CRA has written off nearly $5 million in cannabis excise tax

November 20, 2024 | David Brown

The Canada Revenue Agency has written off nearly $5 million worth of excise tax on cannabis as uncollectible, as of September 21, 2024.

According to newly tabled documents in the House of Commons, a total of $4,718,514 has been written off as uncollectible. The tabled documents are in response to a question from Tako Van Popta, Conservative MP for Langley-Aldergrove, BC.

All of the companies with excise tax written off as uncollectible by the CRA are located in Ontario.

The tabled document lists 12 such companies. Eleven of these show a balance of debt that remains after compromise settlement pursuant to an applicable authority. One of the listed companies shows a debtor in an undischarged bankrupt corporation, with the trustee confirming in writing that he does not foresee any further payments.

Uncollected excise tax

The largest amount for a single company’s uncollected excise tax debt is $1,922,621 from April 2024, while the smallest is $136,095 from September 2024. Of the 11 companies listed, seven show a debt incurred in 2024, three from 2023, and one from 2022. All were located in Ontario.

Mr. Van Popta’s question, in full, asked:

“With regard to entities that owe tax to the CRA for unpaid excise tax on cannabis:

how many have filed for creditor protection or bankruptcy, broken down by year since the legalization of cannabis;
how much excise tax has been written off, in total, and broken down by the province or territory of the entity owing tax; and
for each entity which owed unpaid excise tax on cannabis and had their amount owing written off by the CRA, what are the details, including the (i) name of the entity, (ii) location, (iii) amount written off, (iv) date of the write-off, (v) reason for the write-off?

Insolvency in the industry

According to Insolvency Insider, 47 cannabis-related businesses in Canada have filed for creditor protection (CCAA) since 2019. Another ten have filed for bankruptcy, 13 have filed for receivership, and 21 have filed for a Notice of Intention (NOI) to make a Proposal under the Bankruptcy and Insolvency Act, which allows financially troubled corporations the opportunity to restructure their affairs.

Not all of these businesses are operating in Canada. A few operated in the US but were listed as Canadian businesses, and a few are ancillary services for cannabis producers or retailers.

As of January 31, 2024, the federal government says it has collected $3.4 billion ($3,418,794,702) in federal cannabis excise, with nearly $2.7 billion going back to the provinces and territories ($2,659,784,658).

These amounts reflect the CRA’s administration of Cannabis Duty and Information Returns provided by the licensed cultivators, producers, and packagers of cannabis and/or cannabis products on behalf of the federal, provincial, and territorial governments.

Canada’s federal excise tax for dried cannabis flower is effectively $1 per gram, with 75% of this going back to the provinces, as well as an ad valorem rate of 2.5% of the dutiable amount for the cannabis product. (Other cannabis products are taxed at a flat rate of $0.0025/milligram of total THC).

CCAA filings for cannabis companies have shown significant amounts of unpaid cannabis taxes owed to the Canada Revenue Agency. One recent CCAA listing showed $345,622.38 owed to the CRA. In a recent creditor protection filing, another company showed nearly $5.4 million owed to the CRA for source deductions and excise tax.