17 January 2005 GST/HST Interpretation 54529 - Subsections 317(2) and (8) of the Excise Tax Act

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 letter XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of XXXXX ("the Product").

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX prepare the Product for sale to consumers.

2. The Product sold to consumers consists of a mixture of lettuce, tomatoes, green onions, cheese and olives, with a separate bag of nacho chips (a usual ingredient of taco salads) and two packages of salsa ranch dressing.

3. The Product, along with a fork, is packaged in a plastic takeout bowl. The Product has a shelf life of 3 days if it is kept between 34 and 37 degrees Fahrenheit.

4. The Product is labeled as a "taco salad" and, while it is packaged with one fork, is large enough to serve two people.

Ruling Requested

Are supplies of the Product zero-rated under section 1 of Part III of Schedule VI to the Excise Tax Act (ETA)?

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 7%, or 15% in a participating province, pursuant to section 165 of the ETA.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 7% on the value of the consideration for the supply, or 15% in a participating province, unless the supply is zero-rated, pursuant to section 165 of the ETA. The tax rate in respect of a zero-rated supply is 0%, where a zero-rated supply is a supply that is included in Schedule VI to the ETA.

Under Part III of Schedule VI to the ETA, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or 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 included in paragraphs (a) to (r) of that section. Paragraph (o.1) excludes supplies of salads not canned or vacuum sealed from zero-rating.

The Canada Revenue Agency's administrative policy on basic groceries is set out in Memoranda Series 4.3, Basic Groceries. Paragraphs 86 to 92 of Memoranda Series 4.3 outline how the GST/HST applies to supplies of salads. Paragraph 90 of Memoranda Series 4.3, Basic Groceries, states:

A package which contains the ingredients for a salad where the ingredients are not mixed, such as a package containing lettuce, croutons and dressing (i.e., where the ingredients are in separate containers) and that require mixing by the consumer, is not considered to be a salad for purposes of the GST/HST.

Conversely, paragraph 87 states:

Salads are considered to include food containing ingredients such as chopped, shredded, diced, sliced, or pureed vegetables, meat, fish, egg, or other food supplied with a dressing and/or seasoning(s), whether or not the dressing is mixed with the other ingredients. The only exceptions to this rule are fruit salads and gelatin salads that, generally, do not need a dressing. In addition, a combination of one ingredient mixed with a dressing or seasoning(s), which is sold or represented as a salad is also considered to be a salad.

Most of the ingredients in the Product are mixed by the Company's employees in assembling the Product for sale, and do not require further mixing by the consumer. The lettuce, tomatoes, green onions, cheese and olives are mixed together in the plastic bowl used to package the Product. The only ingredients that are not mixed in by the Company are the nacho chips and the dressing.

Paragraph 87 of Memoranda Series 4.3 states that the supply will still be a supply of a salad even if the dressing is kept in a separate container. This recognizes the nature of the ingredient - if the dressing were mixed in, the other ingredients would become soggy, and the shelf life of the product would decrease. The nacho chips are kept in a separate package for a similar reason - if the nacho chips were mixed in with the other ingredients, the nacho chips would become soggy, and the shelf life of the product would decrease.

The Product is sold and represented as a salad. All of the ingredients are mixed together, other than the dressing and the nacho chips that, because of the nature, should not be mixed into the salad until just prior to serving. The Product better meets the criteria of a salad as described in paragraph 87 of Memoranda Series 4.3 than those of a salad kit as described in paragraph 90 of Memoranda Series 4.3.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8253.

Yours truly,

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

2005/01/26 — RITS 55468 — Consignment of Vehicle