Marijuana Dispensaries and Taxes
With the recent explosion of marijuana dispensaries in Vancouver and Toronto, the Canadian government is having a hard time coming up with new laws to regulate the industry. One of the most complicated areas to deal with in regards to the dispensaries are their tax obligations. Below I will discuss a few current issues.
Prescriptions and GST/HST
Taxpayers and dispensaries are starting to wonder if GST/HST should be charged on the sale of prescription marijuana. Marijuana advocates believe that no GST/HST should be charged, because, they claim, the drug should be zero-rated under the Excise Tax Act. If something is zero-rated under the Act, then no GST/HST is charged on its sale. Their claim is that prescription drugs are zero-rated, and therefore, marijuana should be treated the exact same. This is why some dispensaries charge GST/HST, while others do not. The case law currently states that GST/HST is chargeable on the sale of prescription marijuana, but this may be appealed to the Supreme Court of Canada in the coming days.
Cash Business and Audits
Dispensaries are having a very difficult time finding banks that will work with those in the marijuana industry. Because of this, dispensaries are sitting on large amounts of cash. This creates an incentive for the Canada Revenue Agency (“CRA”) to audit marijuana dispensaries in the hopes of finding unreported cash income, in addition to looking for those that do not charge GST/HST.
Medical Expenses
The CRA has confirmed that marijuana / cannabis prescriptions are eligible medical expenses and may be deducted on your tax returns. Please see here.
If you have opened a marijuana dispensary, and you have tax questions, or you are being audited, give us a call today!
CRA Resources
Case Law
Hedges v. The Queen, 2014 TCC 270 – Marijuana Dispensaries and GST/HST
Hedges v. Canada, 2016 FCA 19 – Federal Court of Appeal affirming Tax Court Decision
**Disclaimer
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.
