Cigar Tax Changes under the Tobacco Tax Act - Prescribed Percentage and Effective Date Fixed

The information in this bulletin does not replace the law found in the Tobacco Tax Act and related Regulations.

Ontario Tax Bulletin TT 1-2001, Cigar Tax Changes, issued February 2001, set out the details of the upcoming changes to the tax on cigars. The most notable of the upcoming changes is that the 45% tax rate will be applied to the taxable price of a cigar. The effective date of the changes has been proclaimed. The prescribed percentage to be used in the calculation of the taxable price of a cigar has been set by O. Reg. 135/01.

Effective Date

August 1, 2001 is the effective date of the changes to the tax on cigars.

Prescribed Percentage

22% is the prescribed percentage rate to be used where the taxable price of a cigar includes a prescribed percentage (refer to Formula for Taxable Price of Cigar and Calculation of Tax).

Reminder to Apply for Designation as Cigar Tax Collector

Well in advance of the August 1, 2001 effective date, you need to be designated as a Cigar Tax Collector if you are a wholesaler, importer, manufacturer or an existing tobacco tax collector and deal in cigars. Please send a completed Application for Registration form promptly to the address provided under General Information. Application forms were attached to Ontario Tax Bulletin TT 1-2001, Cigar Tax Changes. The forms are also available by calling the number provided under General Information.

Formula for Taxable Price of a Cigar and Calculation of Tax

1. Where the taxable price of a cigar equals the price for which the cigar was purchased by the retail dealer plus the prescribed percentage:

   [(price of purchase by retailer)+(22% × price of purchase by retailer)] × 45% = tax

   The price of purchase by retailer includes all consideration given by the retailer of the cigar as well as federal excise, federal duty excluding GST and all costs and charges relating to mailing, delivery and transportation.

   OR

2. Where the importer or manufacturer of the cigar is also its retailer:

   (price paid by consumer) × 45% = tax

   Where the importer or manufacturer of a cigar is also its retail dealer, there is no prescribed percentage added. In this instance, the taxable price of the cigar equals the price for which the cigar was purchased, by the consumer, inclusive of all consideration given by the consumer for the cigar as well as federal excise tax, federal duty excluding GST and all costs and charges relating to mailing, delivery and transportation (price paid by consumer).

Transitional Matters

The Client Accounts and Services Branch will publish a bulletin detailing transitional matters regarding the changes to cigar tax in advance of the effective date.

General Information

If this bulletin does not completely address your particular situation, refer to the Tobacco Tax Act and related Regulations, or contact the:

Ministry of Revenue
Client Accounts and Services Branch
Commodity Revenue Section
33 King Street West
Oshawa ON  L1H 8H9

• Toll-free: 1 866 ONT-TAXS (1 866 668-8297)
• Fax: 905 433-5680
• Teletypewriter (TTY): 1 800 263-7776

This publication and various other English and French tax bulletins published by the Ministry of Revenue, are available online at ontario.ca/revenue.