Excise Tax Act: Taxable Goods, Licensing, and Filing Rules

The Excise Tax Act (R.S.C., 1985, c. E-15) is the federal statute that imposes excise tax on a short list of goods — fuel-inefficient vehicles, automotive air conditioners, and motive fuels — and, in a separate part of the same statute, the Goods and Services Tax. If you manufacture, import, or wholesale the taxable goods and your annual sales exceed $50,000, you need an excise tax licence from the Canada Revenue Agency and you file returns on a monthly cycle, with payment due by the end of the following month.¹

What Goods Are Taxed Under Part III

Part III of the Act imposes excise tax on the goods listed in Schedule I. The list is narrow and targeted rather than a general consumption tax. Tax becomes payable when domestic goods are delivered to a purchaser or when imported goods enter the country.²

Fuel-inefficient vehicles. The “green levy” applies to passenger automobiles, station wagons, vans, and SUVs based on their fuel consumption rating, with rates rising as efficiency worsens. The CRA publishes a list of vehicle models and applicable rates each year.³
Automotive air conditioners. A flat $100 excise tax applies to air conditioning units designed for automobiles, station wagons, vans, or trucks, whether sold separately or permanently installed at the time of sale or import.²
Motive fuels. Unleaded gasoline and unleaded aviation gasoline are taxed at $0.10 per litre; diesel and non-gasoline aviation fuel at $0.04 per litre; leaded gasoline at $0.11 per litre. Heating oil is exempt.²

The fuel rates are temporarily on hold. The federal government suspended all fuel excise tax rates to zero from April 20, 2026 through September 7, 2026, with full rates returning September 8, 2026. The suspension covers gasoline, diesel, and aviation fuel for which tax becomes payable after April 19, 2026.⁴ Returns for periods inside that window should reflect the zero rate.

What the Act Does Not Cover

Tobacco, alcohol, and vaping products are not taxed under the Excise Tax Act. They fall under a separate statute, the Excise Act, 2001, with its own licensing and filing rules.⁵ If you handle those products, register under that statute instead.

Part IX of the Excise Tax Act is a different animal: it establishes the 5% Goods and Services Tax, which in participating provinces is combined with a provincial component into the Harmonized Sales Tax.⁶ GST/HST registration and filing form their own regime; everything below deals with the Part III excise taxes.

Who Needs an Excise Tax Licence

If you manufacture goods subject to Part III excise tax and your annual sales of those goods exceed $50,000, you must hold an excise tax licence (an “E” licence). The tax obligation begins on the day during the calendar year when your sales cross that threshold.⁷ Manufacturers whose annual sales stay under $50,000 qualify as small manufacturers and are exempt from the licensing requirement, though they can apply voluntarily.⁸

Wholesalers who want to buy taxable goods without paying excise tax upfront, intending to resell them to other licensed parties, can also register. Importers of taxable goods have to settle federal levies at entry, and an active CRA account simplifies that process.⁷

How to Register

Registration begins with your Business Number, the nine-digit identifier the CRA assigns when you first register a business. All your federal tax accounts (excise tax, GST/HST, payroll, corporate income tax) hang off the same BN.⁹

The formal application is Form L15, Application for Licence under the Provisions of the Excise Tax Act.¹⁰ You provide:

Your Business Number in the identification block at the top of the form.
The legal entity name exactly as it appears on your articles of incorporation or partnership agreement. Mismatches with your corporate filings can delay processing.
The type of activity: manufacturing, wholesaling, or both.
Product details, including tariff classifications where applicable.
Physical addresses of every manufacturing plant or storage facility where taxable goods are handled.

Get the product classifications right the first time. Inconsistencies between what you declared on the application and what appears on your returns tend to draw audit attention.

Filing Deadlines and Reporting Periods

The default reporting period for excise tax licensees is one fiscal month. Your return and payment are due by the last day of the first month following each reporting period, so a January period has a February 28 or 29 deadline.¹ When the due date falls on a weekend or public holiday, it moves to the next business day.

If your total excise tax liability (including any associated persons) did not exceed $120,000 in both the current and previous fiscal year, and you have been licensed for at least twelve consecutive months, the CRA may authorize half-year filing. Half-year filers face the same last-day-of-the-following-month deadline, just with six-month reporting periods.¹

You can file electronically through the CRA’s My Business Account, which lists excise tax (RE account) as a dedicated filing option.¹¹ Paper returns are still accepted by mail to the appropriate regional tax centre, but processing takes considerably longer.

Record-Keeping Requirements

Every licensee has to keep records that let the CRA verify the excise tax owed. At a minimum, that means invoices, shipping manifests, and inventory ledgers tracking the movement of every taxable unit. Manufacturers need records tying raw material inputs to finished goods for each reporting period. Importers should keep the customs entry documents showing value and quantity of goods brought into the country.

Retain these records for six years after the end of the year they relate to.¹² If you have filed a notice of objection or have an appeal pending in the Tax Court of Canada, keep the relevant records until that matter is fully resolved, even if that runs past six years. The CRA can also issue a written demand requiring longer retention.

Penalties and Interest for Late Filing

Missing a filing deadline triggers a penalty under section 95.1. The calculation is 1% of the unpaid tax as of the due date, plus 0.25% of that amount for each complete month the return remains unfiled, up to twelve months.¹³ The cap means the maximum late-filing penalty comes to 4% of the unpaid balance (1% base plus twelve months at 0.25%).

Interest runs on top of the penalty. For the second quarter of 2026, the prescribed rate on overdue excise tax remittances is 7% annually.¹⁴ The CRA recalculates the rate quarterly. Interest runs from the original due date until the balance is paid and compounds daily.

Refunds and Drawbacks

If you paid excise tax on goods that were later exported, you can apply for a drawback. Section 70 allows drawbacks for goods exported from Canada, goods supplied as ships’ stores, and goods used for the repair or reconstruction of ships or aircraft.¹⁵ The application has to include evidence that the goods actually left the country or were used for the qualifying purpose.

For other refund situations, the CRA directs businesses to Form N15, Excise Tax Application for Refund, available as a fillable PDF on the CRA site.¹⁶ Keep copies of every supporting document. The CRA can request further evidence before paying.

Disputing an Assessment

If you receive an excise tax assessment you believe is wrong, you have 90 days from the date the notice is sent to file a notice of objection with the Minister. The objection must be in the prescribed form, explain your reasons for disagreeing, and set out all the facts you are relying on. Send it by prepaid mail addressed to the Minister at Ottawa.¹⁷

The 90-day window is firm. Missing it severely limits your options. If the Minister’s response is unsatisfactory, you can escalate to the Tax Court of Canada, but you cannot skip the objection step. During an active objection or appeal, keep every record related to the disputed period, even if those records are already older than six years.

1
Canada Revenue Agency. X6-2 Returns and Payments
2
Canada Revenue Agency. X3-1 Goods Subject to Excise Tax
3
Canada Revenue Agency. Rates of Excise Tax on Fuel-Inefficient Vehicles
4
Department of Finance Canada. Temporarily Suspending the Federal Fuel Excise Tax
5
Canada Revenue Agency. EDN105 – Adjusted Rates of Excise Duty on Tobacco Products Effective April 1, 2026
6
Department of Justice Canada. Excise Tax Act
7
Canada Revenue Agency. X2-1 Licences
8
Department of Justice Canada. Small Manufacturers or Producers Exemption Regulations
9
Canada Revenue Agency. Business Number and CRA Program Accounts
10
Canada Revenue Agency. L15 Application for Licence Under the Provisions of the Excise Tax Act
11
Canada Revenue Agency. Services Available in My Business Account
12
Department of Justice Canada. Excise Tax Act – Section 286
13
Department of Justice Canada. Excise Tax Act – Section 95.1
14
Canada Revenue Agency. Prescribed Interest Rates – Second Calendar Quarter 2026
15
Department of Justice Canada. Excise Tax Act – Section 70
16
Canada Revenue Agency. N15 Excise Tax Application for Refund
17
Department of Justice Canada. Excise Tax Act – Notice of Objection