Making tax-exempt tobacco sales

When you sell tobacco exempt of tax on First Nations land as an exempt sale retail dealer (ESRD), you must:

1. Sell tobacco that was purchased tax-exempt (e.g. cigarettes and fine cut tobacco that bears the federal black stock mark)

2. Ensure the purchaser is eligible and the tobacco is purchased for personal use

3. Ensure the amount of tobacco you sell to the eligible purchaser is within the sales limit

4. Document the tax-exempt sale

Eligible purchasers

First Nations individuals

A First Nations individual is an individual who is an “Indian” under the Indian Act (Canada) and whose property is exempt from taxation under section 87 of the Indian Act (Canada) or a provision of a final agreement equivalent to that section.

Individuals with a Certificate of Indian Status card or Temporary Confirmation of Registration Document are generally eligible to purchase tax-exempt tobacco.

Indigenous Services Canada issues a Secure Certificate of Indian Status card (SCIC) to each individual registered as an Indian under the Indian Act (Canada) provided they apply for the card. Some Band offices may issue a paper-laminate or plastic Certificate of Indian Status card.

Treaty Nation individuals with Certificate of Indian Status cards are eligible to purchase tax-exempt tobacco on or after the effective date of the amendments to their final agreement. 

Effective dates for reinstatement of tax exemptions for Treaty Nations

Treaty Nation individuals/Treaty Nation lands (former reserve lands)	Effective date for reinstatement of tax exemptions
Tsawwassen Members/Tsawwassen Lands	March 27, 2023
Maa-nulth-ath/Maa-nulth First Nation Lands	June 23, 2023
Tla’amin Citizens/Tla’amin Nation Lands	Continued (June 23, 2023)
Nisga’a citizens/Nisga’a Lands and Category A Lands	January 1, 2024

First Nations bands

Band has the same meaning as in section 2 of the Indian Act (Canada).

Direct purchases of tobacco made in the name of a band on First Nations land are eligible for an exemption from tobacco tax. For example, a band is exempt from tobacco tax if the invoice is specifically made in their name.

An individual can purchase tobacco on behalf of a band if the individual has written authorization from the band to act for them.

The authorization must:

• Show the band name and number
• Be signed by an appropriate band official
• State the tobacco is for band use

Personal use

First Nations individuals and bands are only exempt from paying tobacco tax when they purchase tobacco for personal use. Personal use does not include:

• Purchases made on behalf of a person who would not be eligible to purchase tax-exempt tobacco directly
• Purchases by a non-eligible person who is paying for tobacco requested by a First Nations individual
• Purchases for resale to another person, even if that other person is eligible for the exemption
• Purchases for business use in a corporation, cooperative, tribal council or band-empowered entity

If you believe that tobacco isn’t being purchased for the personal use of a First Nations individual or band, you must not sell tax-exempt tobacco.

Sales limits

There are limits to the amount of tax-exempt tobacco you can sell to an eligible purchaser. You can sell a maximum of:

• 2 cartons per day
• 8 cartons per month

A carton is 200 cigarettes or a combination of an equivalent amount of tobacco. For ease of administration, we generally consider the following amounts each equivalent to one carton:

• 200 grams of loose tobacco
• 200 units of heated tobacco products
• 50 cigars   

In certain circumstances, we may determine a different carton equivalent than the amounts stated above. For example, if a new heated tobacco product is introduced that contains an amount of tobacco not equivalent to the amount of tobacco in one unit of the current heated tobacco products, we may determine a different carton equivalent for the new heated tobacco product.  

This 2/8 rule applies to all tax-exempt tobacco. Frequent sales to the same purchaser at the limit are not a normal pattern and may indicate the tobacco purchased is not for personal use.

Purchasers can request prior approval to purchase more than the 2-carton daily limit by sending an email or fax to us at 250 387-1852. They can’t request to purchase more than their monthly limit. The request should contain details of why the purchase is needed.

The purchaser will provide you with a special authorization number once an authorization is approved. You must record this number on your signature sheet.

Document sales

You must record every tax-exempt tobacco sale you make on the Schedule of Exempt Tobacco Sales (FIN 361), also known as signature sheets.

You must submit the signature sheets, along with an Exempt Sale Retail Dealer Return, each month by the due date. Contact us if you need a supply of signature sheets. 

The Tobacco and Fuel Tax Exemption Simplification (TAFT) system is an electronic system that replaces the paper-based process with real-time verification and recording of each tax-exempt sale.  If you are an ESRD who uses TAFT, you must record every sale in TAFT. You do not need to complete signature sheets or submit a paper ESRD return.  

Sales to an individual with a Certificate of Indian Status card

When an individual with a Certificate of Indian Status card is requesting to purchase tax-exempt tobacco, you must:

1. Ensure the individual is an eligible purchaser

2. Ensure the photograph on the status card is your purchaser

3. Record the individual’s name, Certificate of Indian Status registration number and quantity of tobacco purchased on the signature sheet

4. Obtain the purchaser’s signature on the signature sheet at the time of sale

5. Ensure this signature matches the signature on the status card

Expired card or Temporary Confirmation of Registration Document

You may accept an expired Certificate of Indian Status Card or Temporary Confirmation of Registration Document (TCRD) ) issued by Indigenous Services Canada as proof the individual qualifies to purchase tax-exempt tobacco if the individual provides an additional government-issued photo identification.

Visit Indigenous Services Canada for more information on the Temporary Confirmation of Registration Document or Secure Certificate of Indian Status card.

Sales to a band on First Nations land

For direct sales to a band, you must:

1. Record the band’s name, 3-digit number and quantity of tobacco purchased on the Schedule of Exempt Tobacco Sales (Fin 361)

2. Obtain the signature of the band’s representative who takes possession of the tobacco

When presented with an individual’s written authorization to act for the band, you must:

1. Verify the individual’s identification matches the name of the individual authorized by the band

2. Obtain the signature of the individual purchasing on behalf of the band on the signature sheet

3. Record the band’s name, 3-digit number and quantity of tobacco are on the signature sheet

Duty-free shops

Duty-free shops are intended only for customers who are about to leave Canada. For more information on sales and reporting for duty-free shops, refer to Canada Border Services Agency.