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: 165306
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
[Application of GST/HST to a Baked Good Product]
Thank you for your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […] (the Product) sold by […] (the Company). We apologize for the delay in responding.
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 (effective April 1, 2013) 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 that:
1) The Company is a GST/HST registrant.
2) The Company produces and sells the Product in bulk through wholesale and retail transactions.
3) The Company targets […][description of clients]. It also offers its products to the general public through its retail outlet. […]
4) The Company does not make sales to school authorities.
5) […], the Company now intends to supply the Product in corrugated cardboard shipping cartons, with each carton containing [#] boxes of the Product and each box containing twelve pieces of the Product. Previously supplies were made by placing [#] individually wrapped pieces of the Product in a shipping carton.
6) Each of the [#] pieces of the Product is separately wrapped in cellophane.
7) The cellophane wrapper holds an adhesive label that identifies the Product type/flavour and imprinted on the wrapper is the company name and logo, the company web address, the company telephone number and a notation that the Product is peanut and nut free. The individual product wrappings do not contain a listing of ingredients or a statement of nutrition facts.
8) Each inner box will contain the company name, logo, and address, the Product identification (e.g. […][sample product]), the Product weight and quantity (e.g. 12 x 50g), a listing of ingredients, a listing of nutritional facts per product, and a representation that the Product is peanut and nut free.
9) Included on the inner box is the Product’s Universal Product Code (UPC).
10) It is the position of the Company that the labelling of its inner box will conform to the Consumer Packaging and Labelling Act, as does the co-branded product box provided for review.
11) […].
12) […], all delivery orders placed must be no less than $[…] or [#] cases ([#] boxes) of the Product.
RULING REQUESTED
You would like to know if the Company’s supply of its boxes of the individually wrapped Product is zero-rated.
RULING GIVEN
Based on the facts set out above, we rule that the company’s supply of the Product, individually wrapped and in boxes of twelve is a zero-rated supply.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
Generally, most supplies of property or services that are made in […][Participating Province X] are subject to the HST at the rate of […]%, unless they are specifically zero-rated (taxable at the rate of 0%) or exempt. Zero-rated supplies are listed in Schedule VI and exempt supplies are listed in Schedule V.
Specifically, Part III of Schedule VI provides that supplies of basic groceries are zero-rated for GST/HST purposes, subject to specific exclusions. Sweetened baked goods that are prepackaged for sale to consumers in quantities of less than six are excluded from zero-rating by means of paragraph (m) of section 1 of Part III of Schedule VI. The Company’s products which are individually wrapped are not prepackaged for sale to consumers in quantities of less than six. As represented, the Product will be supplied in twelve individually wrapped single servings and contained in a manufacturer’s prepackage. Further, the prepackaging will meet the requirements of being prepackaged for sale to consumers as the company’s packaging will satisfy the requirements of the Consumer Packaging and Labelling Act.
[…], if the Company contracts to make supplies of these products to school authorities, such supplies will be exempt from the application of the GST/HST if the Product is to be provided primarily to students of the school except to the extent the supply of the Product is for a reception, conference, or other special event of the school. In instances where the Company makes exempt supplies of the Product it is unable to claim the related input tax credits (ITCs).
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5222. 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,
David Nichol
Basic Groceries and Recapture of Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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