Important Notice Concerning Changes to Tobacco Tax Rates

Bulletin TT 1-2006
Published: January 2006
Content last reviewed: April 2011
ISBN: 1-4249-0025-5 (Print), 1-4249-0027-1 (PDF), 1-4249-0026-3 (HTML)

Notice to the reader: This publication was archived and kept for historical purposes. Use caution when you refer to it, since it reflects the law in force at the time it was released and may no longer apply.

On January 31, 2006, the Minister of Finance announced an increase in tobacco tax rates, to be effective at midnight.
Wholesalers are required to complete Tobacco Products Inventory Reports.
The information in this bulletin does not replace the law found in the Tobacco Tax Act and related Regulations.

Tobacco Tax Rate Increases

Regulation to Increase Tobacco Tax Rates

On January 31, 2006, the Minister of Finance announced an increase in tobacco tax rates as of 12:01 a.m., February 1, 2006. The increase was implemented by a regulation made by the Minister under the Tobacco Tax Act.

As of February 1, 2006, Ontario's tax rates for cigarettes and cut tobacco increased from 11.725 cents to 12.35 cents per cigarette and from 11.725 cents to 12.35 cents per gram of cut tobacco. The tax rate for cigars remains unchanged at 56.6% of the taxable price. The following is a summary of the old and new rates:

	New Rate	Old Rate	Increase
Cigarettes Per cigarette/cigarette stick	$0.1235	$0.11725	$0.00625
Cut Tobacco Per Gram or Part Gram of Coarse/Fine Cut, Snuff, Chewing Tobacco and Raw Leaf Tobacco	$0.1235	$0.11725	$0.00625
Cigars	56.6% of taxable price	56.6% of taxable price	no change

Effective Date of Rate Increases

The tobacco tax rate increases are effective February 1, 2006.

Tobacco wholesalers are expected to collect and remit tobacco tax at the new rates on and after February 1, 2006.

Inventory Requirements - Wholesalers Only

Tobacco Products Inventory Report

To ensure compliance with the regulation, wholesalers of tobacco products are required to take an inventory of all cigarettes and cut tobacco held as of 12:01 a.m., February 1, 2006 and remit to the Minister of Finance the additional tobacco tax on that inventory, based on the difference between the old and new tax rates. In order to calculate the additional tax, the wholesaler must complete a Tobacco Products Inventory Report.

As an exception, wholesalers who have been designated by the Minister of Finance as Tobacco Tax Collectors and who calculate and remit tobacco tax based on actual sales are not subject to the inventory requirements.

Due Date

Tobacco Products Inventory Reports and payment of the additional tax are to be delivered to the Ministry of Finance, on or before February 28, 2006.

Tobacco Products to be Included in the Inventory Report

All tobacco products, except cigars, must be counted and included in the Tobacco Products Inventory Report. More specifically, if you are a wholesaler of tobacco products, you must include in your Inventory Report:

All Ontario-marked cigarettes, tobacco sticks, coarse or fine cut tobacco, snuff, chewing tobacco and raw leaf tobacco stored in your retail outlets, store display areas, store rooms, warehouses, cash and carry outlets, delivery trucks or any other location where tobacco products are stored.

Undelivered Tobacco Products

All tobacco products (other than cigars) ordered or sold, but not delivered before 12:01 a.m., February 1, 2006, must be included in the Inventory Report of the wholesaler who took the order or made the sale.

Consolidated Inventory Report

Wholesalers who have tobacco products at more than one location should consolidate their tobacco products inventory onto a single Tobacco Products Inventory Report.

Five Per Cent Compensation

As compensation for compiling the inventory and remitting the additional tax, the wholesaler may deduct an amount of five per cent from the additional tax amount. However, no deduction may be made if the wholesaler fails to deliver the inventory report or remit the additional tax by the due date of February 28, 2006.