Tax Collection Method for Cigars
Cigar sales made by collection officers who are wholesale vendors
A collection officer who sells cigars at wholesale to a retail vendor must collect the 80% tobacco tax in advance, calculated on the taxable price of the cigars, and remit the tax to the Minister of Revenue, in accordance with the Tobacco Tax Act.
The taxable price of a cigar on which the collection officer who sells at wholesale must calculate and collect the tobacco tax is the sale price paid for the cigar by the retail vendor, increased by 20%.
Example 1 shows how to calculate the taxable price of cigars when a collection officer sells a package of 20 cigars to a retail vendor.
| Item | Details | Amount | |
|---|---|---|---|
| Total before GST ($5.75 + $5.80) | $11.55 | ||
| Sale price | Collection officer's sale price | $5.75 | |
| Calculation of the tax | Amount equal to the GST1 (5%) | + | $0.292 |
| Subtotal | = | $6.04 | |
| Price of each cigar before increase ($6.04 / 20 cigars) | $0.302 | ||
| Increase ($0.302 × 20%) | + | $0.0604 | |
| Subtotal | = | $0.3624 | |
| Applicable tax per cigar3 ($0.3624 × 80% = $0.28992, rounded to $0.29) | $0.29 | ||
| Amount of the tobacco tax to be collected in advance on a package of 20 cigars ($0.29 × 20 cigars) | $5.80 | ||
- Section 2 of the Tobacco Tax Act.
- A fraction equal to or greater than one half-cent is deemed equal to one cent.
- The tobacco tax must be calculated on every cigar, and any fraction of one cent of the tobacco tax must be treated as one cent.
Cigar sales made by collection officers who are retail vendors
A collection officer can also make retail sales of cigars, making the collection officer a retail vendor. In this case, the collection officer does not have to pay suppliers the tobacco tax in advance for the cigars purchased.
However, a collection officer who sells cigars to another retailer must collect in advance the applicable tobacco tax based on the taxable price. A sample calculation is shown in Example 1 (above).
A collection officer who sells cigars to consumers must collect the tobacco tax and remit it to the Minister of Revenue, in accordance with the Tobacco Tax Act. Note that the taxable price of cigars on which the tobacco tax of 80% must be calculated is the price that the collection officer paid to the supplier, increased by 20%.
Example 2 shows how to calculate the taxable price of cigars when a collection officer sells cigars to a consumer.
| Total before GST | = | $12.20 | ||
|---|---|---|---|---|
| Sale price to the consumer | $8.00 | |||
| Supplier's price to the collection officer | $4.00 | |||
| Amount equal to the GST ($4 × 5%) | + | $0.20 | ||
| Subtotal | = | $4.20 | ||
| Price of each cigar before increase ($4.20/20 cigars) | $0.21 | |||
| Increase ($0.21 × 20%) | + | $0.042 | ||
| Subtotal | = | $0.252 | ||
| Applicable tax per cigar ($0.252 × 80% = $0.2016, rounded to $0.21) | $0.21 | |||
| Amount of the tobacco tax to be collected on a package of 20 cigars ($0.21 × 20 cigars) | + | $4.20 | ||
Cigar sales made by importers or manufacturers
Importers or manufacturers who sell cigars imported or manufactured by them directly to the consumers must also collect the tobacco tax of 80% of the taxable price of a cigar, and remit the tax to the Minister of Revenue, in accordance with the Tobacco Tax Act. Note that the taxable price of cigars is the price at which the cigars were sold to the consumer.
Example 3 shows how to calculate the taxable price of cigars when an importer or a manufacturer sells cigars to a consumer.
| Total before GST | = | $13.00 | ||
|---|---|---|---|---|
| Sale price to the consumer | $7.00 | $7.00 | ||
| Amount equal to the GST ($7 × 5%) | + | $0.35 | ||
| Subtotal | = | $7.35 | ||
| Price of each cigar ($7.35/20 cigars) | $0.3675 | |||
| Applicable tax per cigar ($0.3675 × 80% = $0.294, rounded to $0.30) | $0.30 | |||
| Amount of the tobacco tax to be collected on a package of 20 cigars ($0.30 × 20 cigars) | + | $6.00 | ||