If you are in Ontario and you are planning to sell tobacco at retail, here is a general guide to Ontario’s tax rules involving tobacco sales as well as the Tobacco Retailer Inspection Program. It is crucial to familiarize yourself with the tobacco tax regulations in Ontario to ensure compliance and avoid potential penalties. Furthermore, understanding these regulations will help you navigate the legal requirements associated with selling tobacco products effectively. Be sure to keep up-to-date with any changes in legislation that may impact your retail business.
This guide is derived from the Basic rules for Tobacco retail dealers guide put out by the Government of Ontario.
Tobacco retail dealers – what you must know
- You must only sell permitted tobacco products. This prohibits the sale of flavoured tobacco products under the Smoke-Free Ontario Act (SFOA), 2017. This ban includes any tobacco product with a flavouring agent, such as menthol-flavoured cigarettes. Selling these products is a serious offence that can lead to penalties under both the TTA and the SFOA.
- You must have a tobacco retail dealer permit and if you don’t have one, apply here. Make sure that you are purchasing tobacco from licensed tobacco dealers.
- Deal with Ontario-registered tobacco wholesalers only and you can check the list of registered wholesalers here. Stay updated about tobacco topics such as tax news by subscribing to email alerts from the website of the Ministry of Finance
- Make sure to keep copies and records of your business transactions for the last seven years. These records must include purchase invoices, receipts, and bills of lading for all tobacco products. Invoices must show the wholesaler’s full legal name, address, and their valid Tobacco Tax wholesaler’s permit number. The records must also detail the date of purchase and the precise brand and quantity of all tobacco products bought. All documents must be kept at your business premises and be available for immediate inspection.
- Do not sell tobacco products to minors or anyone under the age of 19
- If you believe your buyer is underage or under 25 years of age, ask for identification with a date of birth and photo
- Make sure to post signs about the negative effect of smoking and the legal age allowed for buyers
- Only sell tobacco marked and stamped with ON DUTY PAID CANADA DROIT ACQUITTÉ (see image below). The stamp must have the word “ON” on a yellow background. This mark means it was legally processed and is for distribution in Ontario.
Display and Promotion Rules
The Smoke-Free Ontario Act, 2017 sets out strict rules for how tobacco products can be displayed and promoted in a retail store.
- All tobacco products must be stored out of sight of the public. Customers of any age cannot see tobacco products until after they have purchased them.
- Self-service displays are not permitted. Customers cannot handle the tobacco product before buying it.
- You may post one sign that lists the tobacco products available and their prices. This is known as a “tombstone” sign. It must follow strict formatting rules, using only black text on a white background and containing no logos, images, or descriptive language beyond the brand name.
- You must display mandatory government-issued health warning signs and age restriction signs. These signs must be posted where they are clearly visible to the public at the point of sale.
A peach-coloured stamp on tobacco packaging is legal in Ontario provided that it was purchased for personal use only, meaning:
- First Nation individuals have reserved it
- Purchased by diplomats
- Bought from duty-free shops
Distributing illegal tobacco products
- It violates the TTA
- It promotes criminal activity
- It is not tax-compliant and buying illegal tobacco can negatively impact tax-compliant tobacco business that can result in less tax and less support for government-funded programs for Ontarians
- It doesn’t support the Smoke-Free Strategy of Ontario that aims to protect younger Ontarians from the negative impact of smoking
Penalties for distributing illegal tobacco products
- you can be fined or penalized up to 8x the equivalent of the tax payment that you are supposed to pay or up to $10,000
- you can get two years of prison time
- you can lose your tobacco products to seizure
- you will be prohibited from selling tobacco products again
- you will be prohibited by the Alcohol and Gaming Commission of Ontario from selling lottery tickets
Licence to be a tobacco retail dealer
Dealers with a permit issued by the Retail Sales Tax Act (RSTA) with an expiration date of June 30, 2010, were considered tobacco retail dealer permit holders until July 1, 2018. In 2018, all Ontario tobacco dealers are required to apply for a permit issued by the TTA. As of July 1, 2018, only a tobacco retail dealer’s permit issued by the TTA is considered valid.
If you have the authorization to sell tobacco under Ontario’s First Nations Cigarette System, then you are considered a licensed tobacco retail dealer. The same goes for on-reserve retailers who are authorized by the Ministry of Finance.
How to Apply for a Tobacco Retail Dealer’s Permit
To legally sell tobacco in Ontario, you must obtain a Tobacco Retail Dealer’s Permit for each location where you plan to sell tobacco.
The application process is managed by the Ministry of Finance.
You must complete and submit an “Application for Tobacco Retail Dealer’s Permit” form.
The application requires specific business information, including:
- The full legal name of your business.
- The physical address of the retail location.
- Your 9-digit Business Number (BN) issued by the Canada Revenue Agency.
There is no fee to apply for or to renew a permit.
The completed application form can be submitted by mail or fax to the Ministry of Finance.
Once issued, the permit must be displayed in a place where it is visible to the public at your retail location.
Failing to display the permit is an offence.
Permits are specific to the owner and the location listed on the application and are not transferable.
If you sell your business or move to a new location, the new owner or you at the new location must apply for a new permit.
You are also required to notify the Ministry of Finance of any changes to your business information.
Location inspection for tobacco retail dealers
- location inspection is done by the Ministry of Finance to help retail dealers understand their responsibilities as tobacco dealers and ensure that they are compliant with the TTA
- inspectors who are tasked to inspect a dealer’s location must wear uniforms, identify themselves and show their identification
- surprise inspections can be done anytime, and no necessary warrant is needed
- interfering or delaying inspection is an offence that the Ministry of Justice sanctions. If found guilty, the Ministry of Justice will give notice of offence plus the amount that you need to pay as a fine
- during an inspection, inspectors must do their job in accordance with the Regulator’s Code of Practice. They must inspect in accordance with the standards and principles given to them to promote fairness to all Ontario business owners and a consistent level of excellence in providing service to their customers
- it can take a few hours to complete a tobacco inspection
- during an inspection, the business operation can proceed in a business-as-usual manner
- if the owner of the retail company is not at the location during an inspection, the store staff can contact them, but it won’t disrupt or delay the inspection process
- as inspectors, they have the power to:
- check the location and its entirety
- check the inventory of the tobacco products
- check records, books, and documents
- check for illegal tobacco and seize it if there are any
- issue notice of offence, fine, or penalties as needed or when they deem necessary
- inspectors can ask for information and documents such as the dealer’s permit, invoices, receipts, and shipping or delivery documents
- in case proof of tax payment is not available, the retail dealer will be given a Preliminary Advice Assessment where they can find the proposed fine amount to be settled
- found illegal tobacco products will be seized and removed from the store
- for questions about tobacco inspection, dealers can contact the Ministry of Finance at 1-866-ONT-TAXS (1-866-668-8297)
Revocation of permit to sell tobacco
A retail dealer who habitually violates the Smoke-Free Ontario Act (SFOA) or the TTA can be prohibited from selling tobacco under the SFOA or TTA.
TTA exclusion
- you committed two violations against TTA within five years. It includes any offence under the TTA regulations. If committed, TTA can ban you temporarily from selling, storing, and buying tobacco
- exclusion can last up to 180 days and depends on the committed violation
- if you are a dealer and are currently excluded, then:
- you cannot store, offer or sell tobacco
- you are not allowed to buy tobacco from suppliers
- your name can be or will be published on the website of the Ministry of Finance
- you will be directed to notify the public about your prohibition and have it posted in your store
- failure to comply with your prohibition can result in a fine of $5000 or up to $50000 among other penalties imposed by the TTA
- if you are under prohibition and you continue to operate or sell tobacco products, your tobacco products can be seized
SFOA exclusion
- the SFOA exclusion is issued by the Minister of Health and Long-term Care, implying that you/your store is prohibited from selling, storing, or delivering tobacco products. This is called automatic prohibition and the notice also indicates how long the exclusion will be
- the SFOA exclusion notice is given to tobacco stores/sellers that have two offences or violations in the last five years
- depending on how many offences were committed for the past five years, exclusion can be for half a year, nine months, or a year
- the amended version of SFOA exclusion is now added where automatic prohibition takes effect to any seller, retailer, or owner that commits two violations in five years
Offences that are considered violations of TTA/SFOA
- selling tobacco to minors or anyone under the age of 19
- selling tobacco to someone who looks younger than 25 years old without asking for an identification
- selling of tobacco that doesn’t follow correct packaging
- non-compliance with required signage for your store
- selling tobacco via vending machines
- selling or storing tobacco even when you are currently excluded by the TTA or SFOA
- selling and storing unmarked cigarettes and illegally stamping cigarettes which is a violation of the TTA
Settling a Notice of Assessment
You will receive a Notice of Assessment if an inspector requires you to show proof that you paid your taxes. Once received, you have 30 business days to produce the proof needed then you can file a Notice of Objection.
Once the Ministry of Finance issued a Notice of Assessment, you have to settle the payment right away. Your outstanding due will earn interest daily until it gets paid in full. Cheque payment is accepted and can be sent to the Minister of Finance via mail. Their mailing address is:
Ministry of Finance 33 King Street West PO Box 620 Oshawa ON L1H 8H5
Notice of Assessment Objection
Notice of Objection can be filed after receiving a Notice of Assessment if you believe that it was issued in error. The Notice of Objection will be reviewed by the Ministry of Finance’s Advisory, Objections. Appeals and Services branch. You can file your Notice of Objection within 180 days after the Notice of Assessment was sent to the mail. Rest assured that the Ministry’s goal is to review and address all Notice of Objections as soon as possible.
The form for Notice of Objection is available here or you can request it via mail by calling the Ministry of Finance at 1-866-ONT-TAXS (1-866-668-8297).
