Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Attention: XXXXX
Case Number: 108524
Business Number: XXXXX
January 14, 2009
Dear XXXXX:
Subject:
GST/HST RULING
Tax Status of XXXXX Energy Drinks
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX Energy drinks.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Our understanding of the facts is as follows:
1. XXXXX comes in two varieties, "XXXXX" (Product A) and "XXXXX" (Product B).
2. Product A and Product B are sold in XXXXX mL aluminum cans.
3. The Product A packaging states:
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
4. The Product B packaging states:
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
• XXXXX
5. The XXXXX Website states:
• XXXXX
• XXXXX
• XXXXX
• XXXXX
6. The Products are sold in grocery stores, convenience stores etc. and are placed near beverages such as soft drinks, juices, and sports drinks.
Ruling Requested
You would like to know how the GST/HST applies to supplies of Product A and Product B.
Ruling Given
Based on the facts set out above, we rule that supplies of Product A and Product B are taxable at 5% GST and 13% HST pursuant to section 165.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% on the value of the consideration for the supply (13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI.
Section 1 of Part III of Schedule VI zero-rates supplies of food and beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), other than supplies excluded under paragraphs (a) to (r) of that section.
The terms "food" and "beverage" are not defined in the ETA. However, the Canada Revenue Agency (CRA) considers a product to be a food or beverage if an average consumer would recognize and purchase the product as such in the ordinary course of buying basic groceries. Consumers usually consume food and beverages to allay hunger or quench thirst, or for enjoyment rather than for therapeutic or preventative effects.
GST/HST Memorandum 4.3, Basic Groceries and Info Sheet GI-01, Products Commonly Described as Dietary Supplements, outline the criteria that the CRA considers in determining whether a product is a food, beverage or ingredient for human consumption or a dietary supplement. These criteria consider the labelling, packaging, and marketing of the product. They also provide explanations of the meanings of food, beverages and ingredients.
"Food and beverages are usually consumed by an average person to sustain or maintain life, to allay hunger or thirst, or for enjoyment. Ingredients add to the flavour, texture or appearance of the final product. Products commonly referred to as dietary supplements are consumed for their therapeutic or preventative effects (e.g., to correct actual or perceived health problems), or to achieve specific beneficial effects related to performance or physique."
Products commonly described as dietary supplements are not considered to be basic groceries. Dietary supplements include products such as vitamins, minerals, tonics, fibre, protein powders and herbal supplements. These products are generally taken for their therapeutic or beneficial effects and are available in various forms, for example, pill, capsule, tablet, powder, liquid gel, wafer and concentrates. Although these products may contain some essential nutritional elements, they are not considered to be basic groceries.
The Product A and Product B labelling and marketing indicate that they are dietary supplements.
• The benefits of the Products, XXXXX, are emphasized.
• Medicinal ingredients are listed.
• Nutrients not commonly regarded as ingredients to basic groceries such as taurine, ginseng, B.vitamins, guarana, and caffeine are emphasized.
• There is a recommended dose and a caution regarding consumption on the Product labels.
• The Product labels indicate that they are natural health products.
The primary focus is on the expected health benefits of ingesting the Products and not the format. Products consumed for beneficial effects do not fall within the meaning of a "food" or "beverage" simply because they are ingested into the body by eating or drinking.
Although some of the criteria in GST/HST Memorandum 4.3, Basic Groceries, may indicate that the Products are not dietary supplements on balance they are dietary supplements for purposes of section 1 of Part III of Schedule VI. As a result, supplies of Product A and Product B are taxable at 5% GST or 13% HST as applicable.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9585. 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,
Ben Boboski
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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