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: 161501
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
[…][Baked Snack]
Thank you for your fax of April 10, 2014, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of […] (the Product) in […][different] flavours. Samples of the Product in each flavour were sent to us for review
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the facts to be as follows:
1. The Product contains bite sized pieces that are […], each piece approximately […] thick, […] wide and […] long.
2. The Product’s texture is […].
3. The Product is crunchy and crispy.
4. The Product is packaged loosely in […] gram bags that are similar to potato chip bags.
5. The front of the bag denotes the Product as […].
6. The front of the bag has the words […].
7. The back of the bag notes the ingredients and nutrition facts of the Product and contains the following descriptive statements: […].
8. The Product’s nutrition facts are listed per […], and correlate to the […] calories per serving.
9. […].
10. The […] flavored Product has the following ingredients: […].
11. The […] flavored Product has the following ingredients: […]
12. The […] flavored Product has the following ingredients: […]
13. […].
14. The Product is placed in the cracker aisle.
RULING REQUESTED
What is the tax status of the Product?
RULING GIVEN
Based on the facts set out above, we rule that the Product, in all flavours, is considered to be “similar snack foods” under paragraph 1(f) of Part III of Schedule VI to the ETA and is taxable pursuant to subsections 165(1) and 165(2) at the rates of 13%, 14% or 15%, depending on the place of supply.
EXPLANATION
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply, unless the supply is zero-rated (listed in Schedule VI to the ETA and subject to the GST/HST at the rate of 0%).
Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.
Paragraph 1(f) of Part III of Schedule VI to the ETA excludes from zero-rating the following:
chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels, but not including any product that is sold primarily as a breakfast cereal.
Paragraph 57 of the GST/HST Memoranda Series 4.3, Basic Groceries (MS 4.3) states:
"Products that are enumerated in paragraph 1(f) generally have potatoes, corn, or corn meal as a main ingredient. However, inclusion of ingredients not listed above would not preclude a particular product from falling within paragraph 1(f)."
The following factors as listed in paragraph 56 of MS 4.3 are used when determining whether a food product is similar to the snacks as identified in paragraph 1(f).
Properties
* Ingredients: potatoes, corn or corn meal.
* Flavours: In addition to salty, the product is available in flavours such as salt and vinegar, barbecue, all-dressed, cheese, nacho, ketchup, pizza, sour cream and onion, etc.
* Texture: crispy, crunchy, brittle or fluffy.
* Cooking process: deep fried or baked.
* Size and shape: small, thin, slice, (chip); long and slender cylindrical form (stick); fluffy mass (puff); or spiral or winding form (curl).
Labelling
* The word "chip", "crisp", "puff", "curl" or "stick" appears in the name of the product or elsewhere on the label (e.g., "healthier than a chip", "tastes like a chip" or "part chip").
* The label includes words found on packages of chips, crisps, puffs, curls, or sticks (e.g., "snack", "party snack" or "crunch").
Packaging
* The product is packaged loosely in a bag.
Marketing
* The advertising, whether through print or electronic media, includes words such as "chips", "crisps", "puffs", "curls" or "sticks" (e.g., "chip-loving eaters" or "healthier than a chip").
* The advertising, whether through print or electronic media, includes words found on packages of chips, crisps, puffs, curls or sticks (e.g., "snack", "snack food", "party snack", "crunch" or "crispy").
Although the Product does not have potatoes, corn or corn meal as its main ingredients, the properties, labelling, packaging, and marketing elements considered together provide an overall indication that the Product is a snack food similar to those listed in paragraph 1(f) of Part III of Schedule VI to the ETA. The Product:
* has a salty and savoury taste;
* is crispy and crunchy in texture;
* is baked;
* consists of small, sliced pieces,
* is packaged in a bag similar to snack foods;
* can be consumed directly by just opening the bag; and
* is marketed with words such as […].
Although, we consider placement of a product in store aisles as a relevant consideration, this factor alone is not considered a determinative factor. Therefore, the Product is excluded from zero-rating under paragraph 1(f) and is subject to GST/HST at the applicable rates depending on the province in which the supply is made.
It should be noted that no one factor is determinative of the tax status of a product and changes in the labelling, packaging and/or marketing (e.g., a change in the product name or varieties offered) would not necessarily result in a different tax status. All factors must be considered in determining whether a product falls within paragraph 1(f) of Part III of Schedule VI.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (905) 721-5219. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Elizabeth Onsiong
Basic Groceries and Recapture Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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