MARIJUANA: A Growing Industry

As the legislation to legalize marijuana for non-medical purposes works its way through parliament (Bill C-45 entered the Senate phase on November 27, 2017), producers, vendors, regulators, enforcement, and potential customers are seriously considering the implications. Although it has been expected legalization would occur by July, 2018, the timeline is not certain (as the Senate has recently been scrutinizing draft legislation and other stakeholders have noted concerns).

Where are we at from a tax perspective?

The exact allocation, rates, and method for taxation are dependent on the final legislation.

 

Where will it be retailed?

While retailing cannabis will vary across the country, many provinces are currently looking to either sell, or at least regulate sales through provincial liquor boards or commissions.

For example, in Ontario, the Liquor Control Board of Ontario (LCBO) itself will oversee the sale and distribution of recreational cannabis through a subsidiary corporation. Standalone stores, which would not also sell liquor, will be set up and online distribution will be made available. Approximately 150 standalone locations are expected to be open by 2020.

In Alberta, in-person sales are planned to occur through private corporations but regulated provincially, while on-line sales will be conducted directly by the province.

Most provinces/territories are still working out the details.

 

Getting compliant?

CRA has significant, and rapidly improving tools for detecting the underground economy. In addition, they have methods for estimating yields and unreported income having to do with grow operations.

If one wanted to get compliant and onside with CRA, a voluntary disclosure may be made. However, it is important to note that the Voluntary Disclosure Program is changing March 1, 2018 such that reduced relief will apply in some cases, and no relief will be available in others.

 

Action Point: Monitor provincial/territorial regulations to determine if your industry will be impacted.

 

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a blog such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this blog accepts any contractual, tortious, or any other form of liability for its contents.

For any questions… give us a call.

UNDERGROUND ECONOMY: Contractors, Online Sales, Farmers Markets…

In recent years, CRA has particularly focused on tracking underground economy activities. One way they are doing this is by obtaining information from key 3rd parties.

For example, recently CRA obtained details from contractor credit applications submitted to Rona. Consider the type of information that Rona would have: name, address, and other specifics that would help determine whether credit should be given. Presumably CRA could compare information reported on a credit application to the contractors’ tax returns.

CRA has also recently obtained information from Square Canada. Many smaller vendors accept payment by swiping the customer’s credit card through a little square plastic device connected to the audio jack of a phone or IPad. Square Canada provides this payment processing device, a Square Reader. Through a Federal Court Order issued to Square Canada, CRA obtained identifying vendor information and sale details associated with individuals or entities using these devices. The information request primarily focused on those with annual revenues of $20,000 or greater, for the 2012-2015 and part of the 2016 year.

It would not be unreasonable to expect that CRA could obtain similar information from other websites, web-based apps and organizations.

 

Action Item: Make sure to bring in all related sales information for discussion at tax time. Sales may, or may not, be taxable depending on the specifics of your case.

 

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a blog such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this blog accepts any contractual, tortious, or any other form of liability for its contents.

For any questions… give us a call.

Marsha MacLean Professional Corporation