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
Case Number: 129321
December 6, 2010
Dear [Client]:
Subject:
Excise Tax Interpretation - [...] [the Company]
Thank you for your letter of October 14, 2010 concerning the application of the Excise Tax Act (ETA) to operations of your client [...] [the Company]. In your letter, you have asked the Canada Revenue Agency (CRA) to confirm your understanding on how the ETA would apply to the activities of [the Company] in two separate situations.
The following facts have been outlined in your letter:
1. [The Company] is a corporation which is resident in [...] and not resident in Canada.
2. [The Company] does not currently hold an excise tax licence.
3. [The Company] will be entering into an agreement with a fuel refiner (Refiner) to purchase fuel products that have been manufactured by the Refiner. [The Company] will transport the fuel from the refinery to another place of business of the Refiner where it will sell the fuel back to the Refiner.
4. It is your understanding that the Refiner holds an excise tax manufacturer's "E" licence. You are not aware whether the Refiner has been authorized by the Canada Revenue Agency (CRA) under section 48 of the ETA to be considered as a manufacturer of similar goods.
5. [The Company] will attempt to qualify for a wholesaler "W" licence.
I will now address the application of the ETA to the situations outlined in your correspondence.
First Situation: [The Company] has not yet obtained a wholesaler's licence
Point #1
Upon the Refiner sale to [the Company], subsection 23(1) of the ETA will apply such that the Refiner will pay excise tax to the CRA, and as such, the sale will be made on an excise tax-paid basis.
Confirmation to Point #1
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. Sections 9 and 9.1 of Schedule I to the ETA specify the rates of tax for motive fuel products.
As a licensed manufacturer under the ETA, the Refiner is required to remit, to the CRA, federal excise tax (FET) on sales of motive fuel products. As such, any sale to [the Company] by the Refiner must be made on a tax-paid basis.
Point #2
Paragraph 23(7)(a) will apply to the reselling of fuel from [the Company] to the Refiner (as the Refiner will be purchasing the fuel in question for incorporation into other fuel which is subject to excise tax under the ETA), such that the sale will be on a tax-exempt basis. Section 48 of the ETA could also apply in certain circumstances to exempt the sale to the Refiner from excise tax.
Confirmation to Point #2
Paragraph 23(7)(a) allows for a licensed manufacturer to purchase fuel exempt of excise tax provided the fuel is to be incorporated into or form a constituent or component part of an article or product that is subject to excise tax. As such, the Refiner can purchase fuel from [the Company] on a tax-exempt basis provided the fuel will be further manufactured into a fuel product subject to excise tax.
In order for [the Company] to sell the fuel exempt, the Refiner will be required to issue [the Company], at the time of sale, an exemption certificate with the following sample wording:
"We certify that the goods ordered hereby are to be used in, brought into or attached to excise taxable goods for sale.
Licence Number#
____________________________________
Signature of Licensee or Authorized Person"
Additionally, if the Refiner has been authorized under section 48 of the ETA to be considered as a manufacturer of similar goods, they are eligible to purchase fuel, that is strictly for resale, from [the Company] on a tax-exempt basis. The Refiner would be required to issue [the Company] a copy of their section 48 authorization at the time of purchase in order to exempt the sale.
Point #3
The CRA will pay a refund to [the Company] for the amount of excise tax on the sale of fuel to the Refiner.
Confirmation to Point #3
Administratively, the CRA will issue a refund to [the Company] for fuel sold to the Refiner under conditions outlined in point #2, [the Company] will be required to apply for a refund using form N15 Excise Tax Act - Application for Refund/Rebate. [The Company] should ensure they retain a copy of the exemption certificate or section 48 authorization from the Refiner in order to substantiate a refund claim.
Second Situation: [The Company] is a licensed wholesaler
Point #4
The sale of fuel from the Refiner to [the Company] will be made on a tax-exempt basis under subsections 23(6) or 23(8) of the ETA.
Confirmation to Point #4
As a licensed wholesaler, subsection 23(6) or paragraph 23(8)(a) of the ETA allows [the Company] to purchase fuel from the Refiner on a tax-exempt basis under. An exemption certificate should be issued by [the Company] to the Refiner at the time of purchase in order to exempt the sale. The exemption certificate should contain the following sample wording:
"We certify that the goods ordered hereby are for resale.
Licence Number#
_________________________________
Signature of Licensee or Authorized Person"
Point #5
Paragraph 23(7)(a) will apply to the reselling of fuel from [the Company] to the Refiner (as the Refiner will be purchasing the fuel in question for incorporation into other fuel which is subject to excise tax under the ETA), such that the sale will be on a tax-exempt basis. Section 48 of the ETA could also apply in certain circumstances to exempt the sale to the Refiner from excise tax.
Confirmation to Point #5
As described in Point #2, paragraph 23(7)(a) allows for a licensed manufacturer to purchase fuel exempt of excise tax provided the fuel is to be incorporated into or form a constituent or component part of an article or product that is subject to excise tax. As such, the Refiner can purchase fuel from [the Company] on a tax-exempt basis provide the fuel will be further manufactured into a fuel product subject to excise tax.
In order for [the Company] to sell the fuel exempt, the Refiner will be required to issue [the Company], at the time of sale, an exemption certificate with the following sample wording:
"We certify that the goods ordered hereby are to be used in, brought into or attached to excise taxable goods for sale.
Licence Number#
____________________________________
Signature of Licensee or Authorized Person"
Additionally, if the Refiner has been authorized under section 48 of the ETA to be considered as a manufacturer of similar goods, they are eligible to purchase fuel, that is strictly for resale, from [the Company] on an a tax-exempt basis. The Refiner would be required to issue [the Company] a copy of their section 48 authorization at the time of purchase in order to exempt the sale.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-5899.
Yours truly,
Darren Weiner
Softwood Lumber and Other Taxes Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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