Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 160826
April 22, 2014
Dear [Client]:
Subject: EXCISE RULING
Application of Federal Excise Tax to B-100 Biodiesel
Thank you for your letter of March 17, 2014, concerning the application of the Excise Tax Act to B-100 biodiesel.
All legislative references are to the Excise Tax Act and the regulations therein, unless otherwise specified.
STATEMENT OF FACTS
We understand the following:
* […][The Corporation] is looking at purchasing B-100 biodiesel.
* [The Corporation] would use the B-100 as a carrier for additives in wood preserving.
* The B-100 would be blended with base oil, then heated up such that the oil would be absorbed into wood in order to prevent rotting and decay from the elements.
RULING REQUESTED
You would like to know whether you are eligible for a rebate of or exemption from the federal excise tax that would apply to your prospective purchase of B-100 biodiesel.
RULING GIVEN
Based on the facts set out above, we rule that the B-100 biodiesel you would purchase would be subject to federal excise tax at the current rate of $0.04 per litre.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future change to the Excise Tax Act, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
Subsection 23(1) of the Act mandates that “…whenever goods mentioned in Schedule I are imported or are manufactured or produced in Canada and delivered to a purchaser of those goods, there shall be imposed, levied and collected…an excise tax in respect of the goods at the applicable rate set out in the applicable section of that Schedule…”. Section 9.1 of Schedule I lists the rate of federal excise tax on diesel fuel as $0.04 per litre.
Subsection 2(1) of the Act defines “diesel fuel” as including “any fuel oil that is suitable for use in internal combustion engines of the compression-ignition type, other than any such fuel oil that is intended for use and is actually used as heating oil”.
In your case, the B-100 biodiesel would not be intended for use nor actually used as heating oil.
Further, based on our extensive research, it is clear that B-100 biodiesel is indeed suitable for use in internal combustion engines of the compression-ignition type. Whether or not it is actually used in an internal combustion engine is irrelevant. If it is suitable for use, it is subject to federal excise tax.
Additionally, Paragraph 23(7)(a) states that the federal excise tax is not payable in the case of “goods that are purchased…by a manufacturer licensed for the purposes of this Part and that are to be incorporated into and form a constituent or component part of an article or product that is subject to excise tax under this Act, if the tax on the article or product has not yet been levied under this section”.
In the instant case, the initial purchase of B-100 would only be exempt from federal excise tax if the final product (the blend of base oil and B-100) were subject to federal excise tax in and of itself, and such federal excise tax had not yet been levied. However, the final product in this case (the blend of base oil and B-100) is not in and of itself subject to federal excise tax. As a result, the exemption under Paragraph 23(7)(a) would not apply.
The B-100 biodiesel that would be purchased in order to be incorporated into your base oil blend would be subject to federal excise tax at the current rate of $0.04 per litre.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-1140.
Yours truly,
Neil Varan
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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