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: 162970
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Tax Status of […][the Product]
Thank you for your letter of June 17, 2014, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of […][(the “Product”)] produced by […][(the “Company”)].
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
We understand from your letter the following:
1. The Product is available in [#] different flavours: […].
2. The Company does not control the placement of its product at the store level. The Product is intended to be shelved in the cracker aisle.
3. The Product is new and has been launched in […] but not yet in Canada.
4. […].
5. A sample of the Product, in the […] flavour, […], has been provided.
6. The Product is packed loosely in a plastic, foil-lined bag, and has a net weight of […] grams.
7. The Product is processed into […] pieces. Each piece measures approximately [#] x [#] centimetres in size, and is about [#] millimetres thick.
8. The sample contains the following information on the package: […][ingredients and nutrition facts of the Product]
9. The labelling on the package contains the following descriptions: […][description of the Product]
10. There is no claim that the Product is sold as breakfast cereal.
11. The Product can be eaten on its own but is also pictured on the package to be eaten along with dips.
RULING REQUESTED
You would like to know the tax status of the Product.
RULING GIVEN
Based on the facts set out above, we rule that supplies of the Product are subject to the GST/HST under subsections 165(1) and 165(2). The Product is excluded from zero-rating under paragraph 1(f) of section 1 of Part III of Schedule VI to the ETA.
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 or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.
Paragraph 1(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 food items captured by paragraph 1(f) as mentioned above are not limited to potato chips, corn chips, cheese puffs, potato sticks, bacon crisps, or cheese curls but include any other similar snack foods. The CRA applies the following factors as listed in paragraph 56 of the GST/HST Memoranda Series 4.3, Basic Groceries (MS 4.3), when determining whether a food product is similar to the snacks as identified in paragraph 1(f) of Part III of Schedule VI to the ETA.
Properties
* Ingredients: potatoes, corn, or corn meal
* Flavours: in addition to salty, the product is available in flavours such as salt and vinegar, barbecue, all-dressed, cheese, nacho, ketchup, pizza, sour cream and onion, etc.
* Texture: crispy, crunchy, brittle, or fluffy
* Cooking process: deep fried, or baked
* Size and shape: small, thin, slice, (chip); long and slender cylindrical form (stick); fluffy mass (puff); or spiral or winding form (curl)
Labelling
* 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").
* The label includes words found on packages of chips, crisps, puffs, curls, or sticks (e.g., "snack", "party snack" or "crunch").
Packaging
* The product is packaged loosely in a bag.
Marketing
* The advertising, whether through print or electronic media, includes words such as "chips", "crisps", "puffs", "curls" or "sticks" (e.g., "chip-loving eaters" or "healthier than a chip").
* The advertising, whether through print or electronic media, includes words found on packages of chips, crisps, puffs, curls or sticks (e.g., "snack", "snack food", "party snack", "crunch" or "crispy").
In determining whether the Product is similar to the snacks as identified in paragraph 1(f) of Part III of Schedule VI to the ETA, we have looked at these factors. Our findings respecting the Product are listed below:
Properties
* Ingredients: Dried potatoes are the second ingredient listed.
* Flavours: The Product has a salty and savoury taste. It comes in [#] different flavours: […][list of flavours].
* Taste: The Product tastes very much like the […] potato chips.
* Texture: The Product is thin, light, puffed, and dry. It has a puffy and crunchy texture similar to chips.
* Size and shape: The Product is […] in shape. Each piece is comparable to the size of a potato chip. The Product can be eaten directly without further processing by just opening the bag.
Labelling
* The label includes these descriptions: […] chips.
Packaging
* The Product is packed loosely in foil-type bags similar to a bag of potato chips.
Marketing
* The Product is marketed as […] chips.
Based on the above, the Product is considered to be a “similar snack food” for purposes of paragraph 1(f) of Part III of Schedule VI to the ETA.
Although we consider placement of a product in a store as a relevant consideration, it alone is not considered a determinative factor.
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 905-721-5217. 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,
Denise Chan
Basic Groceries and Point-of-Sale Rebates Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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