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Navigating Sales Tax in Canada: Understanding Sin Taxes on Alcohol and Sugary Drinks

Published Oct 24 2024

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by Herman Grobler

Sin taxes are applied to goods like alcohol, sugary drinks, tobacco, and cannabis in an effort to reduce consumption and generate additional revenue for public health initiatives. In this article, we’ll explore how alcohol and sugary drinks are taxed across Canada, including key regional variations and tips for ensuring proper tax application on these products.


Federal Overview: Alcohol and Sugary Drinks

At the federal level, alcohol is subject to excise duties, while sugary drinks are currently not subject to a federal sin tax. However, federal GST/HST (Goods and Services Tax/Harmonised Sales Tax) applies to the sale of both alcohol and sugary beverages in all provinces and territories.

  • Alcohol: Alcoholic beverages sold in Canada are subject to both federal excise duties and GST/HST.
  • Sugary Drinks: While no federal excise tax exists for sugary beverages, provinces have begun implementing their own taxes on sugary drinks.


Regional Breakdown: Alcohol and Sugary Drink Taxes

There is a notable variation in how liquor and sugar tax is implemented across the regions of Canada. It is important to note that sin tax is not always a percentage, and can be levied based on volume and type. Let's explore how sin tax varies across the regions.


Ontario
  • Alcohol: Alcohol sold in Ontario is subject to the provincial Liquor Tax, in addition to federal excise duties and HST (13%). The Liquor Tax varies depending on the type of alcohol, with different rates for beer, wine, and spirits.
  • Sugary Drinks: Ontario does not currently impose a specific sugary drink tax. However, regular HST applies to most sugary beverages unless they qualify as "basic groceries," which are exempt from tax (e.g., certain juices).
  • Identifying Taxable Items: Any alcohol served in restaurants or sold in retail must include the Liquor Tax. Sugary drinks that contain added sweeteners and are ready-to-drink are generally taxable, whereas pure fruit juices may not be.


British Columbia
  • Alcohol: British Columbia applies a 10% provincial liquor tax on alcohol sales, in addition to the federal excise duty and GST (5%). The liquor tax applies to retail sales, restaurants, and licensed establishments.
  • Sugary Drinks: In July 2020, British Columbia introduced a PST (7%) on sugary beverages. This applies to all carbonated beverages containing sugar or sweeteners, including sodas, energy drinks, and some sweetened juices.
  • Identifying Taxable Items: Alcoholic beverages are taxed at the point of sale, both in-store and in restaurants. For sugary drinks, any non-alcoholic beverages containing added sugar, such as soda and sweetened iced tea, are subject to PST, while unsweetened drinks like bottled water or milk are exempt.


Quebec
  • Alcohol: Quebec applies a specific tax on alcoholic beverages in addition to GST (5%) and QST (9.975%). The specific tax varies by type of alcohol, such as beer, wine, and spirits, and is charged at a fixed rate per litre.
  • Sugary Drinks: Quebec does not have a specific tax on sugary beverages. However, sugary drinks are subject to both GST and QST.
  • Identifying Taxable Items: All alcoholic beverages, including mixed drinks in restaurants, are taxed based on volume. Sugary drinks like sodas and flavoured juices are generally taxed at the standard sales tax rates, unless they are unsweetened or qualify as basic groceries.


Alberta
  • Alcohol: Alberta has no provincial sales tax but levies a provincial liquor mark-up on alcoholic beverages sold through Alberta Gaming, Liquor, and Cannabis (AGLC). Alcohol is also subject to the federal excise duty and GST (5%).
  • Sugary Drinks: There is no specific tax on sugary beverages in Alberta, but sugary drinks are subject to GST (5%).
  • Identifying Taxable Items: Alcoholic beverages carry the provincial liquor mark-up and federal GST. For sugary drinks, any beverages with added sweeteners will have GST applied.


Manitoba
  • Alcohol: Manitoba applies an additional Liquor Consumption Tax (LCT) of 10% on alcohol, along with the standard RST (7%) and federal excise duties.
  • Sugary Drinks: Manitoba does not have a dedicated sugary drink tax, but these beverages are subject to RST and GST.
  • Identifying Taxable Items: Alcoholic beverages incur the Liquor Consumption Tax and RST. Sugary drinks, such as soft drinks and flavoured beverages, are taxed under the same sales tax rules as other non-alcoholic beverages.


Saskatchewan
  • Alcohol: Saskatchewan applies a 10% PST to alcohol sold in retail or served in restaurants. Additionally, the federal excise duty and GST apply to alcohol sales.
  • Sugary Drinks: There is no specific sugary drink tax in Saskatchewan, but they are subject to both PST and GST if sold in non-grocery settings.
  • Identifying Taxable Items: Alcohol is always taxed at 10% PST, and sugary beverages with added sweeteners are taxable unless exempt as basic groceries.


Nova Scotia
  • Alcohol: Alcohol in Nova Scotia is subject to 15% HST, which includes both federal and provincial components. Alcoholic beverages do not incur an additional provincial sin tax.
  • Sugary Drinks: Nova Scotia does not impose a specific sugary drink tax, but they are subject to the standard 15% HST.
  • Identifying Taxable Items: Any alcoholic beverage is taxed under the HST system, while sugary drinks, such as sodas and flavoured beverages, are also taxed unless qualifying as basic groceries.


Newfoundland and Labrador
  • Alcohol: Newfoundland and Labrador imposes 15% HST on alcohol, alongside federal excise duties.
  • Sugary Drinks: As of September 2022, Newfoundland and Labrador introduced a 20 cents per litre tax on sugary drinks, targeting beverages with added sugar such as soft drinks and energy drinks.
  • Identifying Taxable Items: Alcohol is taxed through the HST system. For sugary drinks, any beverage containing added sugar that exceeds the threshold is subject to the sugary drink tax.


New Brunswick
  • Alcohol: New Brunswick applies 15% HST on alcoholic beverages, with no additional provincial sin tax on alcohol.
  • Sugary Drinks: Similar to Nova Scotia, New Brunswick does not have a specific sugary drink tax, but sugary beverages are taxed under the 15% HST system.
  • Identifying Taxable Items: Alcohol and sugary beverages are taxed uniformly through the HST system.


Prince Edward Island
  • Alcohol: Prince Edward Island applies 15% HST on alcohol, with no additional provincial sin tax on alcoholic beverages.
  • Sugary Drinks: There is no sugary drink tax in Prince Edward Island, but beverages with added sugar are subject to the same 15% HST.
  • Identifying Taxable Items: Alcohol is taxed under the HST system, and sugary drinks follow the same rule unless exempt as basic groceries.


Territories: Northwest Territories, Yukon, and Nunavut
  • Alcohol: Alcohol in the territories is subject to federal excise duties and GST. Each territory imposes its own liquor mark-up or fees on alcohol sold within the jurisdiction.
    • Northwest Territories: Liquor is subject to a mark-up per litre.
    • Yukon: Alcohol is subject to a liquor tax based on volume.
    • Nunavut: Alcohol is subject to a liquor tax and GST.
  • Sugary Drinks: There is no specific sugary drink tax in the territories, but they are subject to GST.
  • Identifying Taxable Items: Alcoholic beverages are taxed through a combination of excise duties, liquor mark-ups, and GST. Sugary drinks with added sweeteners are generally subject to GST.


Tips for Managing Sin Taxes on Alcohol and Sugary Drinks

  • Stay Informed on Regional Differences: Tax rates and rules for alcohol and sugary drinks vary greatly by province and territory. Use official provincial tax websites or a solution like MenuBuddy to ensure you’re applying the right rates.
  • Monitor Inventory Closely: Make sure to track which beverages are subject to sin taxes and maintain clear records. This will help during tax audits and ensure you aren’t undercharging customers.
  • Accurate Product Classification: Use accurate product descriptions in your menu and POS systems to correctly apply taxes. For example, clearly identify if a beverage contains added sugars or if it’s a pure juice to avoid tax misclassification. Track product volume for alcohol and sugary drinks, to manage markups.
  • Regularly Update Menu Prices: Given the variation in sin taxes, ensure your menu prices reflect the correct taxes to avoid losses. MenuBuddy can automate these updates based on the region.


Conclusion

Managing sin taxes on alcohol and sugary drinks is critical for restaurants and retailers operating across Canada. Understanding when and where these taxes apply, and keeping up with regional differences, ensures that businesses remain compliant while setting appropriate prices for customers.

Additional Resources

It is important to understand the topics covered in this article, but also to stay up to date with rules and legislation as it changes. Here are some resources to help you find more information on the topic covered in this article.


Federal Resources

  • Canada Revenue Agency (CRA): The CRA provides detailed information on excise duty rates for alcohol at the federal level.


Provincial Tax Authorities

Ontario

  • Ministry of Finance (Ontario): Ontario applies the Liquor Tax to alcohol sold in the province.

British Columbia

  • British Columbia Ministry of Finance: BC applies a 7% PST on sugary beverages and additional taxes on alcohol.​
  • BC Liquor Distribution Branch (BCLDB): Detailed information about how alcohol is taxed, including liquor mark-up rates, which apply at the wholesale level.
  • British Columbia Ministry of Finance: Alcohol in BC is taxed with a 10% liquor tax (in addition to the 5% GST). You can find more details on liquor and other PST-taxed items here.

Quebec

Alberta

  • Alberta Gaming, Liquor & Cannabis (AGLC): Alberta does not have a provincial sales tax but applies a liquor mark-up.

Manitoba

  • Manitoba Finance: Manitoba applies both an RST and an additional liquor consumption tax.

Saskatchewan

Nova Scotia

Newfoundland and Labrador

  • Newfoundland and Labrador Department of Finance: Newfoundland and Labrador recently introduced a sugary drinks tax.

New Brunswick

  • New Brunswick Department of Finance and Treasury Board: Alcohol and sugary beverages are taxed under the HST in New Brunswick. Details on HST and provincial taxes are available on their finance website.
  • Alcool NB Liquor (ANBL): Provides specific details on taxes related to alcohol sales in New Brunswick

Prince Edward Island

Northwest Territories (NWT)

Yukon

  • Yukon Liquor Corporation (YLC): Information about taxes on alcohol in the Yukon is managed by the Yukon Liquor Corporation. Learn more here.
  • Yukon Department of Finance: Sugary drinks are taxed under the GST, and more information on Yukon’s taxes can be found here.

Nunavut