18 April 2006 GST/HST Ruling 60676 - XXXXX

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 Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to various ice cream products manufactured and supplied by your client XXXXX.

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

Statement of Facts

Your client manufactures and sells the following ice cream and ice cream products:

1. Product A is an XXXXX. Each XXXXX contains XXXXX ml of ice cream and is sold in boxes that contain XXXXX units.

2. Product B is called XXXXX and is a small portion of ice cream or sorbet which range in size between XXXXX ml and XXXXX ml. XXXXX and Product B is sold in boxes that hold at least XXXXX. The XXXXX are not individually wrapped.

3. Product C, called XXXXX is a small ball of one flavour of ice cream surrounded by a larger ball of another flavour. This product is sold by the case containing either XXXXX or XXXXX pieces. Each individual piece is XXXXX ml.

4. Product D is called XXXXX and consists of XXXXX filled with ice cream, sherbet or sorbet. Each is XXXXX ml, not individually wrapped and sold in cases of XXXXX per box.

5. Product E is referred to as XXXXX and includes, XXXXX or chocolate XXXXX filled with ice cream. Product E is sold in boxes containing from XXXXX to XXXXX units. None of these items are individually wrapped.

6. XXXXX, provided us with pictures of the XXXXX. With the exception of the XXXXX, which are ice cream in small containers, the pictures confirmed that the other products are not individually wrapped.

7. All of the products are sold to supermarkets or to restaurants.

Ruling Requested

What is the application of the GST/HST to supplies of Products A, B, C, D and E?

Ruling Given

Based on the facts set out above, we rule that Product B, C, D and E are zero-rated supplies (taxable at 0%) pursuant to subsection 165(3) and section 1 of Part III of Schedule VI to the Act. Product A is a taxable supply at 7%, or (15 % as applicable) pursuant to section 165 the Act.

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 Act, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% (or 15% where the supplies are made in one of the provinces participating in the HST). However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the Act.

Section 1 of Part III of Schedule VI to the Act zero-rates supplies of food or beverages for human consumption ("basic groceries") and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(k) excludes from zero-rating:

"ice cream, ice milk, sherbet, frozen yoghurt and frozen pudding, non-dairy substitutes for any of the foregoing, and any product that contains any of the foregoing, when packaged or sold in single servings".

In the case of products listed in paragraph 1(k) of Part III of Schedule VI to the Act, which are measured by volume, a single serving is a package or unit of less than 500 ml. In the case of products measured by weight, a single serving is a package or unit of less than 500 grams.

Products such as those enumerated in paragraph 1(k) are considered to be "packaged as single servings" if each individual serving is packaged in its own right. Further, they are considered to be "sold in single servings" if they are designed and marketed for sale as single servings. Preparation or separation of a product into multiple portions does not necessarily result in the "sale of single servings". Where a product is not designed and marketed for sale in single servings it is not considered to be "sold in single servings".

Products B, C, D and E are not individually wrapped and are therefore not considered "packaged in single servings"; they also are not designed and marketed for sale in single servings. Therefore, Products B, C, D and E are not excluded from zero-rating by paragraph 1(k) of Part III of Schedule VI to the Act.

I would like to point out that if your client were to sell individual portions of Product B, C, D or E, those supplies would be taxable at 7% or 15%. For example, if on your client's premises, individual customers can walk in and purchase individual portions of different ice cream products, where your client opens a box containing XXXXX portions and sells individual portions, these portions would be taxable.

Product A is supplied in a XXXXX that contains XXXXX ml of ice cream and is therefore considered "packaged in single servings" and taxable at 7% or 15 %.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9585.

Yours truly,

Gabrielle Nadeau
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/04/24 — RITS 64488 — Tax Status of Memberships