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 Duties and Taxes Division
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 195962
Dear [Client]:
Subject: EXCISE RULING
[Refund-Federal Excise Tax (FET)]
Thank you for your letter of December 12, 2018 requesting a Ruling on a refund of Federal Excise Tax (FET) due to the premise of diversion of diesel fuel to heating oil.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
RULING REQUESTED:
You would like to claim a refund of the FET paid on the portion of fuel used to heat buildings where a small portion of the fuel purchased is used for industrial processing.
1. Fuel is delivered to a […] tank that supplies the boiler in your […][the Plant].
2. The boiler generates heat to primarily heat […] buildings on the site as well as for the […] used in production.
3. Since the fuel for the boiler is not used exclusively for heating buildings, you pay the four cents FET on all fuel purchases.
4. The vast majority of the heating fuel is used for the heating the buildings within the production complex. Fuel consumption increases in colder months, three times higher in winter months than in summer months.
5. There is no metering of steam provided to the […]. The onsite Process Engineer determines the maximum amount of fuel used each month in the […] based on operating conditions. The balance of the fuel consumed is assumed to be for heating the buildings.
RULING PROVIDED
[…] [The Plant] has fuel delivered to a single tank to be used in a boiler producing steam heat which is used for various purposes and not exclusively to heat a house, building or similar structure. Therefore the fuel is deemed to be diesel not heating oil and is subject to excise tax and no refund is available.
EXPLANATION
Legislation clearly states that for fuel to be considered heating oil it must be consumed exclusively for providing heat to a home, building or similar structure and that is not consumed for generating heat in an industrial process. The fuel from [the Plant] tank is consumed in a boiler which produces steam heat used both for heating buildings or similar structures and in an industrial process so does not meet the definition of heating oil. The ability to calculate separately the amount of steam (fuel oil) used in an industrial process does not change the fact that the fuel used from the tank by the boiler to produce steam is not being used exclusively to heat a house, building or similar structure as required to meet the definition of heating oil.
APPLICABLE LEGISLATION
Subsection 2(1) of the Act provides the following definitions:
diesel fuel includes any fuel oil that is suitable for use in internal combustion engines of the compression-ignition type, other than any such fuel oil that is intended for use and is actually used as heating oil;?(combustible diesel)
heating oil means any fuel oil that is consumed exclusively for providing heat to a home, building or similar structure and that is not consumed for generating heat in an industrial process, including any commercial process that involves removing moisture from a good; (huile à chauffage)
Subsection 68.01 (1) If tax under this Act has been paid in respect of diesel fuel, the Minister may pay an amount equal to the amount of that tax
(a) in the case where a vendor delivers the diesel fuel to a purchaser
(i) to the vendor, if the vendor applies for the payment, the purchaser certifies that the diesel fuel is for use exclusively as heating oil and the vendor reasonably believes that the purchaser will use it exclusively as heating oil,
(i.1) to the vendor, if the quantity of the diesel fuel is at least 1,000 litres, the vendor applies for the payment and the purchaser certifies that, and the vendor reasonably believes that, the purchaser will use the diesel fuel exclusively to generate electricity other than in or by a vehicle, including a conveyance attached to the vehicle, of any mode of transportation, or
(ii) to the purchaser, if the purchaser applies for the payment, the purchaser uses the diesel fuel as heating oil and no application in respect of the diesel fuel can be made by the vendor under subparagraph (i); or
ETSL77 Budget 2016 – Restricting the Relief of Excise Tax on Diesel Fuel and Aviation Fuel states in part;
“Heating oil” would mean any fuel oil that is consumed exclusively for providing heat to a home, building or similar structure and that is not consumed for generating heat in an industrial process, including any commercial process that involves removing moisture from a good.
With the addition of this new definition, “heating oil” would remain clearly excluded from the definition of “diesel fuel”.
The term “exclusively” would be interpreted as meaning solely or 100% for these purposes.”
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(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the type in relevant legislation, 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 (613) 670 7208.
Yours sincerely,
Michael Ryder
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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