The difference between excise duties and excise taxes

For many products entering Canada, import charges extend beyond customs duties and taxes.

Certain goods can also be subject to excise duties and excise taxes, which are two separate charges that apply to different types of imports.

Although these terms are often used interchangeably, they’re not the same.

Excise duties apply to certain products that are subject to federal controls for health or consumption reasons, such as alcohol, tobacco, cannabis, and vaping products.

Excise taxes, on the other hand, target goods that are regulated for environmental or efficiency reasons, including petroleum products, fuel-inefficient vehicles, and air conditioners.

Because understanding excise duties and excise taxes is essential for accurate budgeting and compliance, this article defines each and outlines why they’re applied, how they’re calculated, and ways to stay compliant. 

What are excise duties?

Excise duties are federal charges that apply to specific imported goods, including cannabis, spirits, tobacco, vaping products, and wine, under the Excise Act, 2001 (and the Excise Act for beer).

These duties are administered by the Canada Revenue Agency (CRA) rather than the Canada Border Services Agency (CBSA).

They are a key part of your landed cost, and the amount owed depends on the product type and characteristics, such as alcohol content or volume.

Importers who deal in excise-controlled goods must be licensed or registered with the CRA and remit duties directly through periodic returns, unless a specific exemption applies.

What are excise taxes?

Excise taxes are federal taxes applied to specific goods at the time of import, based on rules set out under the Excise Tax Act.

These taxes apply to fuel-inefficient vehicles, automobile air conditioners, and certain petroleum products, and are collected by the CBSA at the time of import.

Excise taxes are separate from the Luxury Tax, which is a different charge that may also apply to the import of certain vehicles over $100,000.

The key differences between excise duties and taxes

Excise duties and excise taxes differ mainly in why they’re applied and how they’re calculated:

Excise duties

These duties are tied to how much of a product you import (volume, alcohol percentage, quantity). They function like a charge on consumption.

They are calculated on a per-unit basis, for example, per litre of alcohol, per cigarette, or per millilitre of vaping liquid. The total amount depends on the quantity and characteristics of the product (such as alcohol strength or volume).

Rates can be found on the excise duty rates page.

Excise taxes

On the other hand, these taxes are tied to the type and characteristics of the product itself (energy efficiency, design, specific features). They function like a targeted federal tax.

Excise taxes are based on fixed rates or set formulas that vary according to product features, such as a vehicle's fuel-efficiency rating or a flat fee for an air conditioner.  

Rates can be found on the excise tax rates page.

How to ensure compliance

Because excise duties are administered by the CRA, and excise taxes are assessed and collected by the CBSA, the compliance requirements are different for each.

Complying with excise duties

For excise duties, importers must meet specific licensing and reporting requirements:

• • Determine licensing needs: Before importing, you must verify whether you need an excise licence or registration.
  • File regular CRA returns: If you are licensed, you are required to file regular excise duty returns directly with the CRA.
  • Remit duty to the CRA: The excise duty is paid directly to the CRA based on the amounts calculated on your periodic returns. The duty is not paid to the CBSA at the border. 

Complying with excise taxes

For excise taxes, they are handled during the customs accounting process and require the following:

• • Classify your goods correctly: The correct HS code must be used. This code identifies whether your goods are subject to excise tax.
  • Declare accurate information: The excise tax fields must be correctly completed on your Commercial Accounting Declaration (CAD).
  • Pay to CBSA at import: The excise tax is assessed and calculated by the CBSA at the time of import, along with customs duties and GST/HST.

How Cole International can help

Excise duties and excise taxes may not affect every product, but for businesses importing alcohol, tobacco, cannabis, petroleum products, or certain types of vehicles, it’s crucial to understand how they work.

At Cole International, we offer trade consulting and customs brokerage services to help Canadian businesses navigate excise duty and tax obligations.

Our team works with importers every day to:

• Confirm whether their products are subject to excise duties and excise taxes
• Calculate the excise charges that apply to their imports
• Help prepare accurate customs accounting documents
• Streamline the entry of their goods into Canada

We don’t believe in guesswork. We get it right the first time.

If your business imports goods subject to excise duties or taxes, reach out to one of our trade professionals to ensure your obligations are met and your shipment moves through customs without delay.