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: 127153
Business Number: [...]
January 26, 2011
Dear [Client]:
Subject:
GST/HST RULING
Application of the GST/HST to Fuel Gas
Thank you for your letter of August 10, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fuel gas.
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 is as follows:
1. [...] [the Company] operates a natural gas transportation system in [...] [Canada].
2. Gas used to operate the compressors which propel the gas in pipelines is commonly referred to as fuel gas or compressor gas.
3. [...].
4. The amount of fuel gas consumed is measurable.
5. [The Company] uses the Shipper's gas as fuel gas to transport the Shipper's natural gas.
6. Shippers do not charge for fuel gas [the Company] uses.
7. [The Company] does not take title to the Shipper's natural gas.
8. [The Company] provided a copy of a blank contract which is the standard contract used for agreements to ship natural gas. [The Company] also provided a copy of an invoice pertinent to the standard contract. No separate charges for fuel gas are indicated in the contracts or on invoices relating to supplies made pursuant to the contracts.
9. In case HQR0000870, the Canada Revenue Agency (the CRA) stated that a supply does not occur where a pipeline company uses some of a Shipper's gas to pump gas through the pipeline unless the Shipper separately charges for the fuel gas.
RULINGS REQUESTED
1. You would like to know if the CRA has changed its position regarding the treatment of fuel gas.
2. You would like to know how the GST/HST applies to fuel gas as it relates to agreements between [the Company] and Shippers.
Rulings Given
1. The CRA's position on the treatment of fuel gas has not changed.
2. Based on the facts set out above and the sample contract with the terms and conditions specified and invoice provided, we rule that a supply of fuel gas is not being made by Shippers to [the Company].
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
It is the CRA's position that a supply has not occurred when a pipeline company uses a Shipper's gas to pump the gas through the pipeline. Because there is no supply, there is no tax exigible on the transfer of the gas. However, if the Shipper separately charges for the fuel gas, the Shipper has made a supply to the pipeline company. A supply from the pipeline company to the client would occur if the pipeline company makes a separate charge (either in the contracts or on the invoices) for fuel gas consumed in the process of transporting gas.
Based on the sample contract with the terms and conditions specified and invoices provided, a supply of fuel gas is not being made by Shippers to [the Company]. However, it should be noted that where contracts or invoices vary from those provided, there could be a taxable supply of fuel gas.
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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