Tax and Revenue Administration Alberta Indian Tax Exemption (AITE) Special Notice Vol. 4 No. 15

Vol. 4 No. 15 / June 2007

ALBERTA INDIAN TAX EXEMPTION SPECIAL NOTICE:
TOBACCO TAX CALCULATIONS FOR AITE EXEMPT SALE RETAILERS

On April 20, 2007 Alberta's tobacco tax rates changed. Since this increase, large numbers of claims have been calculated incorrectly due to problems with rounding. The Tobacco Tax Act states that when the tax payable is calculated and it includes a fraction of a cent, the tax payable amount should be rounded to the next higher cent. The tax payable referred to in legislation includes the “ Tax Exempt Amount” calculated by retailers. The tax rate should not be rounded.

1. To help retailers calculate their claims correctly and avoid claim-processing delays, we are providing examples for reference.
   
   
   1. The tax rate on a package of 25 cigarettes (A3) is $4.625. This amount must be displayed on the paper voucher in the “Tax Rate” column. The “Tax Exempt Amount” should be rounded up using $4.63, if a single package was sold to a consumer.

   If the consumer purchases two packages of this product, then the tax exempt amount would be $4.625 “Tax Rate” multiplied by “Quantity” 2 = $9.25 “Tax Exempt Amount”.

   Do not round the tax rate then multiply $4.63 by 2 = $9.26, as this will result in a delay of your refund.

2. The tax rate on smokeless snuff (15 grams C22) is $2.775 per unit and this amount must be displayed on the paper voucher. The “Tax Exempt Amount” should be rounded up to $2.78 if one 15 gram container is sold.

If two 15 gram containers are sold to a consumer then the “Tax Exempt Amount” would be $2.775 “Tax Rate” multiplied by 2 = $5.55 “Tax Exempt Amount”.

Do not round the tax rate then multiply $2.78 by 2 = $5.56, as this will result in a delay of your refund.

3. If the retail selling price for a package of cigars is $15.26 per package and there are 20 cigars in this package, the following calculations should occur:

$15.26 divided by 20 cigars = $0.763 per cigar. In the tax rate chart, the rate for this cigar category is 49% (D2). The “Tax Exempt Amount” would be $0.763 x 49% = $0.374. This “Tax Exempt Amount” per cigar should be rounded up to $0.38 per cigar. When the $0.38 is multiplied by 20 cigars, the tax exemption for the package is $0.38 x 20 = $7.60.

2. Due to the large volume of errors in claims received since the tax rate change processing time has increased substantially. Please be prepared for some delays in the processing of your claim. Paper claims that have been prepared using the correct tax rates and calculations will be processed faster than those prepared incorrectly.
   
   
3. Please ensure that the tax rates used on your Point of Sale (POSS) system and your paper vouchers have not been rounded or your refunds will be delayed.
   
   
4. POSS Retailers must ensure that their tax rate tables are updated correctly with the current tax rates for all products; otherwise, transactions may be rejected.
   
   
5. Please contact us at (780) 427-3044 if you have any questions regarding this notice. If you are calling long distance from anywhere in Alberta, please call 310-0000 then enter (780) 427-3044 to avoid long distance charges.