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: 133820
November 1, 2013
Dear [Client]:
Subject GST/HST INTERPRETATION
Point-of-Sale Rebate on Qualifying Prepared Food and Beverages
Thank you for your letter of February 25, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to sales of food and beverages that qualify for the Ontario point-of-sale rebate (the rebate). We apologize for the delay in providing our response.
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%.
Effective April 1, 2013, the 12% HST in British Columbia will be replaced by the 5% GST and a provincial sales tax.
We understand that in some cases, a customer can choose to purchase qualifying food or beverages at the same time as a non-food or beverage item at a total combined price which is less than the total for the items purchased individually. You provide the following example:
Items purchased individually:
Qualifying food $3.00
Tax @ 5% $0.15
Total Charge $3.15
Qualifying Beverage $2.00
Tax @ 5% $0.10
Total Charge $2.10
Non food or beverage item $2.00
Tax @ 13% $0.26
Total Charge $2.26
Items purchased together:
Qualifying food $2.00
Qualifying beverage $1.50
Non food or beverage item $1.00
Tax:
Qualifying food and beverage
$3.50 @ 5% $0.18
Non food or beverage item
$1.00 @ 13% $0.13
Total Charge $4.81
In the second part of the example, where the items are purchased as a discounted package, tax is computed on the amounts based on the underlying nature of the individual components of the package.
It is assumed that the represented "package" refers to the goods being sold for a single price (i.e., $4.50) as opposed to the goods being physically packaged together.
Interpretation Requested
You would like to know the position of the Canada Revenue Agency (CRA) in regard to the following questions:
1. Is the Ontario rebate still available if the items are sold together as a package?
2. Does it make a difference if the individual prices for each of the items sold are separately identified on the customer's invoice, or if it is sufficient to show only the total consideration for the entire package of $4.50 plus tax of $0.31?
3. Does the CRA's position in paragraph 168 of Memorandum 4.3 Basic Groceries apply, such that if 50% or more of the value of the package was attributable to the qualifying food and beverage, the entire package would be subject to the $4.00 threshold and in the example represented, the rebate would not be available?
4. Would the rebate be available for the entire package if the price of the package was $4.00 or less?
Interpretation Given
Based on the information provided, the rebate is available on the sale of qualifying food and beverages when sold in Ontario for a total consideration that does not exceed $4.00. The rebate may apply when qualifying food and beverages are sold at the same time as products that are not qualifying food or beverages. However, in order for the rebate to apply, it must be known that the total consideration for all qualifying food and beverages does not exceed $4.00. It is not sufficient to show only the total consideration for the entire package of $4.50 plus the tax of $0.31. If the price for the package was $4.00 and the non-food or beverage item is not incidental, a rebate is not available for the entire package. The consideration attributable to the qualifying food or beverages must be known to determine the amount of the rebate.
Combined Sales of Qualifying and Non-Qualifying Items
The province of Ontario provides a point-of-sale rebate on the supply of qualifying food and beverages. The rebate is administered by the Canada Revenue Agency under an agreement with the province but is legislatively provided for by the combined effect of section 51 of the Ontario Retail Sales Tax Act and sections 1 and 2 of the Ontario Regulations 262/10 Point of Sale Rebates.
Subsection 234(3) of the ETA permits the deduction of a credited rebate from the net tax calculation of a GST/HST registrant for the reporting period in which the rebate amount was credited by the registrant to the recipient. The rebate on qualifying food and beverages sold in Ontario is prescribed under Schedule 1 of the Deduction for Provincial Rebate (GST/HST) Regulations (the federal regulations), as item 11: "Qualifying food and beverages sold to a person at a particular time, if the total of all consideration for all qualifying food and beverages sold to the person at the particular period of time is four dollars or less". These regulations contain a definition of "qualifying food and beverages". In general, qualifying food and beverages are food and beverages that are not zero-rated under section 1 of Part III of Schedule VI to the ETA. The definition of qualifying food and beverages in the Ontario Regulations refers to the definition in the federal regulations, so the federal regulations determine the applicability of the rebate in a particular transaction.
As you noted in your letter, GST/HST Info Sheet GI-064 Harmonized Sales Tax for Ontario - Point-of-Sale Rebate on Prepared Food and Beverages explains that the rebate is available on qualifying prepared food and beverages sold in Ontario where the total price, excluding HST, is not more than $4.00 for all qualifying prepared food and beverages sold at a particular time. Goods that are not qualifying prepared food or beverages are ignored for purposes of calculating the $4.00 threshold when they are sold at the same time as any qualifying items.
When multiple items, including a non-qualifying item, are sold at the same time, it must be determined whether they are sold together as a single supply or as separate (i.e., multiple) supplies. A single supply, as a whole, would have to be identified as a qualifying food or beverage in order for the rebate to apply. Further, the entire value of the package (before taxes) would have to be $4.00 or less. Where a single supply of a package containing a non-food or beverage item is made, the package will generally be a qualifying food or beverage if the predominant element of the supply is a qualifying food or beverage and the non-food or beverage item is seen as an element that enhances the supply being made. For additional discussion of single and multiple supplies, we refer you to GST/HST policy statement P-077R2 Single and Multiple Supplies.
Where it is determined that multiple supplies exist within the package of goods sold, each item supplied retains its own identity and tax determination. Where, at the time of sale, the consideration for each item within the package is separately identified, tax is to be calculated based on the nature of the items and the value of the consideration. The availability of the rebate will be based on the $4.00 threshold and the items which are qualifying food and beverages.
Difficulty arises when multiple supplies are sold together for a single consideration. Generally, each taxable supply will have tax calculated based on the consideration attributable to the supply. However, it must be determined whether any of the supplies are incidental to another. For further discussion of incidental supply, we refer you to GST/HST policy statement P-159R-1 Meaning of the Phrase "Reasonably Regarded as Incidental"
In your representation of items purchased together, the non-food or beverage item would not qualify as incidental as its consideration represents a significant portion of the total consideration for the package. If the value of the item was significantly less and it is determined that the item is incidental, the question to which supply the item pertains must be asked. Is the item incidental to the supply of the food item, to the supply of the beverage, or, to a single supply of food and beverage? This is a significant issue to consider. If together, the food and beverage were to constitute a single supply, the recognition of another item as incidental would mean that the entire package was a qualifying food and beverage and the entire consideration payable for the sale would have to be $4.00 or less in order for the rebate to apply. Where the item is not incidental to the purchase of food, beverage, or food and beverage it would retain its separate tax status.
Accepting that the non-food or beverage item is not incidental to any other property sold, at the very least a separation of consideration between the qualifying food and beverages and the non-qualifying items is required at the time of sale. Without such a separation it is not possible to determine whether the recipient is entitled to a rebate of the provincial portion of the HST paid or, if entitled to a rebate, the value of the rebate.
GST/HST Memorandum 4.3 Basic Groceries - Paragraph 168
This paragraph applies to packages of similar foods or beverages where the package contains a combination of otherwise zero-rated food or beverages and fully taxable food or beverages (5%, 13%, 14% or 15%). This paragraph does not apply to your scenario. The package represented contains only fully taxable components and is not comprised of similar food or beverages. Furthermore, the package represented is not limited to food and beverages.
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, Excise and GST/HST Rulings and Interpretations Service, 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.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
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 Point-of-Sale Rebates Unit
General Operations & Borders Issues Division
Excise and GST/HST Rulings Directorate
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