Excise duty needs to be paid by cannabis distributors who supply packaged cannabis products to their customers. The excise duty is calculated based on the sales price of product that is charged to customer. Panni has built functionality in SAGE X3 to calculate the excise taxes/duties payable and this document would explain how the excise taxes/duties payable are calculated in SAGE X3.
Any packaged cannabis product that can be classified within the following product types would be considered excise-dutiable at the time of product delivery:
- Cannabis Oil
- Cannabis Extracts
- Edible Cannabis
- Cannabis Topicals
In SAGE X3, Panni has provided an additional tab called ‘Excise Tax’ where the type of cannabis product can be defined under the ‘Product Identifier’ field:
Let us name the rates used for calculating the three components of excise taxes as below.
|Excise tax component||Rate|
|Flat-rate cannabis duty||R1|
|Flat-rate additional cannabis duty||R2|
|Adjustment to additional cannabis duty||R3|
The rates used for calculation of the three components of excise taxes would be based on the province of delivery address and the type of cannabis product delivered. In SAGE X3, Panni has developed an Excise tax rates table where user can define the excise tax rates based on province of delivery and packaged cannabis product type.
Initial data entry on this table would be a one-time activity. The data in table would later need to be updated only when there are changes in the rates provided by Canada Revenue Agency.
For any packaged cannabis product that exists in a lot, Quality Control process would need to be done. In the Quality control process, there would be a technical sheet associated with every packaged cannabis product that exists in a lot. This technical sheet would be filled in by the person who performs the quality control on the product-lot. One of the questions in the technical sheet would be THC in mg per unit of the product.
When the Sales Delivery is created, the excise taxes would be calculated for every line in the Sales Delivery. The rates used for calculation (R1, R2, R3) would be selected based on the product on the line and province of delivery address in the Sales Delivery. The THC (in mg per unit) would be fetched from the quality control record of the product-lot combination. The three components of excise taxes would be calculated and displayed (on a per unit basis) in every line of the Sales Delivery.
Sales Delivery Automatic journal would record the total excise taxes as Credit Excise Tax (Contra revenue) and Debit Excise Tax Payable.