Alcohol Taxes and Duties
MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in alcohol tax and duty matters, including alcohol tax and duty issues arising under the Excise Act, 2001.
The following is a short introduction to alcohol taxes and duties in Canada.
Please note, this background is intended for informational purposes only and does not constitute legal advice on any issue. We would be pleased to provide specific and current advice to your specific situation, if desired.
Alcohol Taxes and Duties
Alcohol Taxes and Duties Legislative Framework
At the federal level, these taxes are levied under the Excise Act, 2001—which covers bulk alcohol sales, spirits, and wines—and the older Excise Act—which covers beer, malt liquor, and distillery operations.
Generally, different excise duty treatment applies to alcohol for non-beverage use.
Alcohol Taxes and Duties Definitions
Spirits, as defined in the Excise Act, 2001, means any material or substance containing more than 0.5% absolute ethyl alcohol by volume other than wine, beer, vinegar, denatured alcohol, or specially denatured alcohol. Also excluded from the definition is any product containing or manufactured from a material or substance mentioned above that is not consumable as a beverage as well as fusel oil and other refuse products produced from the distillation process.
Wine is defined in the Excise Act, 2001 as a beverage containing more than 0.5% but not more than 22.9% of absolute ethyl alcohol by volume that is produced by the alcoholic fermentation of an agricultural product, a plant, or a plant product, other than grain. It also includes a product wholly or partially derived from such an agricultural product or plant or plant product, as well as sake.
Beer (or malt liquor), for the purposes of the Excise Act, is defined as a product consisting of either fermented liquor containing not more than 11.9% absolute ethyl alcohol by volume, brewed in whole or in part from malt, grain, or any saccharine matter without any process of distillation, or ‘beer concentrate’ that adheres to the same alcohol volume and distillation rules.
Alcohol Taxes and Duties Licensing Requirement
Various licences are required to authorize certain alcohol operations under both the Excise Act, 2001, and the Excise Act.
Currently, the following operations require a spirits or wine licence: the production or packaging of spirits or wine, the importation, exportation, denaturation, or transportation of bulk spirits or wine, the storage of non-duty-paid packaged spirits or wines, and the use of spirits for the purposes of fortifying wine. However, a wine licence is not required for the production or packaging of wine by an individual for their personal use, or the packaging of wine from a bottle-your-own premises.
A spirits licensee under this category is required to enter into a bond with the government in an amount between $5,000 and $2,000,000, which depends on the number of spirits for which the licensee will be responsible.
For beer, a licence is required under the Excise Act for the commercial operation as a brewery (i.e., place where beer is manufactured). A licensee under this category is required enter into a bond with the government in an amount of not less than $5,000.
Additionally, the Excise Act also provides that a licence is required for the commercial operation as a distillery (i.e., place where alcohol is distilled, usually into alcoholic spirits). A licensee under this category is required enter into a bond with the government in an amount of not less than $200,000.
Alcohol Taxes and Duties - Rates
Generally, spirits, wine, and beer are all subject to an excise duty that is imposed and becomes payable during the production process. These duties are generally increased each year on April 1, and are indexed to inflation.
Wine
The following rates of excise duty apply to wine (adjusted annually for inflation):
| Wine Containing | Rate – Effective April 1, 2020 |
| Not more than 1.2% of absolute ethyl alcohol by volume | $0.021 per litre |
| More than 1.2%, but not more than 7%, of absolute ethyl alcohol by volume | $0.319 per litre |
| More than 7% of absolute ethyl alcohol by volume | $0.665 per litre |
However, there are several exceptions where the excise duty does not apply, particularly:
- Wine produced exclusively in Canada and composed wholly of agricultural or plant products grown in Canada;
- Wine produced by ‘small producers’ whose total sales of all wine packaged in Canada do not exceed $50,000 in both the current and previous fiscal year; and
- Wine produced and packaged by individuals for their personal use is also not subject to the excise duty.
Spirits
The following rates of excise duty apply to spirits (adjusted annually for inflation):
| Spirits Containing | Rate – Effective April 1, 2020 |
| Not more than 7% of absolute ethyl alcohol by volume | $0.319 per litre |
| More than 7% of absolute ethyl alcohol by volume | $12.610 per litre |
Additionally, spirits are subject to an additional $0.12 per litre special excise duty under the Excise Act, 2001. However, this special duty is not indexed to inflation.
Beer
Beer is subject to different duties depending on whether the beer is brewed domestically or is simply packaged in Canada after it is imported or produced from imported wort.
The following rates of excise duty apply to all beer packaged in Canada that is imported beer or produced from imported wort. The rates also apply to all domestically produced beer in excess of the first 75,000 hectolitres produced (adjusted annually for inflation).
| Beer Containing | Rate – Effective April 1, 2020 |
| Not more than 1.2% of absolute ethyl alcohol by volume | $2.794 per hectolitre |
| More than 1.2%, but not more than 2.5%, of absolute ethyl alcohol by volume | $16.83 per hectolitre |
| More than 2.5% of absolute ethyl alcohol by volume | $33.66 per hectolitre |
Domestic producers have reduced excise duty rates for beer that is brewed in Canada where the total volume brewed in a calendar year is less than 75,000 (hL) (after which they are subject to the same rates as the above table).
| Beer Containing | Volume Range | Rate – Effective April 1, 2020 |
| Not more than 1.2% of absolute ethyl alcohol by volume | 0 to 2,000 hectolitres | $0.2794 |
| 2,001 to 5,000 hectolitres | $0.5588 | |
| 5,001 to 15,000 hectolitres | $1.1176 | |
| 15,001 to 50,000 hectolitres | $1.9558 | |
| 50,001 to 75,000 hectolitres | $2.3749 | |
| More than 1.2%, but not more than 2.5%, of absolute ethyl alcohol by volume | 0 to 2,000 hectolitres | $1.683 |
| 2,001 to 5,000 hectolitres | $3.366 | |
| 5,001 to 15,000 hectolitres | $6.732 | |
| 15,001 to 50,000 hectolitres | $11.781 | |
| 50,001 to 75,000 hectolitres | $14.306 | |
| More than 2.5% of absolute ethyl alcohol by volume | 0 to 2,000 hectolitres | $3.366 |
| 2,001 to 5,000 hectolitres | $6.732 | |
| 5,001 to 15,000 hectolitres | $23.562 | |
| 15,001 to 50,000 hectolitres | $28.611 | |
| 50,001 to 75,000 hectolitres | $28.611 |
Like wine, excise duties do not apply to beer produced and packaged by individuals for their personal/family/non-commercial use.
Further Help with Alcohol Taxes & Duties
Millar Kreklewetz LLP is well-placed to provide assistances with all tax and excise duty related matters, and persons in need of further assistance with the taxes and duties on alcohol are encouraged to use the form on this page to contact us for specific legal advice applicable to their unique fact situation.
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