How Cannabis Excise Tax Works in Ontario

Canada taxes cannabis in layers. The producer pays federal excise duty, a share of it goes to the province, and you pay 13% HST on the shelf price in Ontario. Only the last layer shows up on your receipt, which is why the rest is easy to miss.

This article walks through each layer with the numbers the Canada Revenue Agency publishes, shows how the “higher of” rule works with a worked example, and covers the one tax break that ordinary consumers can actually use: the medical expense claim for cannabis bought under a medical document.

Two duties, one product

Federal cannabis duty is set out in the Excise Act, 2001. It applies to licensed producers, not to shoppers. The producer owes the duty and prices it into what it charges retailers, and retailers pass it along. By the time a pre-roll pack reaches a store counter, the duty is already part of the wholesale price.

There are actually two duties. The first is the base cannabis duty, which the federal government keeps. The second is the additional cannabis duty, which the CRA collects and sends to the province or territory where the product is delivered. Manitoba is the one exception on the CRA pages, since the additional duty does not apply there.

The idea behind the split dates from the original 2017 framework from the Department of Finance. It said the combined federal and provincial tax should not go above $1.00 a gram or 10% of the producer’s sale price, and that the room should be shared equally. That original proposal was 50 cents a gram or 5% for each level of government. The rates now published by the CRA use a different split for the federal part and the provincial part, but the combined ceiling is the same: $1.00 a gram or 10%.

The “higher of” rule for dried cannabis

For dried and fresh flowering cannabis, a licensee works out two amounts and pays whichever is larger. One is a flat rate per gram. The other is a percentage of the dutiable amount, which is roughly the price the producer charges. The CRA rates for products made in Canada are these.

• Base duty on flowering material: the higher of $0.25 a gram or 2.5% of the dutiable amount.
• Additional duty in Ontario: the higher of $0.75 a gram or 7.5% of the dutiable amount, before an adjustment that applies to deliveries in Ontario, Alberta, Nunavut and Saskatchewan.

Add the two together and you get the $1.00 or 10% ceiling. The flat rate matters most when the wholesale price is low, and the percentage matters when the price is high.

Here is where the switch happens. Ten percent of $10 is $1.00. So at a producer price of exactly $10 a gram, both methods give the same result. Below that price, the flat $1.00 is larger. Above it, the percentage wins.

Take a producer selling a gram at $4. Ten percent is $0.40, which is less than the flat amount, so the duty is $1.00 a gram, or 25% of the price. Now take a premium gram sold at $12. Ten percent is $1.20, so that is the duty, and it works out to exactly 10% of the price. Cheaper product carries a heavier tax burden in relative terms. That is the reason small producers who sell at low prices often complain about the flat rate.

Non-flowering material such as leaves and stalks has its own lower flat rates: $0.075 a gram base duty and $0.225 a gram additional duty. Seeds and plants are charged per unit, at $0.25 each for the base duty and $0.75 each for the additional duty.

How edibles, extracts and topicals are taxed

Products other than dried cannabis are not taxed by weight or price. The duty depends on how much THC they contain. That makes sense, because a gram of oil and a gram of flower are nothing alike in strength.

The CRA sets a base duty of $0.0025 for each milligram of THC in the product, and an additional duty of $0.0075 a milligram in Ontario. Together that is one cent per milligram. There is no percentage alternative for these products, so no “higher of” test applies.

A quick example. A vape cartridge holding 800 milligrams of THC carries $8.00 in combined duty (800 times $0.01). Of that, $2.00 is the base duty and $6.00 is the additional duty that goes to Ontario. A gummy with 10 milligrams of THC carries ten cents.

Whether a product is a flower, an oil or a chocolate, the duty has to be worked out again for every batch. Licensees track both duties transaction by transaction, according to the CRA guidance.

When the duty is due

The two parts of the duty are triggered at different moments. For dried cannabis, the flat-rate duty is applied when the product is packaged, based on the quantity. The percentage duty is applied when the product is delivered to a purchaser, based on value. Under CRA guidance, the cannabis duty and the additional cannabis duty are payable when the licensee delivers the products to a purchaser.

In practice, this means the producer carries the cost first. It buys the stamps, pays the duty at delivery and recovers the money through its price list. An Ontario retailer, whether the Ontario Cannabis Store or a private shop, then buys product at a price that already includes those amounts.

Excise stamps

Legal packaged cannabis in Canada carries an excise stamp. The stamp shows that the product was made by a licensee and that duty has been dealt with. Licensees buy stamps from the CRA’s authorized stamp provider.

The price of a stamp is small and is set on a schedule. The CRA lists $0.0070149 a stamp for October 2025 to September 2026, with scheduled increases through 2034. That is well under a cent. Compare it with the duty on a gram of flower and you can see the stamp is a control measure more than a revenue source.

What happens at the till in Ontario

The retail price you see is the producer’s price plus the retailer’s margin plus the duties already baked in. Then the sale itself is taxed. Ontario’s HST is 13%, made up of the federal part and the provincial part, and it applies to cannabis like most other goods.

Say a pack of pre-rolls is priced at $30 before tax. HST adds $3.90, so you pay $33.90. The duty is not a separate line. It sits inside the $30.

Notice that HST is charged on a price that already contains duty. Yes, that means a tax on a tax. The excise duty is treated as a cost of the product, and the HST is figured on the full selling price. The same happens with alcohol and tobacco. You can check how HST works on a purchase with the GST and HST calculator.

For a rough idea of the tax share in a cheap product, use the $4 a gram example from above. If a retailer marks that gram up to $8, the $1.00 in duty is 12.5% of the shelf price, and HST comes on top of that. Actual shop prices vary a great deal, so treat this as arithmetic and not as a typical figure. No official source gives an average tax share of a dispensary receipt, and none is claimed here.

Claiming medical cannabis on your return

Regular shoppers cannot deduct cannabis. Patients with a medical document can. The CRA lists cannabis, cannabis oil, cannabis seeds and other cannabis products among eligible medical expenses when they are bought for medical purposes from a licence holder that sells for medical purposes. You must be registered as a client of that seller, and you need receipts.

The claim goes on line 33099 or 33199 of the federal return. The CRA rule for medical expenses is that you can claim the total you paid minus the lesser of 3% of your net income or a fixed dollar amount set each year. Check the CRA page for the current dollar amount.

A worked case with round numbers. Suppose net income is $50,000, so 3% is $1,500. If the fixed dollar amount for the year is higher than $1,500, the $1,500 is the lesser figure. With $2,400 in eligible medical expenses, of which cannabis is part, the claimable amount is $900. That amount then earns a federal credit at the lowest bracket rate, 14%, which is about $126, plus an Ontario credit at 5.05%, about $45. The actual result depends on your whole return.

To see how medical costs sit inside the wider set of credits, try the tax credits calculator. For tax at each bracket, use the income tax calculator.

Recreational purchases do not qualify. Shops that sell only recreational cannabis, such as Ontario’s licensed retail stores, are not licence holders for medical sales, so those receipts do not count.

The Ontario adjustment

The CRA notes that for products delivered to Alberta, Nunavut, Ontario and Saskatchewan, an adjustment to the additional cannabis duty applies. For Ontario the CRA rates page shows a 3.9% adjustment applied to the base amount or dutiable amount. In plain terms, the provincial part is modified by a small factor. The CRA page does not explain the reason in the summary table, so none is guessed here.

The details of the formula sit in the Excise Duty Memorandum EDM6-3. This article does not reproduce them, because a shopper cannot use them and a licensee needs the official text and not a summary. What matters here is that the round numbers used above, $1.00 a gram and 10%, are the ceiling described in the framework, and the exact duty on a real delivery to Ontario can differ slightly because of the adjustment.

So treat every figure in this article as a way to see the size and shape of the tax. Do not use them to file anything.

A worked comparison of two products

Compare a 3.5 gram pack of dried flower with a bottle of oil. The flower has a producer price of $4 a gram, so 3.5 grams carry $3.50 of combined duty, because the flat rate of $1.00 a gram beats 10% of $4. If the oil holds 1,000 milligrams of THC, the combined duty is $10.00, and the producer price plays no part in the calculation at all.

Suppose the flower pack sells for $28 and the oil for $60, both before HST. HST is $3.64 on the flower and $7.80 on the oil. The shopper pays $31.64 and $67.80. The duty share of the pre-tax shelf price is 12.5% for the flower ($3.50 of $28) and about 16.7% for the oil ($10 of $60). Those prices are invented for the example, only to show how the method works. Real shelf prices differ by brand and by store.

The lesson is small but useful. With flower, a higher producer price does not raise the duty until it passes $10 a gram. With oil, only the strength counts. A pricey oil with low THC carries very little duty. A cheap, strong one carries a lot. See also the PST / QST Sales Tax calculator, and the full set of tax calculators.

Sources

• CRA, excise duty rates
• CRA, how to calculate the cannabis duty and additional cannabis duty on your sales
• Department of Finance, at a glance: cannabis taxation (2017)
• CRA, lines 33099 and 33199, eligible medical expenses

Common questions

Last reviewed: September 29, 2026. Figures come from the official sources listed above. How we check the numbers and our editorial policy.