Understanding Alcohol Tax by Province in Canada

Each Canadian province/territory has its own alcohol tax system.

The following are brief descriptions of the alcohol retail sales tax rates in some Canadian provinces:

Province/Territory Retail sales tax
Alberta Spirits:
$18.33 markup tax/liter (greater than 60% alc/vol)
$13.76 markup tax/liter (between 22% and 60% alc/vol)
Beer: $1.25 markup tax/liter (less than or equal to 11.9% alc/vol)
Wine: $3.91 markup tax/liter (less than or equal to 16% alc/vol)
See full breakdown here.
BC 10%
Quebec Beer: $0.36 markup tax/liter
Other alcoholic beverages: $0.72 markup tax/liter
Manitoba Flat-rate markup between $1.16 and $60.37, depending on alc/vol
New Brunswick 5%
Ontario 6.1% (Ontario wine purchased at retail store)
20.1% (Non-Ontario wine purchased at retail store)
11.1% (Ontario wine purchased from boutique)
26.6% (Non-Ontario wine purchased from boutique)
61.5% (Spirits)
Prince Edward Island 25%
Saskatchewan 10%
Yukon 12%

The alcohol tax rates in each province are influenced by various factors, including government revenue goals, public health concerns, alcohol consumption rates, competitiveness with neighboring provinces, and economic considerations.

These factors play a crucial role in determining the tax rates on different types of alcoholic beverages.

Understanding Alcohol Tax in Canada

Understanding alcohol tax in Canada is important for consumers and businesses in the alcohol industry.

Each province can set its own tax rates and structure.

The tax is based on the alcohol content of the beverage, such as beer, wine, or spirits.

Higher alcohol content typically results in higher tax rates.

The tax is usually included in the retail price, so there is no separate tax at checkout.

If you want to save money on alcohol, consider purchasing from provinces with lower tax rates or exploring local craft breweries or wineries that may offer competitive prices.

As long as you are purchasing alcohol for personal consumption and not for resale or commercial use, you can buy alcohol from another Canadian province or territory and bring it back to yours without any additional taxes or restrictions.

Factors Influencing Alcohol Tax Rates

When it comes to alcohol tax rates in Canada, several factors come into play.

From government revenue to public health concerns and alcohol consumption rates, these factors shape the taxation policies in each province.

Additionally, competitiveness with neighboring provinces and economic considerations contribute to the complex decision-making process.

Government Revenue

Government revenue plays a crucial role in determining alcohol tax rates in Canada.

The government heavily relies on revenue generated from alcohol taxes to support various public services.

In order to maximize government revenue, alcohol tax rates are carefully adjusted based on the economic considerations of each individual province.

Provinces with high demand or significant alcohol consumption rates may implement higher tax rates.

On the other hand, provinces with lower consumption or smaller populations may opt for lower tax rates to remain competitive and ensure a continuous flow of revenue.

Public Health Concerns

Public health concerns play a significant role in determining alcohol taxes in Canada.

By implementing higher tax rates, particularly on spirits, the aim is to reduce excessive consumption and prevent negative health outcomes.

Spirits are typically taxed more heavily than wine, beer and coolers due to the “social” nature of these drinks.

Fact

A study by the Canadian Centre on Substance Abuse estimates that alcohol-related harm costs Canada about $14.6 billion annually, including healthcare expenses and lost productivity.

Alcohol Consumption Rates

Alcohol consumption rates in Canada significantly influence alcohol taxes and policies.

These rates differ among provinces and territories, impacting government decisions regarding taxation and regulation.

When determining tax rates and regulations, policymakers take into account these consumption rates.

Higher rates may indicate the necessity for stricter policies to mitigate harm, whereas lower rates may suggest more moderate approaches.

Competitiveness with Neighboring Provinces

Competitiveness with neighboring provinces is crucial in determining alcohol tax rates in Canada.

The government aims to balance revenue generation with competitiveness.

To stay competitive, provinces must consider neighboring provinces’ alcohol tax rates.

If the tax rates are significantly lower in a neighboring province, it can encourage consumers to buy alcohol there instead.

This can result in revenue loss for provinces with higher tax rates.

Competitiveness with neighboring provinces also affects the local alcohol industry.

Higher tax rates may lead to increased prices for consumers, negatively impacting the competitiveness of local alcohol producers and retailers.

It can also decrease sales as consumers choose to buy alcohol from neighboring provinces with lower tax rates.

Fact

The average sales tax rate on alcohol in Canada falls within the 20-30% range (Source: Canada.ca).

Friends at table toasting drinks

Frequently Asked Questions

  • What is the percentage of government taxes on alcoholic drinks in Canada?
  • How are liquor taxes calculated in Canada?
  • Liquor taxes in Canada vary by province and can be calculated based on tax rate percentage, volumetric liquor tax, or flat-rate liquor tax. Each province has its own specific liquor tax rates.

  • Do higher liquor taxes reduce consumption?
  • Yes, higher liquor taxes have been shown to reduce liquor consumption. The official justification for high liquor taxes in Canada is to reduce liquor consumption and promote harm reduction.

  • What are some strategies to save money on alcohol despite the tax hike?
  • To save money on alcohol, consumers can consider purchasing lower-priced liquors, taking advantage of duty-free shops, and buying alcohol from neighboring provinces/territories with lower alcohol taxes. Production method, age, and location can also affect the price of alcohol, so opting for locally-made wines and beers can help save money.

  • Will the alcohol tax increase significantly impact the cost of alcohol for consumers?
  • The alcohol tax increase on April 1, 2023, was projected to be 6.3%. This adjustment is equivalent to approximately three quarters of a cent per 355 mL can of beer. However, this increase didn’t happen, as the federal budget instead proposed a 2% cap on alcohol for the time being.

  • Are there regional variations in liquor taxes within Canada?
  • Yes, there are regional variations in liquor taxes within Canada. Each province has its own specific liquor tax rates, and regional variations should be considered when analyzing the tax burden on alcoholic beverages.

Tara Al-Khudairi

Tara Al-Khudairihas worked in the financial services industry since 2017. She graduated from McMaster University with a degree in Finance and is pursuing her CFA.

She has worked at a major Canadian financial institution in various client-facing advisory roles, starting as a bank teller and working up to a Client Services Associate within the Asset Management division. She specializes in simplifying concepts of personal finance for people of various financial backgrounds.

When she’s not examining the markets looking for the next SHOP.TO, she’s either practicing yoga, planning her next vacation, or has her nose buried deep in a book.