Toronto May Tax Cannabis Sales at Municipal Level

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In an open letter to Ontario Premier Kathleen Wynne, Toronto Mayor John Tory has indicated that Toronto may tax cannabis sales at the municipal level.

In his letter dated July 17, 2017, Mayor Tory expressed the view that the Province should engage in planned consultations with the City of Toronto, as well as with other stakeholders, cities, towns and municipalities, concluding that he is “sure you agree that Toronto holds an essential place at the table as…decisions are made.”

Mayor Tory indicated his support of the legalization of marijuana but expressed a number of concerns including how any retail distribution will fit within existing communities and the the fact that the people of the City of Toronto would not support future widespread retail locations in residential neighbourhoods or in “certain retailing areas”.

Perhaps more notable was Tory’s concern that the majority of the enforcement of cannabis-related regulations will fall onto the shoulders of the municipalities through licensing, zoning by-law enforcement and municipal policing.  Tory noted that regardless of the particulars of the decisions that end up being made with respect to retail and consumption, there will undoubtedly be increased costs for the City of Toronto.

Tory indicated to Wynne that he wishes to discuss the magnitude of those costs and reach an agreement with her on both increased public health funding and a dedicated share of increased provincial revenues attributable to the sale of cannabis.  On that point, Tory indicated that “discussions might also include the possibility of a special levy on marijuana sales… to offset these increased costs.”

Notably, the City of Toronto Act (the “Act“) as it is currently constituted would prohibit the City of Toronto from imposing a direct tax on cannabis retail sales.

Section 267(2)(5) of the Act provides that Toronto is not permitted to impose a sales tax on a person in respect of the acquisition or purchase of any tangible personal property, any service, or any intangible property, save and except for specific exceptions set out in the Act.

Interestingly, the purchase of alcohol and tobacco are already exceptions set out under the Act.

Whether the Province is prepared to amend the Act or pass regulations as necessary in order to permit the City of Toronto to directly tax cannabis sales remains to be seen.  Without a doubt, the political fight for a piece of cannabis revenues is one that will be ongoing and interesting to watch.

Keep checking back here for further details as they occur.

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