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Taxes on Fuels

Federal taxes

The federal tax you pay at the pump has two components:

• Excise Tax is charged as a flat rate of 10 cents per litre for gasoline (in effect since 1995) and 4 cents per litre for diesel fuel (in effect since 1987). Furnace oil, natural gas and propane are exempt from this tax (only the GST or HST applies).
  
  
• Goods and Services Tax (GST) is calculated at 7% on all petroleum products, including gasoline, diesel fuel, furnace oil and propane. This tax is based on a percentage of the retail price, a method known as ad valorem. For example, in January 2005, when gasoline prices averaged 79.0 cents per litre, the GST accounted for 5.1 cents a litre and in August, when prices averaged about $1.00, the GST accounted for 6.5 cents a litre.   
  
  In Newfoundland and Labrador, Nova Scotia and New Brunswick, the GST and the provincial retail sales tax are combined to form the 15% Harmonized Sales Tax (HST), applicable to all retail petroleum products. 

Provincial and municipal taxes

Provincial governments and some municipalities charge tax on gasoline and other petroleum products. As of January 2006, provincial taxes ranged from 6.2 cents per litre (Yukon) to 20.2 cents per litre (Prince Edward Island).  Some provinces also impose an additional sales tax.

A tax is also collected on gasoline in three municipalities: Montreal (1.5 cents per litre), Vancouver (6.0) and Victoria (1.5). In Vancouver and Victoria, the tax also applies to the purchase of diesel fuel.

Tax exemptions on alternative fuels

Alternative fuels are exempt from the federal excise tax.  In the case of blended fuels where products such as ethanol and biodiesel are mixed with gasoline or diesel, the non-petroleum portions are tax exempt. Some alternative fuels are also exempt from provincial taxes.

Also read

Current Taxes on Fuels on Petroleum Products – January 2006
Current Taxes on Fuels – Fuels for Automotive Use – January 2006