Canada and Cannabis Tax

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Canada and Cannabis Tax

Only two things are certain in life, death and taxes.

There is general feeling of optimism for dispensary businesses in Canada despite the general lack of cannabis tax structures and regulation

However, the CRA (Canadian Revenue Agency) casts uncertainty on the potentially legal bud. Back taxes are the main cause for concern. There are more than 80 dispensary locations as of mid-2017 in the greater Vancouver area alone. Furthermore, only 9 licenses have been given by the city. Most of these locations only accept cash and rely on simple excel/pen and paper record keeping. These dispensaries are ill-equipped to deal with future compliance.

Lack of proper record keeping will cripple dispensaries when the CRA decides it’s time to cash in on the millions owed in cannabis tax. Free passes on their earnings for the past few years will not be given to these stores by the CRA.

Examples Found in Casinos & Gambling

BC Casino workers were hit with similar back taxes in 2015. The issue stemmed from how gratuities were treated by the casino itself. Tips for card dealers and slot attendants were collected in a pool by the casino before equal distribution among staff. Such was the procedure for many years. Unfortunately, the CRA ruled that this counted as taxable wages. Suddenly, casino workers earning $8.5 to $13 per hour owed the CRA thousands in back taxes accumulated over the last three years.

This situation can happen to the cannabis industry in Canada. Many dispensaries in Canada are not prepared for such an event. It is highly likely that a vast majority of cannabis stores will be impacted by owing cannabis taxes.

Be prepared. Using a proper inventory and sale tracking POS is key to producing accurate reports for the CRA. Arbitrary amounts of back taxes or fines may be assigned to dispensaries without proper records. Small business owners are an integral part of our cannabis economy. They must protect themselves and prepare for all outcomes by providing adequate sales records if the occasion should arise.