Canada Proposes Heavy Tax on E-cigarettes

The Canadian government has proposed the country’s first federal tax on vaping products in its 2022 budget. The vape tax, part of the proposed federal budget announced Thursday, would take effect Oct. 1—if it passes Parliament as written.

The proposed tax is substantial, and includes an option for Canadian provinces to piggyback on the federal tax with an equally large assessment of their own. The national government is encouraging provinces and territories to pass equally large taxes, which would be administered by federal tax authorities.

The tax proposed on Thursday only applies to products that contain nicotine, including pod- and cartridge-style refills, disposable vapes, and bottled e-liquid. The tax appears to include nicotine base sold for DIY. The tax does not apply to hardware sold without e-liquid.

The tax is $1 per 2 mL for the first 10 mL in any sealed container (bottle, pod, etc.), and $1 per 10 mL for additional liquid in the container. That would add $7 to the price of a 30 mL bottle of e-liquid, $10 to a 60 mL bottle, and $14 to a 100 mL bottle. A 4-pack of 1 mL pods would be taxed at $4, because each sealed pod is taxed separately and the minimum tax on any individual container is $1.The effective tax rate on bottled e-liquid could be higher than 100 percent of the retail price. For home mixers, it might be worse. The tax on a 1-liter bottle of DIY nicotine would be $104.

For Canadians living in provinces and territories that participate in the proposed “coordinated vaping taxation regime,” the tax burden would be doubled. The offer will be attractive for provinces, because the federal government will do all the accounting work and simply send each participating province a check for taxes collected. Several Canadian provinces have existing taxes.Retailers would be allowed to sell untaxed products that are in inventory on Oct. 1 until Jan. 1, 2023.

The proposed tax rules would allow Canadian residents who travel out of the country for more than 48 hours to bring up to 10 vaping products containing a total of no more than 120 mL of e-liquid back into Canada without paying a duty.