Taxation of Leaf Tobacco

Important notice to tobacco wholesalers, retailers, collectors, importers, exporters and transporters

General

This notice reinforces Ministry of Finance regulations on leaf tobacco sales in Ontario for use in preparing cigarettes and/or pipe tobacco. Leaf tobacco is sold to consumers and to dealers for resale to consumers.

Most leaf tobacco is packaged in a 200 to 225 gram plastic bag. The package sometimes comes with a do-it-yourself kit which tells the consumer/purchaser how to chop the leaves into a form which can be used to prepare cigarettes or pipe tobacco.

Leaf tobacco is "tobacco" under the Tobacco Tax Act and is taxed at the same tobacco tax rate as cut tobacco.

Legislation

Sales of leaf tobacco are ruled by the following provisions of the Tobacco Tax Act:

• The Act requires that every consumer must pay a tax to the Minister of Revenue, in respect of any tobacco purchased by the consumer. Under Subsections 4(2), (4) and (5), collectors, importers, wholesalers and retail dealers must collect tax on sales of tobacco.
• Subsection 3(1) requires any person who sells or delivers tobacco in Ontario for resale to hold an Ontario wholesale dealer's permit.
• Subsection 3(3) prohibits a person from buying or receiving delivery in Ontario of tobacco from a wholesaler who does not hold a wholesaler's permit, or from an importer who does not hold a registration certificate.
• "Tobacco" is defined under the Act as tobacco in any form in which it is used or consumed, and includes snuff.
• Leaf tobacco is a form of tobacco product.

Penalty

• The penalty for not holding a wholesale dealer's permit is a fine of not less than $200 and not more than $10,000, plus an amount of not less than three times the tax stated under Section 2, on all tobacco sold during the period the person did not hold a permit.
• Every collector, importer, wholesaler or retail dealer who refuses or neglects to collect tax as stated in this Act is guilty of an offence. On conviction, this person can be fined not less than the amount of uncollected tax, plus a fine of not less than $500 and not more than $10,000 - Subsection 4(8).

Summary

It is not against the law to sell leaf tobacco, but vendors must collect and pay the tobacco tax on this product as required.

For more information, please call the ministry:

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

Ministry of Finance
Client Accounts and Services Branch
33 King Street West
PO Box 625
Oshawa ON  L1H 8H9

Revised February 1998 to reflect the change in the tax rate.
Revised November 6, 1999 to reflect the change in the tax rate.