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: 163256
Dear [Client]:
Subject: EXCISE INTERPRETATION
Application of Federal Excise Tax to the Sale [of Marine Fuel] from a Licensed Manufacturer to an Unlicensed Trader/Broker, with Delivery Directly to the End User
Thank you for your letter of June 5, 2014 concerning the application of the Excise Tax Act to the sale of fuel used as ships’ stores.
All legislative references are to the Excise Tax Act and the regulations therein, unless otherwise specified.
We understand that […][the Company] would like to know whether federal excise tax (FET) would apply to the sale of marine fuel to an unlicensed trader/broker when [the Company] delivers the marine fuel directly to the foreign vessel, and if so, if the trader/broker would then be eligible for a refund of the FET.
INTERPRETATION REQUESTED
You would like to know whether FET would apply to the sale of marine fuel to an unlicensed trader/broker when [the Company] directly delivers the marine fuel to the foreign vessel, and if it is determined that the sale would be on a tax-paid basis, whether the unlicensed trader/broker would then be eligible to claim a refund of the FET using form N15 – Application for Refund/Rebate.
INTERPRETATION GIVEN
Based on the information provided, FET would apply to the sale of marine fuel from [the Company] to the unlicensed trader/broker despite the fact that the marine oil is delivered directly to the foreign vessel.
Subsequently, the unlicensed trader/broker would be eligible to claim a refund of the FET using Form N15 – Application for Refund/Rebate.
Applicable Legislation
Subsection 23(1) – Tax on various articles at schedule rates – states that “…whenever goods mentioned in Schedule I…are manufactured or produced in Canada and delivered to a purchaser of those goods, there shall be imposed, levied and collected…an excise tax in respect of the goods at the applicable rate set out in the applicable section of that Schedule...”.
Schedule I states the applicable rates of FET. Paragraph 9(a) states that the rate for unleaded gasoline is $0.10 per litre, while Paragraph 9(b) enumerates the rate for leaded gasoline as being $0.11 per litre. Finally, Section 9.1. states the rate for diesel fuel as being $0.04 per litre.
Subsection 23(2) – By whom and when tax is payable – states that “…where goods are manufactured or produced and sold in Canada, the excise tax shall be payable by the manufacturer or producer at the time of delivery of the goods to the purchaser thereof.”
Paragraph 23(6) states that tax is not payable in the case of “goods mentioned in Schedule I that are purchased or imported by a licensed wholesaler for resale by him”.
Section 68.17 – Payment where use as ships’ stores – states that “If tax under Part III has been paid in respect of any goods and a manufacturer, producer, wholesaler, jobber or other dealer has sold the goods for use as ships’ stores, an amount equal to the amount of that tax shall, subject to this Part, be paid to that dealer if that dealer applies for it within two years after that sale of the goods.”
Analysis
In the instant case, pursuant to subsection 23(2), FET would be payable by the unlicensed broker/trader upon delivery from [the Company] to the unlicensed broker/trader. “Delivery” is not defined in the Act. However, Black’s Law Dictionary defines “constructive delivery” as “An act that amounts to a transfer of title by operation of law when actual transfer is impractical or impossible.” In this case, constructive delivery between [the Company] and the broker/trader would occur upon physical delivery from [the Company] to the foreign vessel.
Paragraph 23(6) would not apply in this instance as the broker/trader is unlicensed. FET would not be payable only in the case of licensed wholesalers.
However, the unlicensed broker/trader would subsequently be eligible for a refund of the FET pursuant to Section 68.17 of the Act, as the fuel is being used as ships’ stores, provided they apply for the refund within two years after the sale of the goods. They would do so using form N15 – Application for Refund/Rebate.
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) 957-1140.
Yours truly,
Neil Varan
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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