Patterson Dental – Federal Court of Appeal finds that the single supply doctrine did not deem an anesthetic containing a drug substance to be that drug
Sales by the taxpayer of anesthetic solutions containing epinephrine (which reduced bleeding) to dentists were not zero-rated under Sched. VI, Pt. I, s. 2(e), which referenced any of the “drugs” listed therein including “epinephrine and its salts.”
The taxpayer submitted that the single-supply doctrine deemed its sales to be that of the main element, so that they were zero-rated. Gleason JA did not consider that doctrine to be applicable (although she didn’t really get into it, there is circularity in bifurcating a supply into two supplies, so that you can argue that they are deemed by the single supply doctrine to be one supply), but found that even if the doctrine did apply, it did not work in the taxpayer’s favour, stating:
[B]oth common sense and the expert evidence establish that the reason for administration of dental anesthetics - including those containing epinephrine - is pain control … . Thus, the predominant element in the appellant’s epinephrine-containing anesthetic solutions is not epinephrine but rather the local anesthetic.
Neal Armstrong. Summary of Patterson Dental Canada Inc. v. Canada, 2020 FCA 40 under ETA Sched. VI, Pt. I, s. 2(e).