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: 162969
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Tax Status of […][the Product] [potato snack]
Thank you for your letter of June 17, 2014, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […][the Product].
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 and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
From your letter dated June 17, 2014, the Product sample provided, and various websites, our understanding of facts is as follows:
1. […][Information about the manufacturer] […].
2. […][More information about the manufacturer]
3. […][The manufacturer] produces and distributes the Product under the […][brand].
4. The Product is sold in a […]gram […] foil bag.
5. The Product is available in […][several flavors]: […].
6. The listed ingredients for the Product’s “[…]” variety are as follows:
* Potato flour […]
* […]
* Seasoning […]
* […]
7. The Product packaging identifies the Product as […][Direct quote].
8. Media advertising and product packaging describes the Product as a “[…]”.
9. The Nutritional Facts displayed on the packaging is correlated to the consumption of [#] [units of the product] […].
10. The Product sample shows the Product to be […] in shape with a diameter of approximately […] cm. The sample also reveals the Product to be crispy and somewhat brittle in texture.
11. The Product is baked and on sampling holds a savoury taste.
RULING REQUESTED
You would like to know the application of the GST/HST to the Product.
RULING GIVEN
Based on the facts set out above, we rule that the supply of the Product in a […]gram foil bag, regardless of flavour, is subject to the GST/HST under subsections 165(1) and 165(2) of the ETA. Supplies of the Product are not zero-rated under section 1 of Part III of Schedule VI.
EXPLANATION
Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply, unless the supply is zero-rated (listed in Schedule VI to the ETA and subject to the GST/HST at the rate of 0%) or exempt (listed in Schedule V to the ETA and not subject to the GST/HST).
Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food and beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with, or used in, the preparation of such food and beverages, other than supplies included in paragraphs (a) to (r) of the section.
Paragraph (f) of Part III of Schedule VI to the ETA excludes from zero-rating the following:
“chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels, but not including any product that is sold primarily as a breakfast cereal.”
The following factors, as listed in paragraph 56 of the GST/HST Memoranda Series 4.3 – Basic Groceries, are used when determining whether a food product is similar to the snacks identified in paragraph 1(f) of Part III of Schedule VI to the ETA.
Properties
Ingredients: Products similar to chips, crisps, puffs, curls, or sticks, normally contain potatoes, corn, or corn meal as significant ingredients.
The Product contains potato flour as its main ingredient.
Flavours: Products similar to chips, crisps, puffs, curls, or sticks, are normally salty and are available in flavours such as salt and vinegar, barbeque, all-dressed, cheese, nacho, ketchup, pizza, sour cream and onion, etc.
The Product is available in […][several flavours], (all salty and savoury[…]).
Texture: Similar snack foods are crispy, crunchy, brittle, or fluffy.
The Product is crispy, light, and somewhat brittle.
Cooking Process: Similar snack foods are normally deep fried or baked.
The Product is a baked product.
Size and Shape: Similar snack foods can be small, thin, slice, (chip); long and slender cylindrical form (stick); fluffy mass (puff); or spiral or winding form (curl).
The Product is a small, thin, chip.
Labelling
With similar snack foods, the word “chip”, “crisp”, “puff”, “curl” or “stick” appears in the name of the product or elsewhere on the label (e.g. “healthier than a chip”, “tastes like a chip” or “part chip”).
Although the Product is labelled […], the Product is described as […] on the packaging.
Packaging
Similar snack foods are commonly packaged loosely in a bag.
The Product is packaged loosely in a bag.
Marketing
Similar snack foods are commonly advertised, whether in print or electronic media, as “chips”, “crisps”, “puffs”, “curls”, or “sticks”.
The advertising of similar snack foods, whether print or electronic media, includes words commonly found on packages of “chips”, “crisps”, ”puffs”, “curls”, or “sticks” (e.g. “snack”, “snack food”, “party snack”, “crunch” or “crispy”).
The Product packaging proclaims the Product to be […][crispy].
Consideration of all factors yields the determination that the Product is a snack food similar to those listed in paragraph 1(f) of Part III of Schedule VI to the ETA.
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 given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, 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 (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 and Border Issues Division
Excise and GST/HST Rulings Directorate
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