30 January 2006 Excise Interpretation 65429 - Application of Excise Tax to Items Containing Precious Metals

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 matter noted above. Our comments are set out below.

Information Provided

1. The XXXXX ("the XXXXX Sisters"), a charity, wants to bring a bone from the body of a sister XXXXX to Canada. XXXXX. They are buying a gold plated container for $XXXXX that will be purchased and sealed in the XXXXX and they will transport it.

The container in question is a metal box with a lid of plexi or glass and the bone will be under the lid. (The container is not a cremation urn.) The bone will be sealed in the box which cannot be opened as it would violate church laws. By keeping the bone in XXXXX, the Sisters can use their location as a pilgrammage site.

2. You are also asking whether the following items are subject to excise tax: Swarovski crystal with a 14k gold "frame" so the entire item is a suncatcher; silver or gold pen and pencil; and 14k (presumably gold) Christmas ornaments.

In your XXXXX, you indicate that all these goods (i.e. the frame, pen and pencil and ornaments) are made in a factory by a factory worker using mass production techniques.

Question

Are the items described above subject to excise tax as "goldsmiths' and silversmiths' products"?

Answer

General rules

Pursuant to subsection 23(1) of the Excise Tax Act (ETA) there is an excise tax on the manufacture or production in Canada or importation into Canada of goods listed in Schedule I to the ETA. Goods listed in Schedule I include clocks having a sale price or duty paid value of $50 or more, articles made of semi-precious stones, 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.)

As a matter of administrative policy, excise tax is not imposed on the following:

•   Schedule I goods having a manufacturer's sale price or duty paid value of less than $3.00; and

•   Schedule I goods of a religious nature or significance.

In 2005, the ETA was amended by Bill C-43 and Bill C-259, with the following results:

•   between February 24, 2005, and November 24, 2005, the excise tax rate on clocks (with a sale price or duty paid value of $50 or more) was 8%, but effective November 25, 2005, the excise tax rate is raised to 10% until March 1, 2009, when the tax on clocks is eliminated.

•   between February 24, 2005, and November 24, 2005, the excise tax on watches was 8%, but effective November 25, 2005, the excise tax on watches is eliminated;

•   effective February 24, 2005, the excise tax on articles made of semi-precious stones, jewellery, precious and semi-precious stones and goldsmiths' and silversmiths' products would drop to 8% and continue to drop by 2% every March 1 thereafter, until March 1, 2009, when the excise tax on these goods will be eliminated.

Pursuant to subsection 23(2) of the ETA, the excise tax is payable by the manufacturer or producer of domestically produced Schedule I goods or the importer of Schedule I goods imported into Canada.

Pursuant to subsection 23(1) of the ETA, the excise tax is payable on the sale price of domestically manufactured taxable goods and on the duty paid value of imported taxable goods.

Goldsmiths' and Silversmiths' Products

There is no definition of such products in the ETA. Rather, the matter is determined by reference to an administrative policy. For the purposes of section 5.2 of Schedule I to the ETA, "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 a goldsmith or silversmith (as opposed to a factory worker employing mass production techniques).

Under this policy, objects that contain precious metals for aesthetic purposes will be subject to excise tax. It is not intended to tax objects that contain precious metals for functional or aesthetic purposes, such as tuners for colour television sets or printed circuit boards.

Subject goods

Container for consecrated bone

The policy of the Canada Revenue Agency (CRA) is to exempt from excise tax articles intended and used exclusively for religious purposes, regardless of material content. We find the container for the consecrated bone to be used exclusively for religious purposes; therefore, there is no excise tax on it when imported into Canada.

Other goods - "Suncatcher" in Gold Frame; Silver or Gold Pen and Pencil; Christmas ornaments

We find that the suncatcher, pen and pencil and Christmas ornaments are not subject to excise tax, pursuant to the policy on goldsmiths' and silversmiths' products. Since these goods are made by a factory worker using mass production techniques, they are not considered goldsmiths' and 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 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) 957-1140 XXXXX.

Yours truly,

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

2006/01/03 — RITS 76655 — Excise Tax on Watches, Post Bill C-259