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.
[Addressee]
Excise Duties and Taxes Division
Place de Ville, Tower A, 20th floor,
320 Queen Street
Ottawa, ON K1A 0L5
Case Number: 134794
July 7, 2011
Dear [Client]
Subject:
EXCISE INTERPRETATION [Aviation Fuel]
Thank you for your letter of April 11, 2011 requesting information on the exemption from Federal Excise Tax (FET) and GST/HST on sales of aviation fuel to airlines for international flights.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
STATEMENT OF FACTS:
From your letter we understand that:
1. [...] [the Company] is a duly licensed wholesale aviation fuel dealer operating in Canada.
2. Airline customers have requested that [the Company] sell them aviation fuel into the wing of their aircraft for use in international flights.
3. [The Company] is trying to determine which taxes should be applied to invoices to the international flight airline customers, and how the refund for the tax paid aviation fuel sold for use in international flights is received.
Interpretation Requested
1. Is the aviation fuel sold to airlines exempt from the fuel tax and/or GST/HST?
2. Does the fuel wholesaler sell the aviation fuel tax free to the airline for the international flight and if so, how does the licensed fuel dealer claim a refund of the tax previously paid on the fuel?
3. If the fuel dealer is required to sell the fuel including the taxes and such fuel is exempt, how does the international airline claim a refund for the tax paid on the exempt fuel?
GENERAL INFORMATION:
Imposition of FET
Subsection 23(1) of the Excise Tax Act (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. Section 9.1 of Schedule I to the ETA specifies a tax rate of $0.04 per litre on aviation fuel.
Ships' Stores
Paragraph 59(3.2)(a) of the ETA provides that the Governor in Council may make regulations designating certain classes of goods as ships' stores for use on board a conveyance of a prescribed class.
Subsection 3(1) and Item 4 of the Schedule to the Ships' Stores Regulations designate petroleum products, which includes aviation fuel, as ships' stores for use on board an international aircraft. Subsection 2(1) of the Ships' Stores Regulations defines an international aircraft to mean "...an aircraft operating internationally in the transportation of passengers or goods, or both, for reward".
Refund Information
Subsection 68.01(2) of the Excise Tax Act (the Act) provides that if excise tax has been paid in respect of fuel, an application may be made by, and a refund may be paid to, a purchaser who uses fuel as ships' stores, provided that no application in respect of the fuel is made by any person under section 68.17 or 70 of the Act.
Qualified purchasers are eligible to file a Form N15, Application for Refund/Deduction of Excise Taxes directly with the CRA to apply for a refund of the excise tax paid on renewable fuel pursuant to subsection 68.01(2) of the Act.
All end-user refund claims must be submitted within two years from the date of purchase. A qualified purchaser of renewable fuels (as well as other qualifying fuels) may purchase fuel excise tax exempt by providing the fuel supplier, at the time of delivery, with Form K36A, Ships' Stores Declaration and Clearance Certificate, or other acceptable documentation.
GST/HST Information
A taxable (other than zero-rated) supply of tangible personal property, such as fuel, that is made in Canada is subject to GST at a rate of 5% if made in a non-participating province and if made in a participating province is subject to HST at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. A zero-rated supply is subject to tax at the rate of 0%.
Generally, a supply of fuel is made in Canada if it is delivered or made available to the recipient in Canada and is made in a province if it is delivered or made available to the recipient in the province.
Under the ETA, a supply of fuel may be zero-rated under section 2 of Part V of Schedule VI if it is supplied to a non-resident who is not registered for GST/HST purposes, provided the non-resident carries on a business of transporting passengers or property to or from Canada or between places outside Canada by aircraft, and the fuel is acquired by the non-resident for consumption or use in the course of such transportation. Similarly, a supply of fuel may be zero-rated under section 2.1 of Part V of Schedule VI if it is supplied to a person who is registered, where the person carries on a business of transporting passengers or property to or from Canada or between places outside Canada by aircraft, and the fuel is acquired by the person for consumption or use in the course of such transportation. Fuel that is supplied to a person in Canada and that does not qualify for zero-rating under section 2 or 2.1 of Part V of Schedule VI is generally subject to either GST or HST.
INTERPRETATION:
You have noted that [the Company] is a duly licensed wholesale aviation dealer operating in Canada.
Review of our records indicates that [the Company] does not have either an active manufacturers licence under section 54 of the ETA or an active wholesalers licence under section 55 of the ETA.
As well, the questions you have provided contain references to a fuel wholesaler, a licensed fuel dealer and a fuel dealer. For clarification, the information provided below is directed to the situation of a fuel dealer, unlicensed under the ETA, purchasing FET paid aviation fuel and selling the aviation fuel into the wing of a final purchaser for use in international flights. I trust this scenario provides the information you are seeking.
Section 68.17 of the ETA allows where excise tax has been paid by a manufacturer, producer, wholesaler, jobber or other dealer in respect of any goods that are subsequently sold for use as ships' stores, a refund equal to the amount of this tax is payable to that dealer who sold the goods. The application for the refund, form N15, Application for Refund/Rebate, must be filed within two years after the sale of the goods. Also, the end-user of the goods must certify that the goods will be used as ships' stores.
Alternatively, Subsection 68.01(2) allows that a refund equal to the amount of excise tax is available to a person who purchases excise tax-paid diesel fuel and uses the fuel as ships' stores, if the person applies for the refund using form N15, Application for Refund/Rebate, within two years after the purchase of the diesel fuel. The refund of excise tax will be paid to an end-user of ships' stores, provided an application for a refund under section 68.17 or a drawback under section 70 has not been made by any person in respect of the tax paid on the diesel fuel.
Where an application for a refund of excise tax is made by the vendor or the purchaser of the tax paid fuel, the applicant must provide evidence that the goods were sold for use as ships' stores. Form K36A, Ships Stores Declaration and Clearance Certificate, will provide evidence that fuel purchased by an end-user is for use on board an international aircraft or vessel. Where a Form K36A cannot be obtained, other documentation that confirms the fuel was for an international flight or voyage will be acceptable to substantiate a refund of excise tax.
Form N15, Application for Refund/Rebate is available on the CRA web site, and when completed should be send to:
Canada Revenue Agency
Other Levies Division
Summerside Tax Centre
275 Pope Road,
Summerside, PE C1N 6E7
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, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, 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) 952 0048.
Yours sincerely
Michael Ryder
Softwood and Other Taxes Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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