Excise Warehouses

Excise Duty Memorandum EDM8-1-1

October 2013

NOTE: This version replaces the one dated September 2003.

Disclaimer:
Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Act, 2001. The information in this publication does not replace the law found in the Act and its regulations.

If this information does not completely address your particular situation, you may refer to the Act or relevant regulation, or contact your CRA regional excise office for additional information. The offices are listed at Contact Information – Excise and Specialty Tax Directorate.

Table of Contents

• Definitions
• General
  • Obtaining an excise warehouse licence
  • Obtaining other licence types
• Packaged alcohol
  • Possession and storage of non-duty-paid packaged alcohol
  • Losses of packaged alcohol
  • Information on containers of packaged alcohol
  • Supplying packaged alcohol to retail stores
  • Removal of packaged alcohol and marked special containers
  • Special duty on imported spirits
  • Returned packaged alcohol and marked special containers
• Unstamped tobacco products
  • Possession and storage of tobacco products
  • Removal of Canadian and imported manufactured tobacco or cigars
• Maintaining books and records
• Returns and payments
  • Reporting periods
  • Branches or divisions filing separate returns
• Claiming refunds
  • Reasons for refund
  • Restrictions
• Enforcement

Definitions

1. The following terms are used in this memorandum, as per section 2:

Alcohol means spirits or wine.

Alcohol licensee means a person who is a spirits licensee or a wine licensee.

Bottle-your-own premises are premises authorized under provincial legislation to supply wine and spirits from marked special containers for packaging by a purchaser. All marked special containers in these premises are duty-paid containers.

Canadian manufactured tobacco means manufactured tobacco that is manufactured in Canada, but does not include partially manufactured tobacco or foreign brand tobacco.

Excise warehouse means the premises of an excise warehouse licensee that are specified by the Minister as the excise warehouse of the licensee.

Excise warehouse licensee means a person who holds an excise warehouse licence issued under section 19.

A licensed user is a person who holds a user's licence issued under section 14. That licence authorizes the user to possess and use bulk alcohol, non-duty-paid packaged alcohol or a restricted formulation for specific purposes. A licensed user may not possess and use alcohol in marked special containers.

Liquor authority means a government board, commission or agency that is authorized by the laws of a province to sell intoxicating liquor.

Manufactured tobacco means every article, other than a cigar or packaged raw leaf tobacco, that is manufactured in whole or in part from raw leaf tobacco by any process.

A marked special container of spirits is a container of a capacity greater than 100 litres but not more than 1,500 litres that is marked in a prescribed form and manner to show it is for delivery to and for use by registered users or at bottle-your-own premises. For additional information, refer to Excise Duty Memorandum EDM3-8-1, Special Containers of Spirits.

A marked special container of wine is a container of a capacity greater than 100 litres that is marked in a prescribed form and manner to show it is for delivery to and for use at bottle-your-own premises. For additional information, refer to Excise Duty Memorandum EDM 4-8-1, Special Containers of Wine.

Non-duty-paid, in respect of packaged alcohol, means that excise duty, other than special duty, has not been paid on the alcohol.

Packaged alcohol means packaged either in a container of a capacity of not more than 100 litres that is ordinarily sold to consumers without it being further repackaged or in a marked special container.

Packaged raw leaf tobacco or packaged tobacco product means packaged in a prescribed package.

Special duty means

• in respect of a tobacco product, a special duty imposed under subsection 53(1), 54(2) or 56(1); and
• in respect of imported spirits, the special duty imposed under subsection 133(1).

Stamped, in respect of a tobacco product, means that an excise stamp and all prescribed information in a prescribed format are stamped, impressed, printed or marked on, indented into or affixed to the product or its container in the prescribed manner to indicate that excise duty, other than special duty, has been paid on the product.

Tobacco licensee means a person who holds a tobacco licence issued under section 14.

Tobacco product means manufactured tobacco, packaged raw leaf tobacco or cigars.

General

2. In respect of section 19, an excise warehouse licence allows an excise warehouse licensee to possess and store, within one or more specified premises, packaged alcohol or unstamped manufactured tobacco or cigars on which excise duty has not been paid. The excise duty is not payable while the product is in the excise warehouse.

3. The premises of an excise warehouse licensee may be part of the licensee's business establishment or may be a completely separate building. Licensees must consider the premises specified in the excise warehouse licence as being a separately identifiable area in which dutiable products can be stored and accounted for. There are no size limits for an excise warehouse, and a licensee may have as many premises as required, as long as they are in accordance with the Act.

Obtaining an excise warehouse licence

4. Under subsection 19(1), an excise warehouse licence may be issued to a person who is not a retailer of alcohol, which will authorize the person to possess non-duty-paid packaged alcohol or unstamped manufactured tobacco or cigars in their excise warehouse. A tobacco licensee who wishes to possess unstamped manufactured tobacco or cigars is required to have a separate excise warehouse licence to store the tobacco products.

5. Subsection 19(2) states that alcohol retailers may also be eligible to obtain an excise warehouse licence if they are:

• an alcohol licensee;
• a provincial liquor authority; or
• a person who supplies goods as ships' stores in accordance with the Ships' Stores Regulations.

6. Instructions and requirements for obtaining an excise warehouse licence are provided in Excise Duty Memorandum EDM2-2-1, Obtaining and Renewing a Licence.

7. As per subsections 2(3) and 2(4) of the Regulations Respecting Excise Licences and Registrations, there is an additional requirement for a person applying for an excise warehouse licence to warehouse non-duty-paid packaged alcohol if they are not an alcohol licensee producing or packaging alcohol in the province where the warehouse is located. This person must provide evidence from the provincial liquor authority in each province in which they will have a warehouse, that they are authorized to warehouse alcohol at the premises.

8. Pursuant to section 4 of the Regulations Respecting Excise Licences and Registrations, an excise warehouse licence is valid for a maximum period of two years. The licensing letter issued by the Canada Revenue Agency (CRA) regional excise office will specify the effective and expiry dates of the licence. To have a licence renewed under section 9 of the regulations, Form L63, Licence and Registration Application Excise Act, 2001, must be submitted not less than 30 days before the day on which the licence expires.

Obtaining other licence types

9. Depending on an excise warehouse licensee's activities, the licensee may require other licence types, such as a spirits licence, a wine licence or a tobacco licence.

10. Detailed information on licence types and the activities that may be performed under those licences is available in Excise Duty Memorandum EDM2-1-1, Licence Types.

Packaged alcohol

Possession and storage of non-duty-paid packaged alcohol

11. Under paragraph 88(2)(a), excise warehouse licensees are authorized to possess in their excise warehouse non-duty-paid packaged alcohol that was packaged by an alcohol licensee, as well as non-duty-paid packaged alcohol that was imported by an excise warehouse licensee.

12. Imported non-duty-paid packaged alcohol may be stored in an excise warehouse only after the alcohol has been released by the Canada Border Services Agency (CBSA).

13. Under sections 140 and 141, when non-duty-paid packaged alcohol or imported packaged alcohol is entered into an excise warehouse, the excise warehouse licensee becomes liable for the excise duty on that alcohol.

14. Pursuant to subsections 124(1) and 135(3), by immediately entering the packaged alcohol into an excise warehouse, an alcohol licensee who packages alcohol may defer paying excise duty that would otherwise be payable at the time of packaging. The excise duty will be paid by the excise warehouse licensee when the alcohol is removed from the excise warehouse to the duty-paid market.

15. The same deferral rules apply to imported packaged alcohol. The duty equal to excise duty that is imposed by subsection 21.2(3) of the Customs Tariff must be paid when the packaged alcohol is imported, unless the excise warehouse licensee defers the duty by immediately entering the alcohol into their excise warehouse after its release by the CBSA.

Losses of packaged alcohol

16. Paragraphs 129(1)(c) and 138(1)(c) state that excise duty may be relieved on packaged alcohol received by an excise warehouse licensee when it is lost through breakage as described in section 3 of the Losses of Bulk Spirits and Packaged Alcohol Regulations.

17. For more information on losses of packaged alcohol in an excise warehouse, refer to Excise Duty Memorandum EDM3-4-1, Losses of Spirits, and Excise Duty Memorandum EDM 4-4-1, Losses of Wine.

Information on containers of packaged alcohol

18. Under section 87, information prescribed in the Regulations Respecting the Information to be Displayed on Alcohol Containers and their Packaging is required on all containers and on any packaging encasing the container of packaged spirits entering an excise warehouse. In the case of wine, prescribed information must be displayed on the container of wine and the packaging encasing the container before it can be removed from an excise warehouse.

19. For additional information on the requirements relating to the information that must be displayed on a container of alcohol, refer to Excise Duty Memorandum EDM3-2-3, Labelling of Containers of Spirits, and Excise Duty Memorandum EDM4-2-3, Labelling of Containers of Wine.

Supplying packaged alcohol to retail stores

Limited supply to a single retail store

20. The volume of packaged alcohol that an excise warehouse licensee may supply to a single retail store from a particular premise specified in its licence is limited under subsection 154(1). During a calendar year, the total volume a licensee may supply to a single retail store from particular premises cannot exceed 30% of the total volume of packaged alcohol supplied from that premises to all retail stores during the year.

21. Pursuant to subsection 154(2), an excise warehouse licensee may supply more than the 30% threshold when supplying a retail store if the following conditions are met:

• the excise warehouse licensee is also an alcohol licensee;
• the retail store is located at the same place where the alcohol licensee produces or packages the alcohol; and
• at least 90% of the packaged alcohol supplied during the year to the store from the excise warehouse is alcohol that was packaged by the alcohol licensee or on the licensee's behalf, if the licensee was responsible for the alcohol immediately before it was packaged.

Exception for remote stores

22. Under section 155, the CRA may authorize an excise warehouse licensee, who is a liquor authority, or who is not an alcohol retailer, to supply more than 30% of the total volume of packaged alcohol they supply from a particular premises to a retail store, when delivery to that store by railway, truck or water vessel is not possible for five consecutive months of each year.

23. An excise warehouse licensee must apply for and receive authorization from the CRA to exceed the 30% threshold. Requests must be submitted in writing to their regional excise office and include the legal name of the liquor authority or the excise warehouse licensee who is not a retailer, the business address, the excise duty account number and the reason why delivery to that store was not possible. The CRA regional excise offices are listed at Contact Information – Excise and Specialty Tax Directorate.

24. The CRA may revoke such an authorization if:

• the licensee requests that it be revoked, in writing;
• the licensee fails to comply with any condition imposed in the authorization or any provision of the Act;
• the CRA is no longer satisfied that the requirements for the authorization are met; or
• the CRA considers that the authorization is no longer required.

25. If the CRA revokes an authorization, the CRA will notify the licensee in writing, indicating the reason and effective date of the revocation.

Removal of packaged alcohol and marked special containers

Entry into duty-paid market; excise duty payable

26. An excise warehouse licensee may remove non-duty-paid packaged alcohol from their excise warehouse for entry into the duty-paid market, where:

• the non-duty-paid packaged alcohol is not in a marked special container, as per subparagraph 151(2)(a)(i);
• if the non-duty-paid packaged alcohol is in a marked special container, it is for delivery to bottle-your-own premises, as per subparagraphs 151(2)(b)(ii) and 151(2)(c)(iii).

27. Under the circumstances mentioned above, excise duty is payable by the excise warehouse licensee at the time the packaged alcohol is removed from the excise warehouse, as per section 125 and subsection 136(1).

Packaged alcohol, where excise duty is not payable

28. As per subparagraphs 151(2)(a)(ii) to (vii), and (ix), excise warehouse licensees may remove from their excise warehouse non-duty-paid packaged alcohol, which is not in a marked special container, for delivery:

• to another excise warehouse,
• to a licensed user,
• to an accredited representative, for their personal or official use,
• to a duty free shop, for sale in accordance with the Customs Act,
• to a registered user, for use in accordance with their registration,
• as ships' stores, in accordance with the Ships' Stores Regulations; or
• for export.

29. Under paragraphs 142(1)(b) and 142(2)(b) and subsection 147(1), excise duty is not payable by the excise warehouse licensee where the circumstances in the paragraph above apply.

Packaged wine for consignment sales

30. Under subparagraph 151(2)(a)(viii) and subsection 136(2), qualified small wine licensees^{Footnote 1} may remove from their own excise warehouse packaged wine that they produced or packaged if the wine is delivered to a retail store for sale on a consignment basis. The retail store must not be located on the premises of the wine licensee and must be operated on behalf of two or more small wine licensees. In these circumstances, the wine is deemed to be removed from the excise warehouse for entry into the duty-paid market when the wine is sold and not when the wine is physically removed from the excise warehouse.

31. The excise duty is payable at the time of sale and not at the time of physical removal from the warehouse.

Packaged wine as samples for individuals; excise duty not payable

32. Paragraph 151(2)(a.1) states that non-duty-paid packaged wine may be removed from the excise warehouse if the wine:

• is removed from the excise warehouse of the wine licensee who produced or packaged it;
• is not in a marked special container;
• is provided free of charge to individuals as a sample; and
• is consumed at the premises where the wine licensee produces or packages wine.

33. Under subsection 147(4), excise duty is not payable where the circumstances mentioned in the paragraph above apply.

Marked special containers; excise duty not payable

34. As per subparagraphs 151(2)(b)(i), 151(2)(c)(i) and 151(2)(d), an excise warehouse licensee may remove marked a special container of alcohol from their excise warehouse when it is for delivery to another excise warehouse or for export by the excise warehouse licensee if it was imported. Also, as per subparagraph 151(2)(c)(ii), an excise warehouse licensee may remove a marked special container of spirits from their excise warehouse when it is marked for delivery to a registered user, for use in accordance with their registration.

35. In the circumstances mentioned above, excise duty is not payable under subsection 142(1) as well as subsections 147(2) and (3).

Special containers of alcohol to bulk inventory

36. Under section 156, an alcohol licensee who marks a special container of alcohol may remove this container from their excise warehouse and return the alcohol to their bulk inventory. They must remove the markings on the container in a manner approved by the CRA when they remove the containers from their excise warehouse. As per sections 111 and 120, the alcohol licensee becomes responsible for the bulk alcohol when it is returned to bulk inventory and the excise warehouse licensee ceases to be liable for the excise duty.

Packaged alcohol to bulk inventory

37. Under sections 157 and 158, an alcohol licensee may remove non-duty-paid packaged alcohol from their excise warehouse and return it to their bulk inventory. As per sections 112 and 121, the alcohol licensee becomes responsible for the bulk alcohol when it is returned to bulk inventory and the excise warehouse licensee ceases to be liable for the excise duty.

Transfers to another excise warehouse licensee or licensed user

38. Subsections 142(1) and 142(2) state that when excise warehouse licensees remove non-duty-paid packaged alcohol, which is not in a marked special container, from their excise warehouse and transfer it to another excise warehouse licensee or to a licensed user, the licensee who receives the alcohol becomes liable for the excise duty at the time it is entered into their excise warehouse or the licensed user's premises. In such cases, the transferring excise warehouse licensee ceases to be liable for the excise duty.

Special duty on imported spirits

39. Pursuant to subsection 133(1), a special duty of $0.12 per litre of absolute ethyl alcohol is imposed on imported spirits, in addition to the duty equal to excise duty levied under section 21.1 or 21.2 of the Customs Tariff. The special duty is payable when those spirits are delivered to or imported by licensed users.

40. Under subsection 133(3), when excise warehouse licensees remove imported packaged spirits or imported spirits that were packaged in Canada from an excise warehouse for delivery to a licensed user, they must pay special duty. It is payable at the time they remove the spirits from their excise warehouse.

Returned packaged alcohol and marked special containers

To the excise warehouse

41. Pursuant to the Return of Packaged Alcohol to an Excise Warehouse Regulations, packaged alcohol and marked special containers of alcohol that are removed from an excise warehouse may be returned to that warehouse.

42. The excise warehouse licensee may enter the returned alcohol into their excise warehouse provided that the alcohol is packaged in the same container in which it was packaged when it was removed from the warehouse, and the container:

• has not been opened; or
• if opened, was opened by the licensed user or registered user solely for the purpose of analysis in a manner approved by the CRA.

Refund – Marked special containers returned from bottle-your-own premises

43. In respect of subsections 92(2) and 93(2), marked special containers of alcohol that were opened and that are returned to the excise warehouse licensee from bottle-your-own premises cannot be entered into the excise warehouse. However, the excise warehouse licensee may destroy the alcohol remaining in the containers in a manner approved by the CRA. Under section 187, the excise warehouse licensee may apply for a refund of the duty paid on the alcohol destroyed.

Refund – Packaged imported spirits returned by licensed users

44. Under subsection 185(2), when imported packaged spirits are returned by a licensed user to the excise warehouse licensee who supplied them, the warehouse licensee may apply for a refund of the special duty paid within two years after the spirits are returned.

Refund – Packaged alcohol returned from duty-paid market

45. Under subsection 186, when packaged alcohol is returned from the duty-paid-market to the excise warehouse licensee who supplied it, and the packaged alcohol is entered into the excise warehouse, the warehouse licensee may, within two years after the alcohol is returned, apply for a refund of the excise duty they paid.

46. Refer to the section entitled "Claiming refunds" at the end of this memorandum for more information on how to claim refunds.

Unstamped tobacco products

Possession and storage of tobacco products

47. Under section 37, if manufactured tobacco or cigars made in Canada are not stamped with a tobacco stamp by a tobacco licensee at the time of packaging, the licensee must immediately place the manufactured tobacco or cigars in their excise warehouse. A tobacco licensee who wishes to possess unstamped manufactured tobacco or cigars is required to have a separate excise warehouse licence to store the manufactured tobacco or cigars.

48. Pursuant to subsection 32(2), an excise warehouse licensee who is also a tobacco licensee is authorized to possess and store unstamped manufactured tobacco or cigars of their manufacture and unstamped imported cigars or manufactured tobacco.

49. An excise warehouse licensee who does not have a separate tobacco licence is authorized, under paragraph 32(2)(b), to possess unstamped imported manufactured tobacco and cigars at their excise warehouse and to possess unstamped cigars manufactured in Canada. In this latter case, subsection 50(7)(e) states that the excise warehouse licensee must certify in the prescribed form to the tobacco licensee who manufactured the cigars in Canada that they are destined only for delivery as ships' stores in accordance with the Ships' Stores Regulations, as provided for under subsection 50(9). The possession of unstamped tobacco products may be further restricted under the Act.

Removal of Canadian and imported manufactured tobacco or cigars

Manufactured tobacco or cigars manufactured in Canada

50. Under subsection 50(3), a tobacco licensee is prohibited from removing from an excise warehouse manufactured tobacco or cigars manufactured in Canada and entering it into the duty-paid market.

51. An excise warehouse licensee who also holds a tobacco licence is only permitted to remove from its premises manufactured tobacco or cigars of its manufacture in the following circumstances:

• under paragraphs 50(4)(b) and (c), where Canadian manufactured tobacco is for delivery to an accredited representative, for their personal or official use, or to a duly authorized special excise warehouse, for subsequent sale to an accredited representative for their personal or official use;
• under subsections 50(5) and (6), where Canadian manufactured tobacco is for export in a limited quantity (i.e., 1.5% annually of the total quantity of that category of manufactured tobacco produced by the tobacco licensee in the preceding year), but not for delivery to foreign duty free shops or as foreign ships' stores;
• under subsection 50(7), where cigars are for export, for delivery to an accredited representative for their personal or official use, for delivery to a special excise warehouse, for delivery as ships' stores, for delivery to a duty free shop for the purpose of sale or for delivery to another excise warehouse that certifies that the cigars are for delivery as ships' stores, as provided for under subsection 50(9);
• under subsection 50(8), where foreign brand tobacco is for export, but not for delivery to foreign duty free shops or to foreign ships' stores; and
• under subsection 50(10), where the manufactured tobacco or cigars are removed for purposes of reworking or destruction by the tobacco licensee.

Imported manufactured tobacco or cigars

52. Subsection 51(2) states that, subject to the regulations, an excise warehouse licensee is only permitted to remove from their premises imported manufactured tobacco or cigars in the following circumstances:

• for delivery to another excise warehouse;
• for delivery to an accredited representative for their personal or official use;
• for delivery as ships' stores in accordance with the Ships' Stores Regulations;
• for delivery to a duty free shop for sale in accordance with the Customs Act; or
• for export by the excise warehouse licensee in accordance with the Act.

Maintaining books and records

53. Pursuant to subsection 206(1), every person who has a licence under the Act is required to maintain all records that are necessary to determine whether they are in compliance with the Act.

54. Detailed information about the requirement to maintain books and records is available in Excise Duty Memorandum EDM9-1-1, General Requirements for Books and Records.

Returns and payments

55. Under section 160, excise warehouse licensees are required to file Form B262, Excise Duty Return – Excise Warehouse Licensee, for each reporting period, calculate any excise duty payable in that return, and pay the amount owing. The return and payment are due no later than the last day of the first month that follows the reporting period.

56. A licensee who has more than one licence must file a separate return for each licence. For example, an excise warehouse licensee who also has a spirits licence must file Form B266, Excise Duty Return – Spirits Licensee, in addition to Form B262.

57. For more detailed information on the requirements to file returns and pay excise duty, refer to Excise Duty Memorandum EDM10-1-1, Returns and Payments. Information and instructions on how to complete an excise warehouse licensee’s duty return is available in Excise Duty Memorandum EDM10-1-3, Completing an Excise Duty Return – Excise Warehouse Licensee.

Reporting periods

58. The default reporting period is a fiscal month; however, an authorized licensee may file excise duty returns twice a year (that is, semi-annual or fiscal half-year reporting periods).

59. For additional information on reporting periods and how to determine eligibility and apply for semi-annual reporting, refer to Excise Duty Memorandum EDM10-1-1.

Branches or divisions filing separate returns

60. Subsection 164(1) states that excise warehouse licensees that have branches or divisions with distinct operations under their excise warehouse licence may apply to the CRA for authority to file separate returns for each branch or division. Licensees may request separate returns by completing Form B269, Application or Revocation of the Authorization to File Separate Excise Duty Returns and Refunds Applications for Branches or Divisions.

Claiming refunds

61. An excise warehouse licensee may apply for a refund of an amount as excise duty paid on alcohol, special duty paid on imported spirits, interest or any other amount payable under the Act in circumstances where the amount was not payable, whether it was paid by mistake or otherwise. A refund or a deduction can only be claimed by submitting a completed Form B256, Excise Act, 2001 – Application for Refund, within two years after the amount was paid. There is also a special refund application for foreign importers of tobacco products, Form E681, Excise Act, 2001 – Refund Claim on Exported Tobacco Products.

Reasons for refund

62. In addition to the amount requested, the excise warehouse licensee must indicate the reason for the refund when making the application. Only one in the following four reasons may be used per application:

• Reason 1 – Amount paid in error, as per subsection 176(1). The person must apply for the refund of the amount paid in error within two years after the amount was paid, as is stated in subsection 176(3);
• Reason 7 – Packaged imported spirits returned to excise warehouse licensee, as per subsection 185(2) and section 6 of the Return of Packaged Alcohol to an Excise Warehouse Regulations;
• Reason 8 – Packaged alcohol returned to excise warehouse licensee, as per section 186, as well as section 4 of the Return of Packaged Alcohol to an Excise Warehouse Regulations; or
• Reason 9 – Marked special container of alcohol returned to excise warehouse and destroyed, as per section 187.

Restrictions

63. Subsection 189(4) states that a refund will not be paid to an excise warehouse licensee until the licensee has filed with the CRA or the CBSA all returns or other records that are required to be filed under the Excise Act, 2001, the Air Travellers Security Charge Act, the Customs Act, the Excise Act, the Excise Tax Act, and the Income Tax Act.

64. For more information on refunds, refer to Excise Duty Memorandum EDM10-3-1, Refunds.

Enforcement

65. Under Part 6, an excise warehouse licensee who fails to comply with the Act may be subject to a penalty or face charges under the Act.