Ontario continues to make progress in reducing smoking rates. It is determined to reduce the supply of low‑cost, contraband tobacco and aims to have the lowest smoking rates in Canada. The availability of contraband tobacco however, undermines the government's efforts in reducing smoking rates and protecting children and youth from the dangers of smoking.
Contraband cigarettes can be purchased for as little as a few dollars. The profits generated from contraband tobacco may also fuel other criminal activity, including trafficking of drugs, purchasing illegal weapons and funding other illicit activities.
Under the Tobacco Tax Act, unless otherwise authorized, it is illegal to buy, possess or distribute any quantity of untaxed or unregulated cigarettes or other tobacco products.
Recent action taken
Tobacco taxes are an effective way to reduce smoking rates, and prevent individuals, particularly youth, from starting smoking in the first place. Studies indicate that tobacco taxes are effective at reducing tobacco consumption. Effective February 26, 2016, Ontario increased the tobacco tax rate from 13.975 cents to 15.475 cents per cigarette (from $27.95 to $30.95 per carton of 200 cigarettes) and per gram of tobacco products other than cigarettes and cigars.
Stamps and markings on packaged cigarettes and fine cut tobacco show that Ontario’s tobacco tax has been accounted for on those tobacco products. Effective January 1, 2014, only packages of cigarettes and fine cut tobacco marked with a yellow 'ON DUTY PAID CANADA DROIT ACQUITTÉ' tobacco stamp (replacing the peach-coloured federal stamp) are allowed for sale to consumers required to pay tobacco tax. See the new stamp. The new stamp helps to clearly identify what cigarettes and fine cut tobacco are legal, and which are not.
The Ministry of Finance has also signed an information-sharing agreement with the Alcohol and Gaming Commission of Ontario. Now, retailers who sell illegal tobacco under the Tobacco Tax Act could have their lottery licences suspended or revoked.
The government continues to strengthen tobacco enforcement, which includes a raw leaf tobacco oversight system effective January 1, 2015. Ministry of Finance oversight of raw leaf tobacco will help provide comprehensive coverage of the tobacco supply chain, and provide greater opportunity to disrupt the diversion of raw leaf tobacco to contraband manufacturers.
The government also introduced legislation that amended the Tobacco Tax Act to increase fines for offences related to marked tobacco products, allow for the impoundment of vehicles used to transport contraband tobacco and strengthen other enforcement measures.
Addressing contraband tobacco
Combating underground economies, including contraband tobacco, is a priority for the Government of Ontario. These activities result in a loss of revenue that supports important programs for Ontarians and creates unfair competition for those businesses that comply with Ontario laws.
Ontario has introduced measures to strengthen enforcement against the illegal manufacture and sale of tobacco products, and the results of these actions include:
- since March 2008, penalties assessed against retailers violating the Tobacco Tax Act total more than $37 million
- since 2008, more than 252 million contraband cigarettes, 4.3 million untaxed cigars and 169 million grams of untaxed fine‑cut tobacco or other tobacco products have been seized by the ministry.
The government is committed to addressing the underground economy and the issue of contraband tobacco through a balanced approach of consumer awareness, enforcement and partnerships, which includes working with Crime Stoppers.
- Avoiding tobacco taxes erodes business competitiveness, and reduces the money available to fund vital programs for all Ontarians.
- Report contraband tobacco to Ontario Crime Stoppers at 1 800‑222‑8477, or by leaving an anonymous tip online.
The Ministry of Finance works closely with various law enforcement agencies such as the RCMP-led Cornwall Regional Task Force, local public health units and the Ontario Provincial Police to reduce the presence of contraband tobacco.
Enforcing Ontario's tobacco tax laws also complements the Smoke-Free Ontario Strategy.
What you need to know about contraband tobacco
Under the Tobacco Tax Act, unless otherwise authorized, it is illegal to buy, possess or distribute any quantity of untaxed cigarettes or any other untaxed tobacco products.
Packages of legal cigarettes and fine cut tobacco in Ontario are identified by the Ontario-adapted federal tobacco stamp:
This tobacco stamp contains security features and has a yellow background with the letters 'ON' in white and in black letters the words 'DUTY PAID CANADA DROIT ACQUITTÉ'.
Because the provincial and federal taxes add up to at least $55 per carton of 200 cigarettes, cartons sold for less than this are likely illegal.
Subject to certain limited exceptions, cigarettes and fine cut tobacco sold in packages without a legal ON DUTY PAID CANADA DROIT ACQUITTÉ tobacco stamp are illegal.
For example, cigarette packages with a peach-coloured federal stamp may be sold at authorized duty‑free stores. Some on-reserve retailers are also authorized to buy, from authorized wholesalers registered under the Tobacco Tax Act, limited quantities of cigarette packages with a peach‑coloured stamp. These packages are to be sold only on reserves to First Nation consumers who are Indians as defined under the federal Indian Act, for their own use.
Consequences of breaking the law
Without proper authorization under the Tobacco Tax Act, it is against the law to have any packages of cigarettes or fine cut tobacco that do not have a legal ON DUTY PAID CANADA DROIT ACQUITTÉ tobacco stamp. Consequences include civil penalties, and, if charged and convicted of an offence, possible fines, jail time or both. Packages of cigarettes that do not have the tobacco stamp are unmarked cigarettes.
If you are convicted of possessing unmarked cigarettes you may be fined three times the tax on the unmarked cigarettes you possessed plus:
- a fine of $100 if you possessed 200 unmarked cigarettes or less
- a fine of $250 if you possessed more than 200 unmarked cigarettes but less than 1,001
- a fine of $500 if you possessed more than 1,000 unmarked cigarettes but less than 10,001
- a fine of not less than $500 and not more than $10,000 if you possessed more than 10,000 unmarked cigarettes.
In addition, if it is not your first conviction for possessing unmarked cigarettes or if you are in possession of more than 10,000 unmarked cigarettes you may be sentenced to up to two years in jail.
For tobacco retailers
Tobacco retailers must:
- sell only legal tobacco products
- have a valid tobacco retail dealer’s permit or a retail sales tax vendor’s permit
- only buy tobacco products from tobacco wholesalers who are registered with Ontario. You can see which wholesalers are registered by getting the current Tobacco Tax Registrant List on the Ministry of Finance website. Please subscribe to receive e-alerts about tobacco tax and other topics from the Ministry of Finance
- keep, records and books of account for all tobacco product purchases and sales for seven years at their principal place of business
- not sell tobacco products to a person less than 19 years old
- require ID from anyone that appears to be less than 25 years old
- post applicable health warning and age restriction signs
- sell legal packages of cigarettes and fine cut tobacco that are marked with the ON DUTY PAID CANADA DROIT ACQUITTÉ tobacco stamp.
Tobacco retailers found selling contraband tobacco may be subject to penalties, fines, imprisonment, and may be banned from selling tobacco or lottery products.