Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@beaconhillwm.ca or via telephone at 778.433.1314. You can also read more about Phil at www.Beaconhillwm.ca/team/about-phil/
Cannabis, Income Tax and Justin Trudeau
23 October 15 
Marijuana Question
Hi
I have a close friend that runs a cannabis dispensary in Vancouver and he’s doing quite well. He offered to help me open up my own dispensary with his help. I do have a few questions before I take him up on his offer and actually go through with the business.
It’s really a grey area whether these marijuana dispensaries are actually legal or not. Currently the police in Vancouver seem to be letting everyone slide. I also notice that many of these dispensaries are operating as not for profits. Is this something I should be considering? Or should I just incorporate?
I’m assuming I have to pay taxes on any profits I earn? Or is marijuana profits even subject to income tax?
Any information you could provide would be great.
Thanks
XXXXX
Answer
Note: The answer below was changed slightly from the original answer to take into account the new Liberal government win.
Hi XXXXX
Yes, even though Cannabis is currently not legal and we’re in a current government transition you would need to pay tax on any income earned from your new marijuana dispensary. Also it appears as though it’s also subject to GST. Other than the quasi legal aspect of these dispensaries the tax treatment seems very clear. You would be taxed as though you were running a regular business.
In that case you could choose to incorporate or stay as a sole proprietor. Given the inherent risk to the core business, incorporating would be a good option. Forming a not for profit may also be an option, but only to the extent that the establishment is truly organized for the good of the society and meets the definition of a not for profit.
Once Mr. Trudeau rolls out his plan to legalize marijuana across Canada (which could take some time) we’ll have a much better idea of the tax rules that will surround these types of businesses. Part of his plan may not even include individual private dispensaries and it’s anyone’s guess what legalization will actually look like.
If you want to discuss these issues in more detail please feel free to call me at 250-381-2400.
Cheers
Phil
This commentary reflects the personal opinions, viewpoints and analyses of the Beacon Hill Wealth Management Ltd. partner providing such comments, and should not be regarded as a description of advisory services provided by Beacon Hill Wealth Management Ltd. or performance returns of any Beacon Hill Wealth Management Ltd. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Beacon Hill Wealth Management Ltd. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. Any discussion about taxation is for educational purposes only and should not be viewed as professional advice. Consult your tax professional for tax advice on your particular situation.
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