16 February 2006 GST/HST Ruling 54658 - Sale of intermodal cargo containers in 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 Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to certain supplies of food. Your letter was forwarded from the XXXXX Tax Services Office for our direct response to you. You also sent us two additional XXXXX providing information in response to some questions we had. You also sent us photographs of the supplies XXXXX. We regret the delay in providing you with our response.

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

You are enquiring about the tax status of a supply where more than one prepared food is packaged and sold on a tray, covered with a lid, or similar covered container (the "Plates"). It is our understanding that the Plates are supplied in grocery stores from refrigerated units located near the deli counter of the store. Plates are sold as a single serving meal to customers and are cold at the time of sale. No heating or other preparation instructions are provided. There is no deliberate visual effect to the presentation of the Plates.

The Plates are not supplied under a contract for a catering service. Further, the Plates are not subject to the exclusion from zero-rating found in paragraph 1(q) of Part III of Schedule VI to the ETA.

You have asked for our comments with respect to the supply of the following Plates:

1. Fried rice, an egg roll and chicken balls.

2. Sliced deli meat, cubes of cheddar cheese and mashed potatoes.

3. Mashed potatoes, a chicken leg and coleslaw.

4. Mashed potatoes, a chicken leg and a garden salad with a package of dressing.

5. Salsa, shredded cheddar cheese and tortilla chips.

6. Sliced deli meat, cubes of cheddar cheese and a garden salad.

7. A sandwich, cubes of cheese and a salad.

8. Coleslaw, potato salad and slices of celery and tomato.

9. You also want our comments with respect to the supply of a fajita kit described as:

a sealed package consisting of several separate packages each of which hold one of the ingredients required to construct a fajita. The ingredients include: 1) a soft tortilla shell, 2) meat, 3) onions, 4) lettuce, 5) tomato and 6) sauce.

We also understand that it is your view that for purposes of paragraph 1(o.3) of Part III of Schedule VI to the ETA, a platter not only requires that the food be provided on a piece of serving ware but that the quantity of food is normally for more than one individual.

Ruling Requested

You have asked us to rule with respect to the above examples. You have also asked us to provide some guidelines or analysis for determining the tax status of products similar to those outlined in your examples.

Interpretation Given

As discussed, we are unable to issue a ruling with regard to your enquiry as rulings can only be issued with regard to a clearly defined fact situation of a particular person. However, we are pleased to provide you with the following interpretation.

Based on the information provided, it is our view that the supply of Plates #1 to #8 would generally not be considered as arrangements of prepared food. Therefore, provided the Plates are not captured in another of the exception paragraphs (a) to (r), we would generally consider the Plates to be zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA.

Generally, we view Plate #7 as a supply of a sandwich since it is predominantly a sandwich plate. Therefore, the supply of Plate #7 would be taxable at 7% or 15% pursuant to paragraph 1(o.2) of Part III of Schedule VI. Likewise, Plate #8 would be taxable at 7% or 15% under paragraph 1(o.1) since we view it as being predominantly a salad plate.

The fajita kit in your example would not be considered a sandwich or similar product since the ingredients are not assembled, and therefore, not a ready to eat sandwich. Consequently, the supply of the fajita kit would be zero-rated pursuant to section 1 of Part III of Schedule VI to the ETA.

Rationale

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 1(o.3) of Part III of Schedule VI excludes supplies of platters of cheese, cold cuts, fruit or vegetables and other arrangements of prepared food from zero-rating.

You have stated that to be considered a platter, the supply needs to include food items in sufficient quantity to serve to more than one individual. Notwithstanding that a platter is generally viewed as serving more than one person, there is no specific reference to a serving size in the provision. Note that the provision also refers to "other arrangements of prepared food". It is our view that an "arrangement of prepared food" is a supply taxable at 7% or 15% whether provided to one person or more than one person, provided certain criteria are met.

The Canada Revenue Agency's (CRA) criteria for determining if a supply is an "other arrangement of prepared food" is found in GST/HST Policy Statement P-232, Meaning of "Other Arrangements of Prepared Food". Arrangements with characteristics similar to (although not necessarily identical to) those of "platters of cheese, cold cuts, fruit or vegetables" are considered to be arrangements of prepared food for purposes of paragraph 1(o.3) of Part III of Schedule VI to the ETA. In general, such arrangements should be reminiscent of arrangements a caterer might provide in the course of a catering service.

In particular, they should:

1. be presented on a piece of serving ware (i.e., something on which the prepared food is likely to be served such as, a dish, plate, platter or tray),

2. be deliberately configured to create a visual effect so that it appears likely to be served in the same form in which it is sold, and

3. require little or no additional preparation (e.g., "cooking" or "heating" would generally constitute additional preparation, whereas "thawing" generally would not).

In your XXXXX response to questions we had, you indicated that there was no deliberate visual effect to the presentation of the Plates provided as examples. You also sent us photographs of Plates #1, #3 and #5 and we agree that the Plates do not appear to be deliberately configured to create a visual effect. As a result, we do not view the Plates as arrangements of prepared food under the criteria set out in GST/HST Policy Statement P-232.

However, it is our view that the supplies described as Plate #7, a sandwich plate and Plate #8, a salad plate, would be captured by paragraph 1(o.2) and paragraph 1(o.1) respectively, of Part III of Schedule VI. Therefore, the supply of these Plates would be taxable at 7% or 15%. Paragraph 24 of the Memoranda Series 4.3 discusses a supply where there is a combination of zero-rated and taxable elements as follows:

A supply comprising zero-rated and taxable elements may have a different taxable status depending on the nature and characteristics of the particular supply. For instance, a combination of peppercorns and a peppermill would be taxable at 7% or 15% because the greater part of the value would be for the peppermill.

In this case, it is our opinion that a consumer purchasing Plate #7 would do so for the sandwich, the predominant item on the Plate. However, given that the sandwich and salad included in Plate #7 are both food taxable at 7% or 15%, the greater part of the value of the Plate would result in the Plate being taxable at 7% or 15%. Likewise, Plate #8 would be taxable at 7% or 15% as a salad.

It is important to keep in mind that our comments at this time are of a general nature and restricted to the supplies you provided as examples in this case. In the future, requests for rulings on specific products should include a complete product description and where possible, labelling, packaging and marketing information and the name of the person requesting the ruling. Such ruling requests can be sent to the GST/HST Rulings Centre nearest you.

The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-8814.

Yours truly,

Robert Douthwright, CGA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2006/01/31 — RITS 56772 — Importation of Goods