Published: December 2000
Content last reviewed: September 2009
The purpose of this bulletin is to remind Ontario dealers of their statutory obligations with respect to the sale and delivery of unmarked cigarettes.
In 1990, Ontario introduced a system of marking taxable cigarettes to improve compliance with the Tobacco Tax Act ("Act"). Under this system, distinctive marking is required on all packages of taxable cigarettes intended for sale in Ontario. Cigarettes are marked by markers and stampers who are authorized and registered by the Province. The marking signifies that tobacco tax has been properly accounted for.
Cigarette packages not bearing the designated marking for Ontario are untaxed by Ontario and may be used by authorized persons for:
Under the Act, no person shall purchase, possess, store or sell unmarked cigarettes in Ontario without a permit or authorization to do so. Wholesalers who require unmarked cigarettes for export or for tax-exempt sales in Ontario must obtain an Unmarked Cigarette Dealer's Permit to acquire, store and sell unmarked cigarettes. The Act prohibits the sale of unmarked or unstamped cigarettes, to consumers in Ontario required to pay tobacco tax.
Only a wholesaler who is a designated collector may apply for an Unmarked Cigarette Dealer's Permit. Wholesale dealers who are not designated collectors and retail dealers are not eligible for such a permit and must ensure that all of the cigarettes that they purchase are Ontario marked cigarettes.
An unmarked cigarette dealer's permit may only be used to acquire unmarked cigarettes for the purpose(s) stated on the permit.
Unmarked cigarettes must be stored only at locations authorized by the Minister.
The Minister may demand security from every person who applies for or is the holder of a permit to purchase or sell unmarked cigarettes ("permit holder") in an amount equal to the greater of $500,000 or an average three months of tax that would be collectable or payable by the person. The average three months of tax is calculated on the basis of the twelve-month period preceding the Minister's demand as if the person's acquisition of unmarked cigarettes were marked cigarettes that were sold to consumers in Ontario during the twelve-month period.
Unmarked cigarettes acquired under an Unmarked Cigarette Dealer's Permit must not be used for any purpose other than:
Cigarettes marked for sale in a jurisdiction other than Ontario held by authorized Ontario dealers are reserved for export to such other jurisdictions.
An authorized retailer means a retail dealer situated on a reserve who is authorized by the Minister of Finance to purchase unmarked cigarettes from a permit holder.
Unmarked Cigarette Dealers must keep proper invoices identifying each purchaser's name and business address and the actual delivery address for each sale of unmarked cigarettes.
Under the Act, it is an offence for the permit holder to contravene the Act or the Regulations or any condition or restriction contained in the person's permit. Upon conviction, the permit holder would be liable to pay a fine of up to $10,000 plus not less than three times the tax which was otherwise payable. Any person convicted for having possession of unmarked cigarettes other than as permitted under the Act is liable to pay a fine of up to $10,000 plus an additional fine of not less than 30¢ per cigarette and up to two years in jail.
Unmarked cigarettes held or transported except as permitted under the Act may be subject to forfeiture.
Where any person has possession of unmarked cigarettes, or sells, offers for sale or keeps for sale unmarked cigarettes, except as permitted under the Act, the Minister may assess the person a penalty in an amount up to $130 per carton.
The information in this bulletin is intended as a guide. If this bulletin does not completely address your particular situation, refer to the Tobacco Tax Act and related regulations, visit our website at ontario.ca/finance or contact:
Ministry of Finance
Client Services Branch
33 King Street West
Oshawa ON L1H 8H9