1.1.1 The Excise Duty Program
Note: This version replaces the one dated July 2009.
This memorandum explains the structure and responsibilities of the Excise Duty Program and addresses other related topics such as audits, appeals, taxpayer relief and confidentiality of information. It also briefly explains the role of the Summerside Tax Centre and the Canada Border Services Agency's Science and Engineering Directorate in assisting in the administration the Excise Duty Program.
The information in this document does not replace the law found in the Excise Act, 2001 or the Excise Act and their related regulations. It is provided for your reference. You may also wish to refer to the Acts and regulations, or contact any Canada Revenue Agency regional excise duty office for additional information. These offices are listed in Excise Duty Memorandum EDM1.1.2, Regional Excise Duty Offices.
Table of Contents
- Confidentiality of information
- Structure of the Excise Duty Program
- Rulings and interpretations
- Technical publications
- Licences, registrations and prescribed persons
- Business Number and duty program account
- Audits and regulatory reviews
- Appeals and taxpayer relief
- Summerside Tax Centre
- Science and Engineering Directorate
1. Excise duty is a levy imposed on spirits, wine, beer and malt liquor, and tobacco products. Depending on the particular commodity, excise duty is calculated on the quantity produced, manufactured or packaged. Except where permitted by law, a person must obtain a licence to produce, manufacture or package these commodities.
2. The Excise Act regulates the production of, and imposes duty on, beer, wort and malt liquor within Canada. For purposes of the Excise Act, the definition of beer includes beer and malt liquor that have an alcoholic strength not exceeding 11.9% absolute ethyl alcohol by volume. To access the Excise Act, visit the Department of Justice Web site at http://laws-lois.justice.gc.ca/eng/acts/E-14/index.html .
Excise Act, 2001
3. The Excise Act, 2001 regulates the production of, and imposes duty on, tobacco and alcohol within Canada. Alcohol under this Act is made up of wine and spirits, which includes malt liquor and "high alcohol" beer that have an alcoholic strength greater than 11.9% absolute ethyl alcohol by volume. The Excise Act, 2001 also establishes a framework within which licensees, registrants and certain persons have various entitlements along with specific obligations. To access the Excise Act, 2001, visit the Department of Justice Web site at http://laws-lois.justice.gc.ca/eng/acts/E-14.1/index.html .
4. The Excise Duty Program also administers certain provisions of the Importation of Intoxicating Liquors Act (IILA). The IILA specifies that any liquor, including wine, considered intoxicating by provincial law may be imported only by a board, commission, officer, or government agency legally authorized to sell intoxicating liquor. The IILA provides for some exceptions, including the following: the importation of bulk spirits for packaging in Canada, provided the spirits are eligible for specific tariff treatments; the interprovincial importation of wine by individuals for their personal consumption; and the movement into any province from or out of any place within or outside Canada of intoxicating liquor used for sacramental or medicinal purposes or for manufacturing or commercial purposes other than for the manufacture or use as a beverage. The IILA is available on the Department of Justice Web site at http://laws-lois.justice.gc.ca/eng/acts/I-3/index.html .
5. The Customs Act and the Customs Tariff govern the importation of commodities covered by excise legislation. The Canada Border Services Agency (CBSA) administers these two acts. For importation information, refer to the CBSA Web site at www.cbsa-asfc.gc.ca/import/menu-eng.html .
Confidentiality of information
Excise Act, 2001
6. The Excise Act, 2001 restricts the disclosure of confidential information obtained in the course of the administration or enforcement of this Act.
7. The Excise Act does not include provisions on the confidentiality of information. However, the Access to Information Act, the Privacy Act and Canada Revenue Agency (CRA) policy will apply to the disclosure of information obtained in the course of the administration or enforcement of the Excise Act.
8. Detailed information on the confidentiality of information will be available in Excise Duty Memorandum EDM1.4.1, Confidentiality of Information. In the meantime, please refer to section 211 of the Excise Act, 2001.
Structure of the Excise Duty Program
9. The Excise Duties and Taxes Division (Division) administers the Excise Duty Program. The Division is part of the Excise and GST/HST Rulings Directorate of the Legislative Policy and Regulatory Affairs Branch of the CRA. As well as the Excise Act, 2001, the Excise Act and the Importation of Intoxicating Liquors Act the Division is responsible for administering the provisions of the Softwood Lumber Products Export Charge Act, 2006, the non-GST/HST provisions of the Excise Tax Act (e.g., excise taxes on fuel, fuel-inefficient automobiles, insurance), and the Air Travellers Security Charge Act.
10. The following two units within the Division deal specifically with excise duty operations:
- Excise Duty Operations – Alcohol; and
- Excise Duty Operations – Tobacco.
These two units are involved in key activities that relate to developing and maintaining program delivery in response to legislative requirements, industry practices, technological advances, and compliance issues.
11. The Division is responsible for the following:
- policy development;
- quality assurance and program monitoring;
- providing technical and specialized assistance to the Department of Finance;
- writing excise duty publications, including circulars, memoranda and notices;
- issuing rulings and interpretations;
- developing audit, compliance and licensing programs;
- providing functional direction and training to employees in regional excise duty offices;
- conducting civil litigation actions;
- developing information sharing agreements; and
- administering the excise duty stamp program.
In addition, officials from the Division represent the Excise Duty Program at national and international workshops and conferences.
12. Regional excise duty offices serve as the CRA's liaison with licensees, registrants and the public on all matters relating to the Excise Duty Program. These offices are responsible for licensing and registration, audit and compliance, and for providing support to enforcement agencies as well as technical information on excise duty. For information on how to contact one of the regional excise duty offices, refer to Excise Duty Memorandum EDM1.1.2, Regional Excise Duty Offices.
Rulings and interpretations
13. The Division offers a rulings and interpretations service with respect to excise duties. The purpose of this service is to assist taxpayers (e.g., excise duty licensees and registrants, and other interested persons) to voluntarily comply with the law by providing them with certainty on how the legislation affects their operations or transactions. The Division also issues technical publications and the regional excise duty offices provide a technical telephone enquiry service to interested persons. The rulings and interpretations service is available free of charge.
14. Information on how to request a ruling or interpretation is available in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Services.
15. A broad range of technical publications has been developed to inform licensees and registrants, and other interested persons about excise duties.
Excise Act, 2001
16. Excise duty notices (EDN) are issued to highlight changes to the application and administration of the Excise Act, 2001.
17. Excise duty memoranda (EDM) provide detailed technical information and guidelines on the application of the Excise Act, 2001.
18. Technical publications relating to the Excise Act, 2001 are available on the CRA Web site at www.cra.gc.ca/exciseduty , under "Excise Act, 2001 – Technical Information".
19. Excise duty (ED) circulars provide detailed technical information and guidelines on the administration of excise duties on beer under the Excise Act.
20. Excise duty notices related to beer (EDBN) are issued to highlight changes to the application and administration of the Excise Act.
21. The technical publications respecting the Excise Act are available on the CRA Web site at www.cra.gc.ca/exciseduty , under "Excise Act – Technical Information".
22. The Excise and GST/HST News is published quarterly. It highlights recent developments with respect to federal commodity taxes, including excise duties. Information on how to subscribe to the Excise and GST/HST News is available on the CRA Web site at www.cra.gc.ca/lists . Simply click on "Subscribe to a mailing list" and choose the appropriate publication.
Licences, registrations and prescribed persons
Under the Excise Act, 2001
23. The eight types of licences available under the Excise Act, 2001 are the following:
- spirits licence,
- wine licence,
- user's licence,
- tobacco licence,
- tobacco dealer's licence,
- excise warehouse licence,
- special excise warehouse licence, and
- licence for duty free shop operator.
24. The following information pertains to excise duty licences under the Excise Act, 2001:
- applicants and licensees must comply with the Regulations Respecting Excise Licences and Registrations;
- security is required to obtain a spirits or tobacco licence;
- there is no fee;
- a licensee is required to file monthly returns unless the licensee qualifies to file returns on a fiscal half-year. Only persons who possess a spirits, wine, user's or excise warehouse licence and who do not hold manufactured tobacco or cigars may qualify for fiscal half-year reporting periods;
- the licence is valid for a maximum period of two years; and
- to maintain a valid licence, renewal of the licence is mandatory before the licensing period expires.
25. Detailed information on excise duty licences is available in Excise Duty Memorandum EDM2.1.1, Licence Types.
26. There are four types of registrations under the Excise Act, 2001 available to persons engaged in certain activities related to alcohol. They are the following:
- ferment-on premises registration,
- user's registration,
- alcohol registration, and
- specially denatured alcohol registration.
27. The following information pertains to the registration of persons under the Excise Act, 2001:
- applicants and registrants must comply with the Regulations Respecting Excise Licences and Registrations;
- security is not required;
- there is no fee;
- a registration is valid until it is cancelled, suspended or revoked; and
- a registrant does not have to file returns.
28. Detailed information on these four types of registrations is available in Excise Duty Memorandum EDM2.3.1, Registration Types.
Prescribed persons under the Stamping and Marking of Tobacco Products Regulations
29. A new tobacco stamping regime was implemented on September 1, 2010 in order to enhance the integrity of the tobacco taxation system and to combat the contraband tobacco market. As of April 1, 2011, all tobacco products entered into the duty-paid market or released under the Customs Act and destined for the duty-paid market must be stamped with the new excise stamp. Effective July 1, 2012, all cigarettes, tobacco sticks and fine-cut tobacco products for sale anywhere in the Canadian duty-paid market must carry the federal excise stamp.
30. Persons who import tobacco products destined for the Canadian duty-paid market and who are not tobacco licensees under the Excise Act, 2001 must apply to become a prescribed person in order to obtain the tobacco stamp. The stamp is affixed to the imported tobacco product to indicate that the duty has been paid. This prescribed person must meet the requirements described in paragraphs 2(2)(a) through (e) of the Regulations Respecting Excise Licences and Registrations. They must also post security.
31. Detailed information on how to apply to become a prescribed person is available in Excise Duty Notice EDN28, Becoming a Prescribed Person under the New Tobacco Stamping Regime.
Under the Excise Act
32. Brewers and manufacturers of wort are licensed under the Excise Act.
33. The following information pertains to brewery licences under the Excise Act:
- a licence is mandatory;
- security is required;
- there is an annual fee of $50;
- a licensee is required to file monthly returns unless the licensee qualifies for semi-annual filing periods, which are from January 1 to June 30 and from July 1 to December 31; and
- the licence must be renewed annually.
Business Number and duty program account
34. Excise duty licensees and registrants must obtain a Business Number (BN), which is a nine-digit business identifier from the CRA. The BN is unique and remains the same regardless of the number of program accounts issued to a person. The account number consists of three parts – the BN, the two-letter program identifier ("RD" for the excise duty program) and a four-digit reference number.
35. Persons who do not already have a BN or require further information should contact the CRA Business Enquiries Line at 1-800-959-5525. Additional information concerning BN registration is available on the CRA Web site at www.cra.gc.ca/bn .
Audits and regulatory reviews
36. Audits are detailed examinations of a licensee's activities and books and records. They are conducted to evaluate a licensee's level of compliance with excise duty legislation and regulations.
37. When a business operation has been selected for an audit, an excise duty officer/auditor will contact the licensee to arrange a date and time for the audit.
38. Before examining any books and records, the auditor may wish to discuss the general nature of the business and tour the premises to get a better understanding of the business operations and transactions recorded in the records. The audit usually includes, but is not limited to, an examination of documents such as ledgers, journals, bank accounts, sales invoices, purchase vouchers, production records, inventory records, internal controls, expense accounts, and corporate minute books. Other documents that may be examined include:
- selected returns or customs documents;
- books and records that support selected returns or customs documents;
- records required by regulation;
- audit reports from previous audits; and
- any other pertinent information on file.
39. During the audit process, the auditor may require additional information and assistance from the licensee's employees, particularly those responsible for the accounting, production and inventory records.
40. Once the audit has been completed, the auditor may propose certain adjustments to the licensee's returns (assessments) and books and records. The auditor will prepare a written summary of these proposed adjustments and will discuss them and any findings with the licensee and/or its representative. If the licensee and/or its representative require(s) time to analyze the proposed adjustments, the auditor will confirm the proposals in writing and allow a reasonable time for a reply. If further information is provided within this time, the auditor will consider this information before issuing the final letter and findings. If there are no proposed adjustments to the return, the auditor will inform the licensee and/or its representative, in writing, of this fact and of any other findings when the audit is complete.
41. After an audit assessment is finalized, the CRA will issue:
- a notice of assessment or a notice of reassessment, if the audit was conducted under the Excise Act, 2001; or
- a letter outlining the audit findings if the audit was conducted under the Excise Act.
42. Additional information about the audit process is found in GST/HST Pamphlet RC4188, What You Should Know about Audits .
43. Regulatory reviews consist of examining a licensee or registrant's activities that may not require an audit. These reviews can include spot checks of records, internal controls, and compliance with regulations or excise policies. The regulatory reviews can complement an audit program (e.g., verification of inventories or packaging).
44. Regulatory reviews can also include a request for a visit made by a licensee or registrant in order to assist in matters dealing with excise legislation and/or regulations (e.g., reviews of product or raw material destructions, reviews of credits, or unusual production issues).
Appeals and taxpayer relief
Excise Act, 2001
45. Licensees and registrants are entitled to every benefit available under the Excise Act, 2001. If a licensee or registrant believes that it has not received the full entitlements of the law, or if a licensee or registrant is not in agreement with the CRA on a duty or penalty matter, it has the right to a formal review of its file. In these situations, representatives from the Appeals Branch that were not involved in the original decision are available to conduct a formal and impartial review. For more information on appeals, contact the Appeals Division of a CRA tax services office.
46. For persons who wish to object to an assessment, reassessment or appeal a decision regarding an objection, additional information will be available in Excise Duty Memorandum EDM11.1.1, Assessments, Reassessments, Objections and Appeals. To file a notice of objection, these persons should use Form E680, Notice of Objection (Excise Act, 2001).
47. Where a licensee under the Excise Act believes that it has not received the full entitlements of the law or is not in agreement with the CRA on a duty or penalty matter, the regional excise duty office will make every effort to resolve the issue. Where a licensee's request for reconsideration cannot be resolved with the regional excise duty office, that office will forward the request for review to a more senior level.
48. On occasion, extraordinary circumstances prevent licensees and registrants from complying with the legal requirements of legislation or regulations administered by the CRA. There are taxpayer relief provisions available that allow for a common sense approach in dealing with licensees and registrants that, because of personal misfortune or circumstances beyond their control, are unable to comply with the legislation or regulations administered by the CRA.
Waiving or reducing interest, s 173
Waiving or reducing penalty for failure to file, s 255.1
49. Under the Excise Act, 2001, CRA officials have the discretion to cancel and waive interest in certain situations, but this action does not apply to penalties. However, in certain situations, the Act allows CRA officials to waive or reduce any penalty that becomes payable by a licensee in respect of a return for a reporting period.
50. Detailed information on taxpayer relief that applies to excise duty will be available in Excise Duty Memorandum EDM10.2.1, Interest and the Taxpayer Relief Provisions.
Summerside Tax Centre
51. The Specialty Business Returns Section of the Summerside Tax Centre is responsible for processing excise duty returns. Persons in Canada and the United States may call this section toll free at 1-877-432-5472. Persons outside these countries may dial 1-902-432-5472. Service is available in both English and French
52. Excise duty returns and applications for refund/deductions should be mailed to the following:
Specialty Business Returns Section
Canada Revenue Agency
Summerside Tax Centre
275 Pope Road, Suite 101
Summerside, PE C1N 6E7
53. Excise duty licensees can also obtain information on their accounts and request certain services online. Further information is available on the CRA Web site at www.cra.gc.ca/mybusinessaccount .
54. You can make your payment online using the CRA's My Payment service at www.cra.gc.ca/mypayment or using your financial institution's telephone/Internet banking services. For more information, visit the site at www.cra.gc.ca/electronicpayments or contact your financial institution.
Science and Engineering Directorate
55. The Science and Engineering Directorate (SED) is the scientific arm of the CBSA. Through a service level agreement, the SED provides a diverse range of scientific and technological services to the CRA. In particular, the SED provides advice on questions relating to contraband detection, determination of the origin of goods, and a number of other specialty areas. For detailed information about the SED, refer to the Contraband Detection page on the CBSA Web site at http://cbsa-asfc.gc.ca/menu-eng.html, under Programs and Services.
All of the memoranda in the Excise Duty Memoranda Series are available on the CRA Web site at www.cra.gc.ca/exciseduty, under Excise Act, 2001 – Technical Information.
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