation are summarized below:

  • cannabis edibles and beverages cannot contain added vitamins or minerals,
  • there will be limits on the amount of caffeine permitted per edible package, and
  • there will be a prohibition on adding alcohol to the edible or cannabis beverage.

The proposed cannabis edibles regulations also provide certain labeling requirements including a requirement to include the standardized cannabis symbol for products containing THC, a health warning message, the THC/CBD content, an ingredient list, a list of allergens (if any), and a nutrition facts table.

Packaging requirements for edibles products will require the use of plain packaging with child proof safety features in addition to more general requirements to avoid appealing to young people.

Resources for Businesses and Employers

At Field Law our cannabis group has experience advising cannabis producers on financing and corporate governance, packaging and intellectual property. We are also available to assist prospective cannabis retailers with applications for retail licenses, lease negotiations, raising capital and development permit appeals.

More to Come

Field Law’s Cannabis Industry Group will continue to provide updates on the emerging cannabis industry. Stay tuned for more information on securities and capital markets, labour and employment, intellectual property and business-related issues that may arise following the legalization and regulation of cannabis in Alberta and the Territories.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.