7 June 2007 Excise Interpretation 85746 - END USER REFUNDS

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 fax concerning the application of the Excise Tax Act (ETA) to the operations of XXXXX.

The facts, as stipulated in your letter, are that XXXXX purchases denatured ethanol from independent Canadian suppliers and that said ethanol contains a gasoline content varying between XXXXX% and XXXXX% gasoline by volume. Your letter further states that the gasoline content is added by either Canadian or foreign ethanol manufacturers in order to render the product non-comestible.

Please be advised that the following is considered to be general information only and should not be construed as a definitive ruling from the Canada Revenue Agency.

I will address your questions in the order in which they were posed.

Q. # 1) Could you confirm (based on paragraph 23.4(2) of the ETA) if the gasoline content included in the "denatured" ethanol is also exempt of the excise tax?

Under subsection 23.4(2) (see below) of the ETA, excise tax is not payable on the alcohol portion of a gasoline-alcohol blend. This is provided that the gasoline-alcohol blend contains not less than 1.35% alcohol by volume. If denatured ethyl alcohol is used for blending, this exemption does not apply to the gasoline that was used to denature the alcohol. Excise Tax is payable on the gasoline denaturant.

Where excise tax is not payable on gasoline/alcohol

23.4 (2) Where gasoline or aviation gasoline has been blended with alcohol to produce a gasoline-alcohol fuel, or an aviation gasoline-alcohol fuel, containing not less than 1.35% alcohol by volume, the excise tax imposed under subsection 23 on gasoline or aviation gasoline is not payable on the portion of the gasoline-alcohol fuel or aviation gasoline-alcohol fuel that is equal to the percentage by volume of alcohol in the fuel.

Q. # 2) If not [exempt], who is responsible for remitting the excise tax on this gasoline content; the manufacturer of the ethanol (if manufactured in Canada / or the supplier of the gasoline to the Canadian ethanol manufacturer) the importer if the ethanol (if manufacturer out of Canada) or the Canadian manufacturer who purchases the "denatured" ethanol from a Canadian supplier to ultimately be mixed with gasoline?

Please note that ethanol manufacturers may acquire their gasoline "denaturant" exempt of excise tax. The resultant denatured alcohol may then be sold to a manufacturer to be mixed with gasoline from their production. The manufacturer, in this case XXXXX, must then remit the excise taxes owing on both the 90% gasoline content as well as the .05% gasoline used to denature the ethyl alcohol.

The excise tax rate would be 9.05 cents (10 cents minus .95 cents for the ethyl alcohol content).

Further, based on the information provided it would appear that the product meets the specifications of a denatured alcohol grade 2-F as set out in the Denatured and Specially Denatured Alcohol Regulations. Provided that the product is not sold or used as a beverage it is not subject to the excise duty provisions of the Excise Act, 2001.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 957-7593.

Yours truly,

Robert Murray
Technical Policy Adviser
Excise Taxes and Special Levies Unit
Excise Duties and taxes Division
Excise and GST/HST Rulings Directorate

2007/04/30 — RITS 65282 — [Exemption Applications Relating to Certain Insurance Policies]