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, 11th floor,
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 195961
Dear [Client]:
Subject: EXCISE INTERPRETATION
[Fuel purchased for use as ships’ stores]
Thank you for your letter of October 12, 2018 requesting clarification of section 68.17 of the Excise Tax Act.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
INTERPRETATION REQUESTED:
1. Would an unlicensed trader be considered a “Dealer” within section 68.17 of the ETA, where fuel is purchased from a physical supplier and then is resold for use as ships’ stores in an ocean-going ship engaged in international trade as outlined in the Ships’ Stores Regulation?
2. In an instance where there is more than one dealer involved in a single transaction for fuel purchased solely for use as ships’ stores does the Federal Excise Tax (FET) have to be passed to the further dealer?
INTERPRETATION:
1. An unlicensed trader who purchases fuel from a physical supplier and then resells the fuel to a vessel that qualifies to purchase the fuel as ships stores under the Ships Stores Regulations would be considered a “dealer” within section 68.17 of the ETA.
2. The dealer who sells the goods directly to an end user is eligible to claim a refund of the FET provided that at the time of delivery, the end user certifies and provides acceptable documentation to qualify the purchased fuel as ships stores.
APPLICABLE LEGISLATION
Subsection 23(1) - Tax on various articles at schedule rates - states that “…whenever goods mentioned in Schedule I…are manufactured or produced in Canada and delivered to a purchaser of those goods, there shall be imposed, levied and collected…an excise tax in respect of the goods at the applicable rate set out in the applicable section of that Schedule…”
Subsection 23(2) - By whom and when tax is payable - states that “…where goods are manufactured or produced and sold in Canada, the excise tax shall be payable by the manufacturer or producer at the time of delivery of the goods to the purchaser thereof.”
Section 68.17 - Payment where use as ships’ stores - states that “If tax under Part III has been paid in respect of any goods and a manufacturer, producer, wholesaler, jobber or other dealer has sold the goods for use as ships’ stores, an amount equal to the amount of that tax shall, subject to this Part, be paid to that dealer if that dealer applies for it within two years after that sale of the goods.”
Subsection 68.01(2) - If tax under this Act has been paid in respect of fuel and no application is made in respect of the fuel by any person under section 68.17 or 70, the Minister may pay an amount equal to the amount of that tax to a purchaser who applies for the payment and who uses the fuel as ships’ stores.
Your example provided:
Company “A” (A) is the physical supplier of the fuel and delivers this product directly to the ocean-going ship engaged in international trade for use as ships’ stores.
Company “B” (B) 1st dealer purchases this fuel with FET applied from A. B then sell the product to Company “C” (C).
C has purchased the fuel from B. C then sells the fuel to Company “D” (D).
D is the Owner/Operator or Charterer of the ocean-going ship.
In the above example is it necessary for B to pass down the FET to C?
Answer
Company A cannot sell the fuel to Company B FET exempt or qualify for a refund of FET on the sale of fuel to B as ships stores as B is not the end user and cannot verify or certify that the fuel will be used as ships stores.
Company B would not qualify for a refund of the FET on its sale of fuel to C as ships stores as C is not the end user and cannot verify or certify that the fuel will be used as ships stores.
GENERAL INFORMATION:
A Form N15, Application for Refund/Deduction of Excise Taxes must be filed directly with the CRA to apply for a refund of the FET paid on fuel pursuant to subsection 68.17 of the Act.
Claims must be submitted within two years from the date of purchase.
Where an application for a refund of the FET is made by the vendor or the purchaser of the tax paid fuel, the applicant must provide evidence that the goods were sold for use as ships’ stores. Form K36A, Ships Stores Declaration and Clearance Certificate, will provide evidence that fuel purchased by an end-user is for use on board an international aircraft or vessel. Where a Form K36A cannot be obtained, other documentation that confirms the fuel was for an international flight or voyage may be acceptable to substantiate a refund of excise tax.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, 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) 670-7208.
Yours sincerely,
Michael Ryder
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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