29 March 2006 Excise Interpretation 65232 - Partial Exemption of Excise Tax for Oil Drilling Businesses in Western Canada

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 concerning the application of the Excise Tax Act to the operations of XXXXX. We apologize for the delay in responding.

In your correspondence, you have asked the Canada Revenue Agency (CRA) to confirm whether the current XXXXX Tax Services Office administrative arrangement that allows for the sale of diesel fuel on a 50% taxable/50% exempt basis to oil drilling companies in Western Canada is still applicable.

The CRA would like to confirm that it will no longer allow licensed manufacturers or wholesalers to provide partial excise tax exemptions for sales of goods. Goods must be sold either on a 100% excise tax-paid or tax-exempt basis. This includes sales of diesel fuel to oil drilling operators in Western Canada. This was outlined on March 23, 2006 in ET/SL Notice 58, which extends the CRA administrative policy for accepting end-user refunds until December 31, 2006.

Oil drilling operators will have to purchase diesel fuel under the existing CRA end-user refund policy, which is as follows:

•   If at time of purchase, the use of the goods was known to be for an excise tax-exempt purpose, the goods must be purchased exempt of excise tax by furnishing an excise tax exemption certificate or other acceptable documentation to the supplier; or

•   If at time of purchase, it was not possible to determine the use of the goods, or the goods had both excise tax-exempt and taxable uses, the goods must be purchased on an excise tax-paid basis. The purchaser can then file an end-user refund claim directly with the CRA for the portion of the goods that was used under exempt conditions.

I have enclosed ET/SL Notice 58 for your reference.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-5899.

Yours truly,

Darren Weiner
Excise Tax Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate

2006/04/10 — RITS 65280 — Application of Excise Tax to Diesel Fuel and Heating Oil