Spirits Taxes

The 2016 Fall Budget Bill amended the Alcohol and Gaming Regulation and Public Protection Act, 1996 to provide that as of July 1, 2017, purchases of spirits and spirits coolers from stores operated by a spirits manufacturer are subject to a basic tax, a volume tax and an environmental tax. For the purpose of this publication, 'spirits' includes 'spirits coolers'.

Who pays spirits taxes?

If you buy spirits made by Ontario spirit manufacturers (distillers) and sold from a distillery retail store in Ontario, you pay tax on those beverages.

Spirits tax is included in the price you pay for the beverage.

If you purchase these beverages from the Liquor Control Board of Ontario (LCBO) you do not pay spirits taxes on those beverages.

Tax rates

Spirits

Spirits taxes include:

  • spirits basic tax
  • volume tax
  • environmental tax (if applicable).

Environmental tax

The environmental tax is 8.93 cents for each non refillable container in which the spirits bought is packaged.

Spirits volume tax

The spirits volume tax is calculated based on the volume of spirits bought and the rate depends on whether the beverage is spirits or a spirits cooler:

Type of product Spirits volume tax rate
Spirits 38 ¢/L
Spirits cooler 28 ¢/L

For example, on a 750mL bottle of spirits sold at a distillery retail store, the spirits volume tax would be 0.750L × $0.38/L = $0.285.

Spirits basic tax

The spirits basic tax is calculated as a percentage of the retail price of the spirits bought. The retail price is the price set for the spirits by the LCBO (or the distillery, if the LCBO has not set a price), less the total of:

  • any deposit on the container, and
  • all taxes imposed on the purchase of the beverage under
    • Part IX of the Excise Tax Act (Canada) (i.e., the harmonized sales tax), and
    • Alcohol and Gaming Regulation and Public Protection Act, 1996 (i.e., the spirits tax).

The tax rate that applies to the retail price of the spirits is 61.5 per cent of the retail price of the spirits.

Example calculation for a 0.75L bottle of spirits with a final retail selling price of $39.95.

Step Instruction Running tally/calculation
1. Deduct container deposit in respect of the bottle ($0.10 per container more than 0.1L up to 0.63L and $0.20 per container more than 0.63L).

  • Container deposit amount = $0.20/container X 1 container = $0.20.
$39.95 - $0.20 = $39.75
2. Deduct Harmonized Sales Tax in respect of the purchase of the bottle, rounded to the nearest cent (HST rate is currently 13%):

  • HST on bottle = ($39.75/1.13) X 0.13 = $4.5730,
    rounded to nearest cent = $4.57.
$39.75 - $4.57 = $35.18 =
basic price of the bottle.
3. Deduct environmental tax in respect of the purchase of the bottle ($0.0893 per container).

  • Environmental tax on bottle = $0.0893/container X 1 container = $0.0893.
$35.18 - $0.0893 = $35.0907
4. Deduct volume tax in respect of the purchase of the bottle ($0.28 per litre for spirits cooler and $0.38 per litre for non-spirits cooler):

  • Volume tax on bottle = $0.38/L X 0.75L = $0.2850.
$35.0907 - $0.2850 = $34.8057
5. What remains is the retail price of the bottle including the basic tax.

To deduct the basic tax in respect of the purchase of the bottle, it must be backed out from the amount:

  1. Add 1 to the basic tax rate that applies to the spirits or spirits cooler (61.5 per cent): 1 + 61.5% = 1.615.
  2. Divide the result in Step 4 by the result in Step 5.1. above.
$34.8057/1.615 = $21.5515 =
retail price of the bottle.

(To obtain the spirits basic tax on the bottle, multiply the retail price by the basic tax rate, e.g., $21.5515 X 0.615 = $13.2542 = spirits basic tax on the bottle).

 

Collection of tax by Ontario distilleries

An Ontario distiller collects the spirits taxes and amounts on account of the spirits taxes on the spirits it distributes in Ontario and must report and remit them to the Ministry of Finance. The reporting period is monthly and the return and tax remittance must be received by the 20th day of the next month.

Filing a spirits tax return

Learn how to complete your spirits tax return.

Information about filing requirements, supporting schedules, penalties for late filing and failure to remit tax collected or payable and payment information for remitting the tax is also provided.

When Ontario distillers are deemed to be buyers of their own products

A distiller is deemed to be the buyer of the spirits it distributes in Ontario without charge and must pay the spirits taxes on that spirits. If a distiller provides samples of spirits at a charge and the charge does not cover all of the spirits taxes associated with that sample, the distiller is deemed to be the buyer of the sample to the extent of the shortfall and must pay the shortfall in the spirits taxes for that sample.

Limited exemption for Ontario distillers

A distiller can claim a limited exemption from the spirits taxes on up to 1,250 litres of spirits per corporate family per annual period beginning on July 1 for spirits distributed in Ontario without charge for promotional purposes.

Read on: Promotional Distribution Exemption: Ontario Spirits Manufacturers

Tax‑included pricing

The purchase price of all spirits sold at distillery retail stores must include all spirits taxes payable.

Distillers must provide information on the amount of the spirits taxes included in the price in a manner approved by the Minister of Finance.

Read on: Tax‑Included Pricing and Requirements for Spirits Manufacturers

Alcohol licensing

The Alcohol and Gaming Commission of Ontario (AGCO) and LCBO are responsible for the general regulation of the beer, wine and spirits industries in Ontario, including the licensing of alcohol manufacturers and authorizing of retail stores.

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