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What Is an Excise Duty?

An excise duty amounts to a tax charged on some Canadian products, including wine, spirits, and tobacco. Unlike Canadian GST that requires consumers to pay taxes on products on top of the purchase price, products incur excise duty at the point of manufacture before they reaches customers’ hands. If you run a small business that produces wine, spirits, or tobacco, you include the excise duty in the price of your products.

An Example of an Excise Duty Levied on Goods

When your business produces a bottle of Canadian wine, for example, the Canada Revenue Agency places an excise duty of 63.9 cents per litre of wine that contains 7% ethyl alcohol or more by volume. If your wine contains more than 1.2% but less than 7% alcohol by volume, the excise duty comes to 30.6 cents per litre.

In this instance, you figure out excise duty based on how many litres of wine you produce overall and then divide that by the bottles you send to market. Alternatively, you can increase the price per bottle based on the bottle’s size, which is typically 750 millilitres or 3/4 of the excise duty amount. Keep in mind that the CRA adjusts excise duties annually, so the amount you pay this year may be different from what you pay next year.

How an Excise Duty Affects Your Business

To cover the excise duty levied on your products, you may need to adjust prices to compete with products imported from other countries with lower excise duties. Pricing affects how you export your Canadian-made spirits, wine, or tobacco because wine from Australia or France may cost less depending on how those countries levy excise duties on their own goods. The domestic market, though, may remain more competitive as non-Canadian producers may pay an import duty for their goods.

QuickBooks Online can help you track expenses and income, giving you insight into making price adjustments on your goods. Monthly customized reports simplify calculating the correct excise duty amounts so your business stays compliant with Canadian tax law. QuickBooks Online can also help you maximize your tax deductions. Keep more of what you earn today.

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