Tax and Revenue Administration Alberta Tobacco Tax Act Information Circular  TTA-2R2

TTA-2R2 / September 2006

NOTE: This Information Circular is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this Information Circular and governing legislation, the legislation takes precedence.
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ALBERTA TOBACCO TAX ACT INFORMATION CIRCULAR:
OFFENCES, PENALTIES AND ENFORCEMENT

This Information Circular provides information on the following topics:

• Offences and Penalties
  • Consumers
  • Sellers
  • Marking
  • Records
  • Returns
  • Negligence
  • False Statements
• Enforcement
  • Inspection
  • Search and Seizure

Offences and Penalties

Consumers

1. Consumers are required to pay tax on tobacco at the time of purchase. A consumer who fails to pay the tax as, and when, required is guilty of an offence and upon conviction for a first offence subject to a fine up to $5,000, or up to 30 days imprisonment, or both a fine and imprisonment. Upon conviction for a second or subsequent offence, a consumer could be fined up to $15,000, or receive up to six months imprisonment, or both a fine and imprisonment.
   
   
2. It is an offence for anyone not entitled to purchase tax-free tobacco in Alberta to be in possession of black stock product (cigarettes, tobacco sticks and fine cut tobacco marked as required by federal legislation or regulation, and not for tax-paid sale in a province). Upon conviction for a first offence the person is subject to a fine up to $5,000, or up to 30 days imprisonment, or both a fine and imprisonment. Upon conviction for a second or subsequent offence, a person could be fined up to $15,000, or receive up to six months imprisonment, or both a fine and imprisonment. For more information on black stock, see the Alberta Indian Tax Exemption (AITE) series of Information Circulars.
   
   
3. It is also an offence for a person to be in possession of more than 200 cigarettes, 200 tobacco sticks or 200 grams of manufactured tobacco not marked for tax-paid sale in Alberta, unless the person is:
   
   • a wholesaler or importer with written permission from Tax and Revenue Administration (TRA) to possess, store or sell these products;
   • in possession of a receipt showing Alberta tax was paid when the tobacco was brought into Alberta through a port of entry, or received by mail from a place outside Canada; or
   • in possession of tobacco purchased in another province or territory with a copy of the return filed with TRA, reporting and paying the tobacco tax.

Upon conviction for a first offence the person is subject to a fine up to $5,000 or up to 30 days imprisonment, or both a fine and imprisonment. Upon conviction for a second or subsequent offence, the penalty could be a fine up to $15,000, or up to six months imprisonment, or both a fine and imprisonment.

For additional information on Alberta's tobacco marking program see Information Circular TTA-1, Overview of Tobacco Tax .

4. The same type of penalty also applies to a person who possesses more than 1000 cigarettes or tobacco sticks, more than 1000 grams of fine cut tobacco, cigars containing more than 1000 grams of tobacco or any combination containing more than 1000 grams of tobacco.
   

Sellers

5. A person selling tobacco to consumers must collect the tax owing on that sale and remit the tax collected to a tax collector or, if so directed, directly to the Minister. A person who fails to collect or remit tobacco tax as required is guilty of an offence and, upon conviction, is subject to the fines and prison terms set out in paragraph 8.
   
   
6. Unless in receipt of written permission from TRA, the wholesaler or importer cannot sell or possess cigarettes, tobacco sticks or fine cut tobacco that is not Alberta-marked. This provision applies both to black stock cigarettes, tobacco sticks or fine-cut tobacco and those products marked for sale in other jurisdictions. For requirements relating to the sale and purchase of black stock, see the AITE series of Information Circulars. A wholesaler or importer found to be in contravention is guilty of an offence and subject, upon conviction, to the fines and prison terms set out in paragraph 8.
   
   
7. It is an offence for a person to purchase, possess, store, sell or offer for sale cigarettes, tobacco sticks or fine cut tobacco not marked for tax-paid sale in Alberta, unless:
   
   • the person has written permission from TRA to do so; or
   • in the case of black stock, the person is an exempt-sale retailer or a duty-free shop.

A person found to be in contravention is guilty of an offence and is subject, upon conviction, to the fines and prison terms set out in paragraph 8.

8. It is an offence for a person to sell tobacco for resale without a valid wholesaler's licence issued by TRA or for an importer to sell tobacco to a consumer without a valid importer's licence issued by TRA. It is also an offence for a retailer to purchase tobacco from anyone other than a wholesaler possessing a valid licence. A wholesaler, importer or retailer found to be in contravention is guilty of an offence and is subject, upon conviction, to the fines and prison terms set out in paragraph 8.
   
   
9. Upon conviction of any of the offences outlined in paragraphs 4 though 7, a person is subject to the following penalties:
   
   • for a first offence - a fine of up to $10,000 or up to 6 months imprisonment, or both a fine and imprisonment;
   • for a second offence - a fine of up to $25,000 or up to one year imprisonment, or both fine and imprisonment;

   and

• A fine of three times the amount of tax that:
  
  • should have been collected and remitted by a person selling tobacco to consumers;
  • would have been payable under the Tobacco Tax Act (the Act) by a wholesaler, importer, or retailer if the tobacco were marked for tax-paid sale in Alberta and sold to a consumer in Alberta; and
  • would have been payable by a wholesaler or importer without a valid licence or a retailer had the tobacco been sold to a consumer.

Penalties specific to the possession and sale of black stock are outlined in Information Circular AITE-4, Offences and Penalties .

Marking

10. Any person who marks tobacco without a permit or holds a valid permit and refuses or neglects to mark packages as required is guilty of an offence. Any person found guilty of either offence is, upon conviction, subject to a fine of up to $1,000,000 or up to three years imprisonment, or both a fine and imprisonment.
    
    
11. Any person who holds a permit to mark tobacco must follow all conditions or restrictions stated in the permit or specified in the Tobacco Tax Regulations. A permit holder who does not follow the conditions or restrictions is guilty of an offence and upon conviction, subject to a fine of up to $10,000.
    
12. Any person who has received permission from TRA to handle tobacco that is not Alberta-marked, or is marked for sale in other jurisdictions must follow all conditions and restrictions specified in the authorization, legislation and regulations. To do otherwise is an offence and upon conviction is subject to a fine of up to $10,000.

Records

13. A person who fails to maintain records and books of account as required under the Act may be issued a requirement letter by TRA specifying the records that must be kept. Any person who has been issued a requirement letter and who fails to maintain the records specified in the requirement letter is guilty of an offence and is subject to a fine of $50 for each day he/she fails to maintain the required records. For details on records required under the Act and retention periods, see Information Circular TTA-5, Administration .

Returns

14. Any person who fails to file a return as required by the Act, or provide information or produce documents as required by the Act or the regulations is guilty of an offence and is subject to a fine of $50 for each day of default.

Negligence

15. If, in the opinion of the Minister, there has been neglect, carelessness, wilful default, fraud or evasion by a person resulting in an amount owing to the Crown, a penalty of 25 per cent of the amount owing may be assessed against the person.

False Statements

16. Any person who makes false statements, alters records or makes records available to another person to be altered, makes false or deceptive entries in records or wilfully attempts to evade compliance with the Act or the Regulations is guilty of an offence. The fine for the offence is up to $10,000 or imprisonment for up to two years, or both the fine and imprisonment, in addition to any other penalty provided by this Act.

Inspection

17. TRA auditors are officers authorized by the Minister to conduct inspections and audits of records relating to the collection of tobacco tax or Alberta's tobacco marking program. Auditors are authorized to enter premises and require the owner or manager of the premises to give all reasonable assistance and make reasonable efforts to answer questions the auditor may have relating to the administration of the Act. Staff from the Alberta Gaming and Liquor Commission conducts investigations under the Act.

Search and Seizure

18. Typically, an officer must have a warrant before searching premises; however, the Act provides that, if an officer believes on reasonable and probable grounds that there has been a contravention of the Act or the regulations and that obtaining a search warrant would cause a delay that could result in the loss or destruction of evidence, the officer may, stop a vehicle or enter any premises or place, other than a personal residence, without a warrant and search and seize any records or other evidence.
    
    
19. The Act also permits an officer to seize a vehicle, if he/she believes on reasonable and probable grounds that a vehicle was used in the contravention of the Act or the regulations. If the registered owner is not present when the vehicle is seized, notice will be given to him/her as soon as possible.
    
    
20. If charges under the Act are not laid, items seized from a person will be returned to that person within a reasonable time. If there has been a conviction for asn offence under the Act, items seized may either be forfeited to the Crown as part of the penalty for the offence or, if the judge so declares, returned to the convicted person. Where the judge has ordered the property seized be returned the convicted person must apply to the Clerk of the Court for the return of the seized items after the expiration of the period for filing an appeal.