31 October 2005 Excise Interpretation 62196 - "Goldsmiths' and Silversmiths' Products"

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.

This is in reply to your facsimile message XXXXX in which you inquire about "goldsmiths' and silversmiths' products" that are subject to excise tax. Our comments are set out below.

Questions

1. What is meant by "goldsmiths' and silversmiths' products" that are subject to excise tax?

2. Are mass producers of gold and silver products, such as a mint, considered to be goldsmiths or silversmiths?

Answer

General Rules

Pursuant to subsection 23(1) of the Excise Tax Act ("ETA"), there is an excise tax of 8% on the maufacture or production in Canada or importation into Canada of goods listed in Schedule I of the ETA. Goods listed in Schedule I include clocks and watches having a value of $50 or more; articles made in whole or in part of ivory, jet, amber, coral, mother of pearl or other semi-precious stones; jewellery, real or imitation, including precious or semi-precious stones; and goldsmith's or silversmith's products (excluding gold-plated or silver-plated ware for the preparation or serving or food or drink).

On February 23, 2005, the Minister of Finance announced in his Budget that the excise tax on the items listed above - collectively referred to as "jewellery"- will be phased out over a four year period. Effective February 24, 2005, the excise tax rate will drop from 10% to 8%, and continue to drop by 2% every March 1 thereafter, until March 1, 2009, when the excise tax rate on jewellery will be 0%.

It must be emphasized that this proposal affects only the rate of excise tax on jewellery. There will be no change with respect to the structure or operation of the excise tax on jewellery during the four year phase-out period. During this period, licencees must comply fully with their legal obligations under the ETA. That is, they must self-assess on their taxable sales, file regular returns and remit tax, as required.

Finally, please note that this proposal became law when Bill C-43 received Royal Assent on June 29, 2005.

Pursuant to subsection 23(2) of the ETA, the excise tax is payable by the manufacturer or wholesaler or the importer on importation into Canada.

1. Goldsmiths' and Silversmiths' Products

The Canada Revenue Agency ("CRA") is currently revising its policy on taxable "goldsmiths' and silversmiths' products". Until the updated policy is issued, if there is some question about the application of the excise tax to an item in this category, the matter will be determined on a case-by-case basis, with reference to existing precedents, such as excise tax rulings and court cases.

2. Status of Mass Producers

You have asked whether mass producers of products containing precious metals would be considered goldsmiths or silversmiths. We would point out that in section 5.2 of Schedule I of the ETA, the words "goldsmith" and "silversmith" have the common, ordinary meaning of word, as found in various dictionaries. (The dictionaries typically define a goldsmith or silversmith to be a person who fashions objects from gold or silver, respectively.)

It is quite possible that these mass producers may employ goldsmiths or silversmiths, but again, whether a product is subject to excise tax will be determined by reference to existing authorities and CRA policy on this issue.

We are providing you with this interpretation letter that sets out our general views with respect to your inquiry. Future amendments to the ETA, if enacted, could have an effect on this interpretation. This letter is not a ruling and, in accordance with the guidelines in section 1.4 of Chapter 1 of the GST/HST Memorandum series, does not bind the Canada Revenue Agency with respect to a particular situation.

If you have any further questions or require clarification of the above matter, please do not hesitate to contact me, at telephone number (613) 957-1140 XXXXX.

Yours truly,

Pauline Greenblatt
Rulings Officer
Excise Taxes Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
Canada Revenue Agency

2005/08/19 — RITS 62835 — Application of Excise Tax to Jewellery Findings