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.
August 12, 2015
Excise Duties and Taxes Division
Place de Ville, Tower A, 20th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 168897
Dear [Client]:
Subject: EXCISE INTERPRETATION
Application of Excise Tax on Fuel Imported into Canada
Thank you for your letter of March 19, 2015 concerning the application of the excise tax to fuel imported into Canada and sold to a licensed manufacturer.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
Based on the information provided, we understand the following:
• A U.S. resident corporation (US Co.) purchases bio-diesel in the U.S.
• US Co. wants to begin selling the bio-diesel to a Canadian purchaser.
• US Co. transfers title to a related Canadian corporation (Can Co.) immediately before the bio-diesel is exported from the U.S.
• Can Co. acts as the importer of record in respect of the importation of the fuel into Canada.
• Neither US Co. nor Can Co. is licensed as either a manufacturer or a wholesaler under the ETA.
• The Canadian purchaser is an excise tax licensed manufacturer who will blend the bio-diesel with gasoline and the end product (i.e. diesel fuel) which will be subject to excise tax when sold to a purchaser.
• Pursuant to the contract between US co., Can Co. and the Canadian purchaser, the terms of delivery are “delivered at terminal”. The contract specifically states that the Canadian purchaser is required to pay any duties levied in accordance with the provision of the Customs Act.
• “Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.
INTERPRETATION REQUESTED
You would like to know which company will be liable to pay the excise tax on the fuel at the time of importation and if the Canadian licensed manufacture will be able to purchase the fuel exempt from excise tax pursuant to 23(7)(a) of the ETA.
INTERPRETATION GIVEN
Based on the information provided, the excise tax will be payable by Can Co. at the time of importation and the fuel must be sold tax-paid to the Canadian licensed manufacturer.
Subsection 23(1) of the ETA imposes a tax on goods listed in Schedule I, such as bio-diesel, when the goods are imported or manufactured or produced in Canada and delivered to a purchaser.
Subsection 23(2) states that “where goods are imported, the excise tax imposed by subsection (1) shall be paid in accordance with the provisions of the Customs Act by the importer, owner or other person liable to pay duties under that Act …”.
Paragraph 23(7)(a) states that the tax imposed under subsection 23(1) is not payable in the case of goods that are purchased or imported by a licensed manufacturer, that are to be incorporated into and form a constituent or component part of an article or product that is subject to excise tax if the tax on the article or product has not yet been levied under section 23.
According to subsection 23(2), Can co. would be liable to pay the excise tax on the bio-diesel at the time of importation since they are the importer of record and do not hold a federal excise tax manufacturer or wholesaler’s licence.
Since Can Co. would pay the tax on the bio-diesel at the time of importation, paragraph 23(7)(a) would not apply […] given that the tax would have previously been levied. As a result, Can Co. would have to sell the fuel tax-paid to the Canadian purchaser even though the Canadian purchaser holds a manufacturer’s licence.
However, 23(7)(a) would allow the Canadian purchaser to import the bio-diesel tax-exempt under the manufacturer’s licence if they were the importer of record and the goods were to be incorporated into and form a constituent or component part of an article or product that is subject to excise.
The foregoing comments represent our general views with respect to the subject matter of your request. This interpretation, including any additional information, is not a ruling and, in accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the Excise Tax Act, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-4138.
Yours truly,
Nathalie Robitaille
Excise Taxes and Other Levies
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
Email this Content