Cannabis edibles will soon be taxed on how high they get you

Cannabis oils, edibles and concentrates will be taxed based on the quantity of tetrahydrocannabinol (THC), the psychoactive component in cannabis, rather than by weight, starting in May.

The Liberal government says the new rules are meant to simplify how these taxes are calculated, and ease compliance issues that producers have encountered with respect to cannabis oils. The taxes apply to both medicinal and recreational cannabis products.

Dried cannabis flower and cannabis oils, which were legalized for recreational use last October are currently subject to a 10 per cent excise tax on each gram or gram-equivalent, or $1 per gram — whichever is higher — regardless of THC content.

But the Liberal government’s 2019 budget is proposing that edible cannabis, cannabis extracts and cannabis topicals, all of which are new lines of cannabis products that are set to become legal this fall, will be taxed based on how much THC they contain.

The government is proposing a THC-based excise duty rate of 1 cent per milligram of total THC.

Products containing cannabidiol (CBD), the non-psychoactive component in cannabis, and trace amounts of THC are exempt from the excise tax. This could provide an incentive to producers to increase the variety of CBD-based products that come to market this October.

Cannabis excise tax revenue is currently split between the federal government and provinces or territories; the former collects 25 per cent of revenue, and the latter collects the remaining 75 per cent. The new THC-based duty rate will be distributed in that same ratio between provinces and the federal government, according to budget documents.

Currently, only pharmaceutical cannabis products that have a Drug Identification Number are exempt from taxes.

But some licensed producers have argued that any kind of cannabis products sold on the medical market should not be subject to an excise tax. Edmonton-based licensed producer Aurora Cannabis Inc., for example, pays the excise tax on behalf of their patients — a policy that the company says has cost more than $2 million in lost revenue over the past 3 months.

Tuesday’s federal budget appears to have slightly eased the tax burden of patients with a prescription for medical cannabis — they will now be eligible for a medical expense tax credit.

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