Medical marijuana is subject to GST and HST, it seems
In Gerry Hedges v. The Queen, 2016 FCA 19, the Federal Court of Appeal recently ruled that medical marijuana was subject to GST.
The taxpayer sold marijuana to the British Columbia Compassion Club Society to provide to members who needed it for medical purposes. This was done outside the scope of the Medical Marijuana Access Regulations, which permitted certain people to legally buy and own marijuana. However, based on numerous Court cases, the Compassion Club and its patients were protected by the Charter of Rights, since access to marijuana is a legitimate health need for many patients.
The taxpayer was assessed for not collecting and remitting GST on his sales. He argued that, based on a technical reading of a hard-to-read rule in the GST legislation, marijuana was “zero-rated” (i.e., tax-free) as a drug.
The Tax Court dismissed Mr. Hedges’ appeal, and he appealed to the Federal Court of Appeal. The Court of Appeal did not address the technical arguments of the case, but simply ruled that Mr. Hedges’ sales were “unlawful” and therefore could not be zerorated. The Court of Appeal did not address the point that the sales were likely protected by the Charter of Rights.
So it appears that medical marijuana is subject to GST/HST — at least when its sale is unlawful. The status of medical marijuana sold “lawfully” is not yet clear, since the Federal Court of Appeal declined to address the legal arguments on that point. This letter summarizes recent tax developments and tax planning opportunities; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this letter, which are appropriate to your own specific requirements.
This letter summarizes recent tax developments and tax planning opportunities; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this letter, which are appropriate to your own specific requirements.