19 August 2005 Excise Interpretation 62835 - Application of Excise Tax to Jewellery Findings

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.

Dear XXXXX:

This is in reply to your facsimile message XXXXX in which you ask about the application of excise tax to jewellery findings. Our comments are set out below.

Information Provided

1. The XXXXX Corporation ("Corporation") is an importer and distributor which sells findings to manufacturers and bead stores.

2. The Corporation imports findings that are .925 sterling silver and cost $3.00 and under.

Question

Does excise tax apply to the findings imported by the Corporation?

Answer

General Rules

Pursuant to subsection 23(1) of the Excise Tax Act ("ETA"), there is an 8% excise tax on the manufacture 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, jewellery, precious and semi-precious stones and goldsmiths' and silversmiths' products. (This last category excludes gold-plated and silver-plated ware for the preparation or serving of food or drink.)

In particular, paragraph 5(c) of Schedule I, imposes excise tax on "... jewellery, whether real or imitation, including diamonds or other precious or semi-precious stones for personal use or for adornment of the person... ... "

For the purposes of paragraph 5(c) of Schedule I, "goldsmiths'and silversmiths' products" will be taken to mean:

All products produced by a goldsmith or silversmith, which contain precious metals for aesthetic purposes (as opposed to functional purposes) and that are produced by a process or processes under the control of the goldsmith or silversmith (as opposed to produced by a factory worker employing mass production techniques).

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

As a matter of administrative policy, excise tax is not imposed on inexpensive items of jewellery having a manufacturer's sale price or duty paid value of $3.00 each or less.

Jewellery Findings

Jewellery findings (such as jump rings, spring rings, metal clasps, bell caps, pins (tacks) for tie tack pins and ear wires) are not classified as "jewellery" and do not attract excise tax. However, when jewellery findings are made wholly or in part of gold, silver or other precious metal, they may, pursuant to the policy described above, qualify as goldsmiths' or silversmiths' products, and, as such, would be subject to excise tax.

In light of the foregoing information, we can advise that only where jewellery findings contain precious metals and exceed $3.00 in duty paid value or sale price is it necessary to consider if they are taxable by virtue of being goldsmiths' or silversmiths' products. Further, jewellery findings that contain precious metals but are made by a factory worker employing mass production techniques do not qualify as goldsmiths' or silversmiths' products and are not subject to excise tax.

The foregoing comments represent our views with respect to the subject matter of your letter. Proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance, with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memorandum series do 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 myself or a member of my staff, Pauline Greenblatt, at telephone number (613) 957-1140 XXXXX.

Yours truly,

Doug Rollins
Manager, Excise Taxes
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate

2005/11/14 — RITS 64730 — Application of Excise Tax to Jewellery