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 Duties & Taxes Division
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 165778
Dear [Client]:
Subject: EXCISE INTERPRETATION
Application of Excise Duty to cider production
Thank you for your letter of October 14, 2014.
All legislative references are to the Excise Act, 2001 and the regulations therein, unless otherwise specified.
We understand that you wish to clarify the application of the Act, on behalf of your client (the Producer), to the following set of facts:
1. The Producer plans to begin producing apple cider in […][Province X].
2. The final product contains only the following:
* apple juice and/or apple concentrate produced from apples harvested in [Province X];
* water sourced from Canada;
* natural flavours produced in Canada from agricultural or plant products grown in Canada;
* artificial flavours produced outside Canada from non-agricultural or non-plant products; and
* sugar, yeast, filtering agents, and gases from outside Canada.
3. The final product contains more than 0.5% absolute ethyl alcohol by volume and is produced by the alcoholic fermentation of apples, without the use of distillation.
RULING REQUESTED
You would like to know whether the cider product would qualify for the exemption set out in paragraph 135(2)(a) of the Act.
Although you requested a ruling, we are issuing an interpretation because your request does not identify the producer, which is a requirement for issuing a ruling as set out in paragraph 32 of GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service.
For your convenience, a copy of GST/HST Memorandum 1-4 is available at http://www.cra-arc.gc.ca/E/pub/gm/1-4/README.html.
INTERPRETATION GIVEN
Based on the facts outlined above and our review of the relevant legislation and publications, the cider would meet the definition of wine (Footnote 1) in the Act because it is made from apple juice and/or apple concentrate. That means the wine must be produced and packaged by a person issued a wine licence under the Act (Footnote 2).
Excise duty is imposed on wine that is packaged in Canada at the time the wine is packaged (Footnote 3); paragraph 135(2)(a) exempts wine produced in Canada and composed wholly of Canadian-grown agricultural or plant products (commonly referred to as 100% Canadian wine) from excise duty.
Provided the artificial flavours sourced outside Canada are not produced from or contain any agricultural or plant products, then the cider, as described, would qualify for the exemption.
Any wine packaged in Canada by a wine licensee would qualify as 100% Canadian wine provided:
* all of the primary raw materials that are fermented (including grapes, berries, other fruits, honey and dandelions) have been grown in Canada;
* if the wine is produced from juice, the raw material used to make that juice (e.g., grapes, berries, apples) have been grown in Canada;
* all juices, juice concentrates, fruits or plant products added at any time before packaging have been made wholly from Canadian-grown agricultural or plant products; and
* any wine, beer or spirits added at any time before packaging, including brandy or fruit spirits, have been made in Canada wholly from grains, fruits and other agricultural product that have been grown in Canada.
Some additives used in the winemaking process, such as sugar and yeast, are considered incidental ingredients are not required to be wholly from Canadian sources. Regardless of their origin, these ingredients would not exclude an otherwise qualifying wine from the excise duty exemption. (Footnote 4)
[…]. The Canada Revenue Agency’s policy is to base the excise duty exemption for 100% Canadian wine on the origin of specific ingredients as outlined above; the reason why ingredients are added and their impact on taste or alcohol content are not material to the determination. The origin of ingredients determined to be incidental will not otherwise affect the wine`s eligibility for the excise duty exemption.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, this interpretation, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the Act, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me at (613) 957-4156 or Joy Piepjohn, Manager, Excise Duty Operations – Alcohol at (613)
957- 8642.
Yours truly,
Rupam Faruquee
Rulings Officer
Excise Duty Operations – Alcohol
Excise Duties & Taxes Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 Section 2
2 Subsection 62(1)
3 Subsections 135(1) and (3)
4 Excise Duty Memorandum EDM 4.1.1 (http://www.cra-arc.gc.ca/menu/EXMS-e.html), paragraphs 37 to 42
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