23 May 2006 Excise Interpretation 78827 - Paragraph 260(2)(f) of the Excise Act, 2001

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 an imported digital up timer. Our comments are set out below.

Statement of Facts

1. Your client, XXXXX ("client") imported a XXXXX Digital Up Timer ("clock") and excise tax was applied at the time of importation. Your client uses the clock as part of this company's advertising strategy by installing it in an indoor soccer arena in front of a XXXXX foot by XXXXX foot banner ad for his company. It is not for household or personal use.

2. The XXXXX commercial digital alarm clock serves as both a display clock and an alarm clock. The clocks are configured to meet customer specifications. Key features include the following:

•   Over 60 user selectable display formats (for example, temperature, 4 or 8 digits displays of time, blinking digits);

•   Up/down elapsed time;

•   Up to 99 alarm settings;

•   Optional alert horn may be used to signal work and break times;

•   May be used as stand-alone time displays;

•   Can connect with any number of clocks to form a synchronized network; and

•   Aluminum frame with special hangars for mounting.

Interpretations Requested

1. Are the clocks described above subject to excise tax on importation into Canada?

2. Are clocks for commercial use (i.e. non household/personal use) subject to excise tax?

Interpretations Given

(Please note that in the Budget of May 2, 2006, the Minister of Finance announced that the excise tax on clocks, jewellery, precious and semi-precious stones and goldsmiths' and silversmiths' products will be eliminated, effective May 2, 2006. Therefore, the interpretations provided in this letter apply to clocks imported into Canada or delivered in Canada before May 2, 2006.)

1. Section 5 of Schedule I to the Excise Tax Act imposed excise tax at the rate of 10% on clocks with a duty paid value or sale price of more than $50 and that were adapted to household or personal use, except those specially designed for the use of the blind. Since section 5 of Schedule I expressly applied to clocks for household or personal use, the Canada Revenue Agency (CRA) interpreted this provision to mean that commercial clocks were not subject to excise tax.

The clocks described in the Statement of Facts, above, should not have been subject to excise tax on importation into Canada, since they were not "adapted to household or personal use". Rather, they were for commercial use.

2. As stated, the CRA interpreted section 5 of Schedule I to the Excise Tax Act such that clocks for commercial use were not subject to the excise tax.

The foregoing comments represent our views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, 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 GST/HST Memorandum series, do not bind the CRA 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) 941-1933.

Yours truly,

Pauline Greenblatt
Rulings Officer
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate

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