Excise tax in Canada is a federal charge applied to specific goods rather than to spending in general. It sits on top of ordinary sales tax and is built into the shelf price of things like gasoline, alcohol, tobacco, cannabis, vaping products, fuel-inefficient vehicles, and certain luxury purchases. Most rates are set per unit, so the tax scales with how much of the product you buy rather than with its price.
Two Frameworks: Excise Taxes and Excise Duties
Canada actually runs two overlapping systems. Excise taxes under the Excise Tax Act apply to petroleum products, fuel-inefficient vehicles, and automobile air conditioners. Excise duties under the Excise Act (beer) and the Excise Act, 2001 (spirits, wine, tobacco, cannabis, and vaping products) cover the regulated goods most people think of first.1Canada Revenue Agency. Excise Duties Technical Information
The difference matters for manufacturers and importers, who need different licences depending on which regime governs their product. For a shopper, both work the same way: a fixed dollar amount per litre, per gram, or per unit, embedded in the retail price before you see it.
Rates on Alcohol
Spirits carry the steepest excise duty at $14.117 per litre of absolute ethyl alcohol, effective April 1, 2026. Wine is tiered by alcohol content, ranging from $0.022 per litre for wine at 1.2% alcohol or less up to $0.745 per litre for wine above 7% alcohol.2Canada Revenue Agency. Excise Duty Rates Wine made entirely from Canadian honey or apples is exempt, and non-alcoholic wine containing 0.5% alcohol or less is not dutiable. Beer duties fall under the older Excise Act and are also charged by volume.3Department of Justice Canada. Excise Act, 2001 (S.C. 2002, c. 22) All alcohol duty rates are adjusted for inflation each year.
Rates on Tobacco and Vaping
As of April 1, 2025, cigarettes carry an excise duty of $0.95391 per five cigarettes (or fraction thereof) in a package. Manufactured tobacco other than cigarettes and tobacco sticks is charged $11.92379 per 50 grams.4Canada Revenue Agency. EDN101 Adjusted Rates of Excise Duty on Tobacco Products Effective April 1, 2025 These rates rise annually.
Vaping products are charged $1.12 per 2 mL (or fraction thereof) for the first 10 mL in a container, then $1.12 per 10 mL for anything above that. Provinces that participate in the coordinated vaping duty framework add a matching duty on top, which effectively doubles the charge in those provinces.5Government of Canada. Calculating Excise Duty on Vaping Products
Rates on Cannabis
Cannabis duty uses a hybrid structure. For dried and fresh cannabis, producers calculate both a flat-rate duty (for example, $0.25 per gram of flowering material) and an ad valorem duty of 2.5% of the dutiable amount, then pay whichever is greater. Cannabis extracts, edibles, and topicals are taxed only at a flat rate of $0.0025 per milligram of total THC.2Canada Revenue Agency. Excise Duty Rates Coordinating provinces collect an additional cannabis duty on top of the federal amount.
Rates on Fuel
Federal excise tax on unleaded gasoline is $0.10 per litre. Diesel and aviation fuel (other than aviation gasoline) are taxed at $0.04 per litre. Leaded gasoline and leaded aviation gasoline carry $0.11 per litre.6Canada Revenue Agency. Current Rates of Excise Taxes Provincial fuel taxes add roughly $0.07 to $0.16 per litre on top, depending on where you fill up.
Fuel-Inefficient Vehicles and Air Conditioners
Passenger vehicles with poor fuel economy face a graduated excise tax based on their weighted fuel consumption rating, calculated as 55% city and 45% highway consumption in litres per 100 kilometres. The tax starts at 13 L/100 km:7Department of Justice Canada. Excise Tax Act (R.S.C., 1985, c. E-15) – Schedule I
- 13 to under 14 L/100 km: $1,000
- 14 to under 15 L/100 km: $2,000
- 15 to under 16 L/100 km: $3,000
- 16 L/100 km or more: $4,000
Pickup trucks, vans seating 10 or more passengers, ambulances, and hearses are excluded. Automobile air conditioning units installed in taxable vehicles carry a separate excise charge under the Excise Tax Act.6Canada Revenue Agency. Current Rates of Excise Taxes
Air Travellers Security Charge
Airline tickets for flights departing Canadian airports carry a separate federal levy, the Air Travellers Security Charge, which funds aviation security. Domestic flights are charged approximately $9.46 to $18.92, flights to the continental United States run about $16.08 to $33.77, and other international flights carry a flat $34.42.8Canada Revenue Agency. Air Travellers Security Charge (ATSC) Rates The exact amount depends on whether GST/HST applies and where the ticket was bought. A round-trip domestic flight with a stopover can be charged twice.
The Federal Luxury Tax
Since September 1, 2022, the Select Luxury Items Tax Act has imposed a federal tax on expensive vehicles, aircraft, and vessels.9Justice Laws Website. Select Luxury Items Tax Act It applies only when the price exceeds $100,000 for a vehicle or aircraft, or $250,000 for a vessel.10Canada Revenue Agency. LTN2 Subject Vehicles Under the Select Luxury Items Tax Act
The tax owed is the lesser of two amounts: 10% of the full sale price, or 20% of the amount above the threshold.9Justice Laws Website. Select Luxury Items Tax Act That formula softens the hit on purchases just above the threshold. A $120,000 vehicle owes the lesser of $12,000 or $4,000, so the tax is $4,000. A $300,000 vehicle owes the lesser of $30,000 or $40,000, so the tax is $30,000. The vendor or importer collects and remits.
What Businesses Owe
If you produce or import excisable goods, you generally need a CRA licence before you can operate. Manufacturers of fuel, fuel-inefficient vehicles, or automobile air conditioners need a manufacturer’s “E” licence once annual sales of taxable goods cross $50,000; below that threshold you qualify as a small manufacturer and no licence is required.11Canada Revenue Agency. Excise Taxes and Special Levies Memoranda Series The tax obligation starts the moment sales cross the line in a calendar year.12Justice Laws Website. Small Manufacturers or Producers Exemption Regulations Failing to register when required is an offence carrying a fine of up to $1,000, plus back taxes, penalty, and interest. Wholesalers can also apply for a “W” licence that defers tax until goods leave for a non-licensed buyer.
Producers under the excise duty regime need product-specific licences: spirits, wine, tobacco, cannabis, or vaping.13Canada Revenue Agency. The Excise Duty Program Spirits and tobacco licensees must post financial security starting at $5,000, scaling to $2 million for spirits and $5 million for tobacco.14Canada Revenue Agency. Financial Security Requirement for Producers or Packagers of Spirits, Manufacturers of Tobacco Products and Prescribed Persons That Import Tobacco Products Wine, cannabis, and vaping licensees do not post security.
Calculating what you owe is usually a matter of multiplying the rate by the quantity produced or sold: per litre for fuel and spirits, per five cigarettes for smokes, per milligram of THC for cannabis extracts, and so on. Cannabis flower is the outlier because you calculate both the flat and ad valorem amounts and pay the greater.2Canada Revenue Agency. Excise Duty Rates The standard reporting period is a fiscal month, and the return and payment are due by the last day of the following month.15Canada Revenue Agency. X6-2 Returns and Payments A May liability is due June 30. For mailed payments, the CRA counts the arrival date, not the postmark.
Penalties for Late Filing
A late return triggers an automatic penalty of 1% of the unpaid amount, plus 0.25% for each complete month the return remains late, capped at 12 months.16Department of Justice Canada. Excise Tax Act (R.S.C., 1985, c. E-15) A return filed 12 months late therefore carries a 4% penalty on top of the tax owed. Interest also runs on overdue amounts; the prescribed rate for Q2 2026 is 7%, and it compounds daily.17Canada Revenue Agency. Interest Rates for the Second Calendar Quarter Because penalty and interest run at the same time, filing on time is worth doing even in a month you can’t pay the full balance.