Marijuana missteps – a taxing situation

By Rachel Herscovici, Windsor Law J.D. Candidate 2020

As with all good things, medical marijuana must be subject to a tax.

And taxes are an excellent way at evaluating what a country values.

Specifically, I am referring to the taxation of medical marijuana and the implications under the new Cannabis Act. In other words, another tax on disability.

Medical marijuana users represent a noteworthy proportion of people with disabilities in Canada.

As of September 2018, approximately 342,103 Canadians were registered with licensed marijuana producers and approximately 25,447 operations were licensed to grow their own supply of medical marijuana. Licensed providers have sold approximately 1,755 kilograms of dried cannabis to licensed users, providing a lot of medicine to a lot of people.

However, medical cannabis is not always financially accessible. In 2017, the average price of medical cannabis was approximately $8.18 per gram leading to approximately $14,355,900.00 spent on dried cannabis alone (not including oils), by Canadians as of September 2019. But the one in seven Canadians over the age of 15 living with a disability earn approximately $10,000 dollars less than those Canadians living without a disability.

Most pertinent to the cost issue of medical marijuana is the fact that every dollar is subject to sales tax. Moreover, with the enactment of the Cannabis Act in October of 2018, medical marijuana is now also subject to an excise tax.

What is an excise tax? It’s most commonly referred to as a “sin tax” and it is applied to things like alcohol and tobacco. Subjecting recreational marijuana to this tax is not surprising – the government wants to profit off legalization as much as possible, raise the price and deter use – like cigarettes. But adding additional taxes to medical marijuana is effectively taxing medicine, calling into question why the government wants to make access to medicine more difficult or if they just don’t care.

This issue of taxation and medical marijuana is not a novel concern. The Courts have dealt with it before. Specifically, the case of Hedges v Canada sets the foundation for dealing with taxing medical marijuana before excise taxes, when it was subject to just GST.

Around 1989, Mr. Gerry Hedges, a medical marijuana user himself, began selling his dried medical marijuana (which he named after his pet dog Pro-Chi), to the British Columbia Compassion Club Society (BCCCS). The BCCCS was a society dedicated to providing legal access to medical marijuana to members who were admitted only with a physician’s certificate, and from suppliers whose products that were tested regularly for efficacy and safety.

However, Mr. Hedges never received a license to possess, cultivate or sell his product and in January, 2010. Mr. Hedges’ operation was raided by the police for illegal activity. Shortly thereafter, Mr. Gerry Hedges was reassessed by the Canada Revenue Agency (CRA) and he was found to owe $14,968.43 in Goods and Services Tax (GST) for his sales of dried marijuana between 2007 and 2009.

Mr. Hedges’ conduct was in violation of the Criminal Code. But, what did taxes have to do with the unlicensed production of medical marijuana? Mr. Hedges believed the dried plant to be zero-rated. The term “zero-rated” refers to taxable items that have been given a tax rate of zero – items like basic groceries and prescription drugs. Thinking the medical cannabis he sold qualified under the zero-rating umbrella, Mr. Hedges did not collect the GST on any of his sales leading to that outstanding amount of GST which he appealed to the Tax Court of Canada.

At the heart of the case was the Excise Tax Act. Specifically, a provision which sets out the standards and specifics of zero-rated prescription drugs and biologicals.

Mr. Hedges’ main issue was “the addition of the need for a “prescription” to qualify as a drug for purposes of Schedule VI-I-2(d) of the Act.”

Ultimately the Court found that dried medical marijuana available through the Medical Marihuana Access Regulations (MMAR) was not zero rated and while the MMAR provided the user with an authorization to possess cannabis, the applicants doctor did not actually write a prescription like traditional prescription drugs.  

This problem has carried on to the succeeding legislation.

Despite the government’s recent Cannabis Act, this language remains the same and the issue of taxes has become central to the equality and access issues surrounding medical marijuana.

When challenging the taxes on medical marijuana, it becomes vibrantly clear that the issue is with a lack of a proper prescription for it.

The current system for filling a traditional prescription is roughly as follows: your doctor writes it pursuant to the proper requirements, you take it to the pharmacist and they fill it. Contrast this with the complexities of the current system to obtain medical cannabis where your doctor fills out a medical document (which includes almost all of the same information, if not exactly the same information as a traditional prescription), then you are approved by Health Canada and then you are registered with a licensed cannabis producer who dispenses your medication to you – effectively “filling the prescription” or following the order/dosage maximums on the medical document. The similarities are muddled, but clearly identifiable broken down step-by-step.

Overall, the main difference in filling a prescription for one’s cholesterol medication and a medical document for cannabis is effectively the middle man: Health Canada. Health Canada must approve a patient based on the medical document which effectively looks the same as a prescription. This approval effectively exempts users from the wrath of the criminal law which was the entire reason for the Minister of Health’s involvement in the days of the MMAR, MMPR and ACMPR.

With legalization, Health Canada can now step back from the approval process and hand control back to the medical professionals and classify medical marijuana as a prescription so that it may be properly zero-rated and treated like other prescription drugs. After all, medical marijuana is medicine approved by the government since 2001.

And while many medical professionals are not yet comfortable to prescribe medical marijuana as medicine, many of these concerns go to the fact that little research was able to be done on its effects because of its previously illegal status, and little research has been done on dosing and more. But, given how many legal users of medical marijuana there were, the medical community was interested, aware and supportive of some possible benefits to medical marijuana. I had a hope that legalization would bring more medical research. But now, given the process, and the little benefits received by medical users, they may be forced to use recreational cannabis to self medicate under little supervision rather than jump through the medical document hoops

People with disabilities have long been suppressed in between the lines of legislation. As is the case with the Cannabis Act, they have been left out of the equation all together. Ultimately, it is either for the legislature to take action or for the matter to be litigated through the court system.