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Tax and Revenue Administration
Tobacco Tax Act
Information Circular TTA-4R
5


Last Updated : October 22, 2009
Produced by: Alberta Treasury Board and Finance, Tax and Revenue Administration
For more information: tra.revenue@gov.ab.ca

TTA-4R5 / October 2009

TOBACCO TAX ACT INFORMATION CIRCULAR:
LICENSING, REPORTING AND REMITTING


The Tobacco Tax Amendment Regulation (December 15, 2011) implements changes to Alberta's tobacco marking requirements. They come into effect April 1, 2012. For more information, see Special Notice Vol. 3 No. 14, Changes to Tobacco Marking Requirements. Tobacco tax publications are in the process of being updated to reflect the new stamping regime.

NOTE: This information circular is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this information circular and governing legislation, the legislation takes precedence.

This information circular discusses the following topics:

Licensing

Wholesalers and Importers

  1. To become a licensed wholesaler or licensed importer you are required to apply, at no charge, to Alberta Treasury Board and Finance, Tax and Revenue Administration (TRA) for a licence by completing a Tobacco Licence Application (form AT347) and Schedule A (form AT350).

  2. TRA may refuse to issue a licence, suspend, or cancel a licence if, in the opinion of the Minister of Finance (the Minister), you:
  • refuse or neglect to pay, or account for, money received as proceeds of tobacco tax;
  • refuse to provide surety or bank guarantees as requested by TRA;
  • contravene the Tobacco Tax Act (the Act), its regulations, or another jurisdiction’s statute or regulation governing the sale of tobacco;
  • have a director, officer or employee who has contravened the Act, or its regulations, or another jurisdiction’s statute or regulations governing the sale of tobacco; or
  • break the terms of a tax collection agreement to which you are a party.

The Minister may also refuse to issue a licence if you are not dealing at arm’s length with another person whose application for a licence has been refused or whose licence has been suspended or cancelled.

  1. If you have been refused a licence or had a licence cancelled or suspended you may file a Notice of Objection with TRA. Refer to the “Objections and Appeals” section of Information Circular TTA-5R4, Administration for more information.

  2. Licensed wholesalers and licensed importers are required to display their licences prominently at each of their places of business in Alberta. If there is no place of business in Alberta, the wholesaler or importer is required to keep the licence with him/herself at all times while doing business in Alberta.
  1. Your wholesaler or importer licence will expire when you stop selling tobacco in Alberta or if it is suspended or cancelled by TRA. If a licence is damaged, lost or destroyed, you are required to notify, and obtain a replacement licence from, TRA.

  2. You are required to send TRA a written notice of any name or address changes. If you end your business operations as a licensed wholesaler or licensed importer you are required to return your licence(s) to TRA immediately.

  3. As a licensed wholesaler and/or licensed importer, you may sell tobacco for resale to retailers in Alberta. To sell tobacco to consumers you must apply to TRA for an exemption. This exemption may be provided in an agreement signed between you, as the wholesaler, and TRA or by letter noting any conditions.

  4. You must have written permission from TRA to buy, possess, store, sell or offer for sale tobacco products not marked for tax-paid sale in Alberta. You are also required to ensure black stock is available for sale only to exempt-sale retailers or retailers, or where any other tobacco products not marked for tax-paid sale in Alberta will be transported out of Alberta for resale. Tobacco products not marked for tax-paid sale in Alberta include:

    • black stock – tobacco products stamped as required by federal legislation or regulation to show duty has been paid, but not stamped or marked for retail sale in a particular province(s);
    • tobacco products stamped or marked, as required by legislation, to show the products are for retail sale in a province or territory other than Alberta, or outside Canada; or
    • unmarked or unstamped tobacco products.

  5. Written permission to handle products not marked for tax-paid sale in Alberta is given only if the Minister is satisfied the products will be transported out of Alberta or, in the case of black stock, sold to an exempt-sale retailer or a duty-free shop as defined in the federal Excise Tax Act.

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Tear Tape Manufacturers

  1. To produce Alberta tear tape apply to TRA for a licence. TRA may issue a licence if you agree to:

    • mark the tear tape in a manner approved by TRA;
    • ensure the tear tape can be identified as being produced by you, the licence holder;
    • ensure you sell the tear tape only to tobacco marking permit holders;
    • keep accurate records of the tear tape you produced and sold and maintain an inventory of the tear tape;
    • ensure you keep the tear tapes secure;
    • allow a peace officer or employee of TRA, or an agent of the Government of Alberta, access to the records required to be kept for the purpose of verifying compliance; and
    • make available any records you are required to keep to TRA for inspection.

  2. TRA can refuse to issue a licence to manufacture tear tape if not satisfied the applicant will comply with the above requirements. TRA can suspend or cancel a tear tape manufacturer’s licence if the manufacturer fails to comply with the requirements.

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Reporting and Remitting

Wholesalers and Importers

  1. The Minister may appoint any tobacco tax collectors required for administration of the Act. Licensed wholesalers and importers appointed as tax collectors must enter into a tax collection agreement with the Minister. The agreement sets out the duties and responsibilities of the tax collector under the Act. TRA may ask you to provide surety satisfactory to the Minister. This may be up to three times the estimated amount of tax collectable by you for a collection period. TRA may also require you to deposit the tax collected into an account in the name of, or in trust for, the Minister at a financial institution specified by the Minister.

  2. Most tobacco manufacturers and main suppliers provide information by tax memo summary to TRA on all tobacco shipped to Alberta. Please ensure tax memo reports are received by TRA by the 7th day of the month following the sale transaction. TRA sends a copy of the tax memo summary to the collectors monthly to assist them in completing their monthly tax returns.

Calculation of cigar tax

  1. Paragraph 18 explains how the calculation of tobacco tax is rounded in certain circumstances. The examples show only how this is done and may not reflect current tax rates. Current tobacco tax rates are available in Information Circular TTA-8, Alberta Tobacco Tax Rates.
  1. Tax payable on cigars is calculated on each cigar as a percentage of the taxable price of the cigar. The tax payable is not less than a minimum amount or more than a maximum amount per cigar. If the amount of calculated tax payable includes a fraction of a cent, the amount is rounded up to the next higher cent.
  1. The taxable price of a cigar manufactured in Canada is the manufacturer’s selling price before any volume discount, including any charges for delivery or transportation and any duty and excise tax required by Canadian law except the federal goods and service tax (GST), multiplied by 1.3.

  2. The taxable price of a cigar manufactured outside Canada is the importer’s selling price before any volume discount multiplied by 1.3. The importer’s selling price before any volume discount is the greater of:

    • the price charged by the importer, or
    • the price charged by a party to whom the importer sells the cigar and with whom the importer does not deal at arm’s length.

  3. The taxable price of a cigar manufactured outside Canada also includes any charges for delivery or transportation and any duty and excise tax required by Canadian law, except the federal goods and service tax (GST).

EXAMPLE:

A Canadian manufacturer sells a particular type of cigar in packages of 80 for $39.02. Assume the following rates apply:

  • The taxable price of a cigar is 1.3 times the manufacturer’s selling price.
  • Tax payable on a cigar is 103% of the taxable price.
  • The minimum amount of tax per cigar is 20.0 cents.
  • The maximum amount of tax per cigar is $6.27.

To calculate the tax payable on the package of cigars, first calculate the taxable price of one cigar:

$39.02/80 X 1.3 = taxable price of one cigar

$0.48775 X 1.3 = $0.634075

Next, calculate the amount of tax payable on one cigar:

Taxable price X 103% = tax payable per cigar

$0.634075 X 103% = $0.65309725 rounded up to $0.66 per cigar

Finally, to calculate the tax payable on the purchase of a package of cigars, multiply the number of cigars in the package by the tax payable for one cigar:

80 X $0.66 = $52.80

KEY POINTS:

  • Do not round the calculation of the manufacturer’s selling price.
  • Do not round the calculation of the taxable price.
  • If the amount of tax payable includes a fraction of a cent, round the tax payable up to the next higher cent. Never round down.
  • If the tax payable calculated for one cigar is less then the minimum amount of tax per cigar, the minimum amount applies.
  • If the tax payable calculated for one cigar exceeds the maximum amount of tax per cigar, the maximum amount applies.

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Remitting Tobacco Tax

  1. A tax collector must remit all the tobacco tax on all tobacco purchases made in a calendar month to TRA by the 28th day of the following month. Taxes may be paid by any of the following methods:

    1. mailed, delivered by courier or hand-delivered to TRA. Remittances should be made payable to the Government of Alberta and accompanied by a Remittance Advice. The effective date of receipt of a mailed or delivered remittance is the date on which it is actually received by TRA. Remittances mailed or couriered to TRA should be sent with adequate lead-time to ensure receipt on or before the due date. If hand-delivered, they should be taken to TRA at the address listed on the bottom of page one between the hours of 8:15 a.m. and 4:30 p.m., Monday to Friday, except government holidays.

    2. at most financial institutions in Canada, if accompanied by a Remittance Advice. The effective date of receipt is the business day stamped on the Remittance Advice by the institution.

    3. by wire transfer. The effective date of receipt is the business date that the funds are received by TRA's bank. For more information on this option, contact TRA at 780-427-3044 or 310-0000-780-427-3044 (Alberta toll free).

    4. through internet payment services provided by major financial institutions in Canada and by TelPay for Business. The effective date of receipt is the date that TRA's account is credited. The earliest possible effective date is the next business day. For further details on this option, contact your financial institution or call TRA at the above number.

  2. In addition to the remittance, complete a return (Tobacco Tax Return - form AT300) and accompanying schedules showing the amounts of tobacco purchased:

    1. Schedule A – Tax Memo Purchases
    2. Schedule B – Non-Tax Memo Purchases
    3. Schedule C – Non-Taxable Tobacco Sales Summary

    where applicable. File returns and the applicable schedules by the 28th day of the month following the end of the reporting period.

  3. Ensure that the amount of the remittance and the total amount to be remitted, as reported on the return, agree and are received by TRA by the 28th day of the following month. If the 28th day of the month falls on a government holiday or a weekend, returns and remittances are due on the next business day. Late remittances or remittances of less than the total tax due will be charged interest on the late or under-remitted portion. The interest rate is the same as the debit interest rate calculated for purposes of the Alberta Corporate Tax Act.

  4. Current interest rates can be obtained from our Internet site or by calling TRA.

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