Tobacco sticks are provided for in the federal Excise Act which was amended in 1991 to include the new rate of excise duty and the definition for tobacco sticks. At the time it was acknowledged that partially-made cigarettes, requiring some preparation prior to smoking, did not fit into any existing category. Tobacco sticks can only be made by a licensed tobacco manufacturer under the same regulatory requirements as cigarettes.
At the federal level, cigarettes and tobacco sticks attract both excise duties and excise taxes. On the total sale price of a carton of 200 cigarettes, excise duties represent $5.50, while on a carton of 200 tobacco sticks, excises duties represent $3.67. As a result of the increased taxes announced on February 13, 1998, excise taxes on cigarettes and tobacco sticks vary from $2.25 to $5.35 for a carton of cigarettes and from $1.85 to $2.93 for a carton of tobacco sticks, depending in which province the tobacco products are offered for sale. This situation is due to the fact that the federal excise tax rate is linked to the provincial tax rate for tobacco products. For example, in Quebec, a carton of 200 cigarettes would attract $7.75 in federal duties and taxes compared to $5.52 for 200 tobacco sticks. In Alberta the duty and tax is $10.85 on a carton of cigarettes and $6.60 on tobacco sticks.
The government has also indicated its intent to review the tax differential existing between the two products.