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.
May 17, 2013
Excise Duties and Taxes Division
Place de Ville, Tower A, 20th Floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case number: 148970
Dear [Client]:
Subject: EXCISE INTERPRETATION
Application of Excise Tax to Kerosene
Thank you for your letter of [mm/dd/yyyy] concerning the application of the Excise Tax Act to kerosene.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
We understand you are looking to purchase kerosene or a similar product as a blending agent for your final product.
Kerosene would make up [...]% of the final blend. You also mentioned that after blending, the kerosene would no longer be a motive product.
Interpretation Requested
You would like to know if you could purchase kerosene exempt of excise tax.
Interpretation Given
Based on the information provided, the kerosene must be purchased excise tax paid.
Subsection 23(1) of the ETA, subject to subsections (6) to (8), imposes excise tax on items listed in Schedule I to the ETA, at the rate specified in the Schedule. Section 9.1 of Schedule I specifies the rate of tax of $0.04 per litre for diesel and aviation fuel.
Subsection 2(1) of the ETA defines diesel fuel to include 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 and actually used as heating oil. As such, when diesel fuel is intended and actually used as heating oil, it will not be subject to the federal excise tax (FET).
The CRA considers kerosene to be a fuel oil suitable for use in internal combustion engines of the compression-ignition type. The CRA will allow kerosene to be entered, from the refinery into the distribution system, exempt of FET provided the fuel is intended to be sold as heating oil. The kerosene will remain exempt of tax when sold by a distributor to an end-user as long as the fuel will actually be used as heating oil.
In your case, since the fuel is not being used for heating, the kerosene must be purchased by [...][Company X] on a federal excise tax-paid basis. Since the sale of kerosene blended product by [Company X] is not for heating purposes, the kerosene must be sold on a tax-paid basis. No provision in the ETA allows for a refund to either [Company X] or the end-user on the basis that kerosene has been blended with other products to render it non-motive.
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 Excise Tax Act, 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 613-657-4138.
Yours truly,
Nathalie Robitaille
Excise Taxes and Other Levies
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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