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 and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 119343
Business Number: [...]
January 11, 2011
Dear [Client]:
Subject:
GST/HST RULING
Heating corn used for fuel and wild deer and wild turkey feed
Thank you for your letter of October 20, 2009, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of corn used for heating purposes and supplies of wild deer and wild turkey feed. We apologize for the delay in this response.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Our understanding of the facts, based upon on your letter, telephone conversations and a conversation with [...], is as follows:
1. [...] ([the Company]) is a farm supplier that sells crop inputs and feed to farmers.
2. [The Company] grows corn [...] that is either packaged for feed or cleaned and packaged separately to be used for heating purposes. The corn is shelled. The only difference between the corn used for feed and the corn used for heating is that the corn used for heating is cleaned. The heating corn is sold for fuel in [...]kg bags and is labelled as [...].
3. Some farmers prefer purchasing the heating corn as feed for their animals since it is cleaned.
4. [The Company] also sells feed for deer (not farmed deer) and wild turkey, labelled as [...] and [...].
5. The [...] (Deer Mix) is sold in [...]lb bags ([...]kg) with an attached tag which gives the name of the product, the wording [...], and the ingredients. The ingredients are: [...].
6. The Deer Mix, which is labelled as described above, is the same mixture as is sold for cattle, with only the labelling and size of packaging differing. The Deer Mix is intended as feed for wild deer, but it is suitable for farmed deer, as well as for cattle. The Deer Mix is not advertised in your store with any specific signage, other than the product labelling, but all customers asking for feed for wild deer are directed to the Deer Mix and not to the beef feed, which is labelled as [...]. The [...] is sold to farmers in [...]kg sizes, as well as in bulk. The main purchasers of the Deer Mix are seniors and hunters, who use the product to feed wild deer.
7. The [...] (Turkey Mix) is sold in [...]kg bags with an attached tag which gives the name of the product, the wording [...], and the ingredients. The ingredients are: [...]. All seeds are whole seeds.
8. The Turkey Mix is used for wild birds only. [The Company] sells a separate mix for farmed fowl. It is also purchased mainly by consumers (seniors). It also has no other advertising other than the product label.
9. [comments given by Client]
Rulings Requested
You would like to know how the GST/HST applies to sales of the following products:
1. Heating corn used for fuel;
2. Deer Mix; and,
3. Turkey Mix.
Rulings Given
Based on the facts set out above, we rule that
1. The supply of the heating corn is subject to GST/HST pursuant to subsection 165(1);
2. The supply of the Deer Mix is subject to GST/HST pursuant to subsection 165(1); and
3. The supply of the Turkey Mix is subject to GST/HST pursuant to subsection 165(1).
These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by these rulings 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 GST/HST as applicable calculated on the value of the consideration for the supply. HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories. Pursuant to subsection 165(3), the tax rate in respect of a zero-rated supply (i.e., a supply included in Schedule VI) is 0%.
Ruling 1: Heating corn used for fuel
Part III of Schedule VI 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. The supply of corn for human consumption is not excluded by paragraphs (a) to (r) of section 1 of Part III and is therefore zero-rated.
To be zero-rated as food, the product must be for human consumption. The Canada Revenue Agency (CRA) recognizes that there are products which can be used for human consumption or that can be used for other purposes. This is explained in paragraph 144 of GST/HST Memorandum 4.3 Basic Groceries (MS 4.3). It reads:
Many products have uses as ingredients for food or beverages for human consumption. These same products may also have non-food or non-beverage uses. Such multi-use ingredients are zero-rated when supplied as ingredients for human consumption. When the product is supplied for a non-food use in the same packaging or form (e.g., in bulk) as when supplied for food or beverage uses, the supply is also zero-rated. When a good is packaged and promoted for non-food uses only, the supply is taxable.
The supply of corn for feed for livestock or poultry is zero-rated under two sections of Part IV of Schedule VI. These sections are described below.
Section 2 of Part IV of Schedule VI zero-rates a supply of
(a) grains or seeds in their natural state, treated for seeding purposes or irradiated for storage purposes,
(b) hay or silage, or
(c) other fodder crops,
that are ordinarily used as, or to produce, food for human consumption or feed for farm livestock or poultry, when supplied in a quantity that is larger than the quantity that is ordinarily sold or offered for sale to consumers, but not including grains or seeds or mixtures thereof that are packaged, prepared or sold for use as feed for wild birds or as pet food.
Section 10 of Part IV of Schedule VI provides that a supply of prescribed property is a zero-rated supply. The schedule to the Agriculture and Fishing Property (GST/HST) Regulations lists property that, when supplied by way of sale, is prescribed property for the purpose of section 10. Under subsection 1(3) of the schedule, the following is zero-rated:
(3) By-products of the food processing industry and plant or animal products, when sold in bulk quantities of at least 20 kg (44 lbs) or in bags that contain at least 20 kg (44 lbs), that are ordinarily used as feed, or as ingredients in feed, for farm livestock, fish or poultry described in subparagraph (2)(c)(i) or for rabbits, ostriches, rheas, emus or bees.
Therefore, the supply of the heating corn may be zero-rated under the above provisions if it is for human consumption or for animal feed. However, the corn in question is neither labelled for consumption by humans, nor as feed for livestock or poultry, but is used as fuel for heating purposes.
Paragraph 1 of the above Memorandum 4.3, further clarifies the issue by stating:
If a product's tax status is in doubt, the CRA will consider the manner in which the product is displayed, labelled, packaged, invoiced and advertised to determine its tax status.
The corn sold for heating is specifically packaged and labelled for that purpose. It is thus packaged and promoted for a non-food or non-feed use. As there are no provisions to zero-rate the supply of heating corn, the supply of this product will be subject to GST/HST.
Ruling 2: Deer Mix
There are two sections of Part IV of Schedule VI that may apply to zero-rate feed for livestock, sections 2 and 10.
Section 2 of Part IV of Schedule VI applies to supplies of seeds or grains, hay or silage or other fodder crops. To be eligible for zero-rating under this section, the seeds or grains must be in their natural state. The GST/HST Info Sheet GI-107, Grains, Seeds, Hay and Other Fodder and Plant Crops (GI-107) states that seeds that are mechanically broken, crushed or pulverized are not considered to be in their natural state. Therefore, as the corn in the Deer Mix is rolled (crushed into smaller pieces), it cannot be zero-rated under section 2 of Part IV of Schedule VI as the seeds are not in their natural state.
As provided above, section 10 of Part IV of Schedule VI zero-rates prescribed property listed under the Agriculture and Fishing Property (GST/HST) Regulations. Under the schedule to the Regulations, subsection 1(2) zero-rates certain feed for farm livestock and subsection 1(3) zero-rates by-products of the food processing industry and plant or animal products.
Subsection 1(2) of the schedule to the Regulations will not apply to zero-rate the Deer Feed, as deer are not considered "livestock" under the Feeds Regulations 1983, which is a requirement of this subsection.
Subsection 1(3) of the schedule to the Regulations is stated above. The following conditions must be met in order for a feed to be zero-rated by this subsection:
• the feed must be for "farm livestock";
• the grains or seeds must be "ordinarily used as, or to produce food for human consumption" or "ordinarily used as feed, or as ingredients in feed, for farm livestock"; and
• the plant products must be sold in bulk quantities of at least 20 kg (44 lbs) or in bags that contain at least 20 kg.
The first condition is that the Deer Mix must be for farm livestock. CRA has stated in paragraph 5 of GST/HST Memorandum 4.4, Agriculture and Fishing (MS 4.4), that it considers deer to be farm livestock, however, wild deer is not included in the list of examples of zero-rated animals. Although your letter states that the Deer Mix is for "not farmed deer", the labeling does not state that the product is only for wild deer. The Deer Mix is of the same composition as the cattle feed sold by [the Company], but with different labeling and sizing. Thus, when there is doubt to the tax status of a product, we can look to its labeling and packaging.
The labeling does not state that the Deer Mix product is only for wild deer. However, when customers ask for wild deer feed, they are directed to the Deer Mix and not to the product labeled as [...], which is sold to farmers for domestic cattle. The Deer Mix is also packaged in [...] pound bags to facilitate its purchase by consumers. The name of the product includes the word [...], which is a term that would generally be associated with living in the wild, rather than a term used in the farming industry. Therefore, to be consistent with the approach in basing the tax status on the label and packaging, the Deer Mix would be feed for wild deer which are not considered to be farm livestock.
The two remaining conditions of subsection 1(3) of the schedule to the Regulations relate to seed types and the packaging and quantity of the feed sold. GI-107 lists seeds that are considered to be ordinarily used as, or to produce food for human consumption or feed for farm livestock or poultry. The ingredients for the Deer Mix [...] are contained in this list and thus are plant products that are ordinarily used as feed for livestock.
The last remaining condition for zero-rating under this provision, is that when the products are sold in bags, the bags must contain at least 20 kg (44 lbs) of the product. As the Deer Mix is sold in bags that contain only [...]lbs ([...]kg), it is sold in an amount that does not meet this quantity requirement.
Therefore, the Deer Mix does not meet all of the requirements of subsection 1(3) of the schedule to the Regulations, as it is not feed for farm livestock and is sold in bags that contain less than 20kg. Supplies of the Deer Mix are thus subject to tax.
Ruling 3: Turkey Mix
The Turkey Mix may qualify for zero-rating under section 2 of Part IV of Schedule VI, which is quoted above in the response for heating corn. A number of conditions must be met in order for a feed to be zero-rated under this section. One requirement is that the feed is for "farm livestock or poultry". As noted in paragraph 5 of MS 4.4, CRA lists wild turkeys, along with pheasants, partridges, quail, squabs and colins to be zero-rated poultry for purposes of section 1 of Part IV to Schedule VI.
However, in order to be included in section 1 of Part IV of Schedule VI, the wild turkeys must be farm livestock that are ordinarily raised or kept to produce, or to be used as food for human consumption. Thus, wild turkeys that are raised in captivity would qualify as farm livestock, but wild turkeys which are free roaming and not captive would not be considered to be farm livestock.
Another condition of section 2 of Part IV of Schedule VI is the exclusion from zero-rating of grains or seeds or mixtures thereof that are packaged, prepared or sold for use as feed for wild birds or as pet food.
As with the rulings provided on the Heating Corn and Deer Mix, CRA looks to the labeling and packaging of the product to determine its tax status, which will then apply regardless of the end use. If we rely on the labeling, then as feed labeled specifically for wild turkeys, the Turkey Mix will not be eligible for zero-rating. As wild turkey are considered to be zero-rated poultry only when raised as farm livestock, supplies of wild turkey feed will be excluded from zero-rating under section 2 of Part IV of Schedule VI, as the supply of the Turkey Mix is packaged, prepared and sold for use as feed for wild birds.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (902) 426-6940. 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,
Nancy Jardine
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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