27 July 2005 GST/HST Ruling 58794 - Supplies made via the Internet

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:

Thank you for your fax XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of your XXXXX mL Cranberry Juice ("the Product").

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is pure cranberry juice, which has not been diluted or sweetened.

2. Pure berry juices have a wide variety of uses as an ingredient in recipes for glazes, marinades, salad dressings, punches and alcoholic beverages.

3. The Product is not generally consumed directly without modification by the consumer. It is most commonly mixed with other sweeter juices before being consumed. However, some consumers may ingest a few tablespoons of the Product at one time.

4. The Company has provided a faxed copy of the Product's product label. The product label for the Product states that it is XXXXX. The other side of the label states, XXXXX.

5. The Company states that its competitors are now marketing and promoting cranberry juice as a constituent of other prepared foods, as adjuncts to food such as a salad dressing or meat glaze, and as a constituent of fruit juice blends. The Company is shifting its marketing approach in the same direction as its competitors.

6. The nutrition facts table on the product label lists the nutrition information per XXXXX mL of the Product. XXXXX.

Ruling Requested

You would like to know the tax status of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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

Section 1 of Part III of Schedule VI to the Excise Tax Act ("ETA") zero-rates supplies of food and beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), other than supplies excluded under paragraphs (a) to (r) of that section.

Supplies of non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk-based beverages, that contain less than 25% by volume of

(i) a natural fruit juice or combination of natural fruit juices, or

(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state,

or goods that, when added to water, produce such a beverage, are excluded from zero-rating under paragraph 1(d) of Part III of Schedule VI to the ETA.

Supplies of beverages (other than unflavoured milk), or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding are excluded from zero-rating under paragraph 1(n) of Part III of Schedule VI, except

(i) when prepared and pre-packaged specially for consumption by babies,

(ii) when sold in multiples, pre-packaged by the manufacturer or producer, of single servings, or

(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving.

Paragraphs 36 and 37 of GST/HST Memoranda 4.3, Basic Groceries, provide the CRA's administrative position with respect to concentrates in interpreting paragraph 1(d):

Supplies of non-carbonated fruit juice or fruit-flavoured beverages, including concentrates that, when reconstituted (according to instructions on the package) contain less than 25% by volume of natural juice(s), are taxable at 7% or 15%.

To determine the tax status of frozen fruit juice beverage concentrates, the [CRA] will consider the percentage of fruit juice by volume in the frozen concentrate (not the percentage of fruit juice in the beverage when reconstituted). If the percentage of fruit juice in the concentrate is more than 25% by volume, the supply of the concentrate is zero-rated. If the percentage of fruit juice in the concentrate is less than 25% fruit juice by volume, the supply of the concentrate is taxable at 7% or 15%.

The Product is not a juice concentrate, and therefore, the administrative position for concentrates does not apply. The product label for the Product does not instruct the consumer to add the Product to water. It identifies the Product as 100% pure cranberry juice, not from concentrate.

The Company states that it is shifting its marketing approach to be more like that of its competitors, which are now marketing and promoting cranberry juice as an ingredient in food and beverages. XXXXX.

The Product is not promoted as a product that can be added to water to produce a beverage, although this is a possible use of the Product. Based on the label, the most common use of the Product would be as an ingredient to a beverage made with other juices.

Based on the labelling and marketing of the Product, it is not a single serving of a beverage even though it is below the administrative quantity threshold for paragraph 1(n). The Product is not sold as a beverage.

As neither paragraph 1(d) nor 1(n) apply, supplies of the Product in XXXXX mL bottles will be zero-rated for GST/HST purposes pursuant to section 1 of Part III of Schedule VI to the ETA.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-8253.

Yours truly,

Jacqueline Russell
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/07/15 — RITS 59548 — GST on Supplies Made by Tour Operators