11 April 2007 Excise Interpretation 82897 - Excise Tax Status for Fuel Used in Medivac Flights

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 in respect of gasoline delivered to a reserve.

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

Interpretation Requested

You would like to know why gasoline delivered to a status Indian on a reserve is not exempt of excise tax.

Interpretation Given

Under the ETA, an excise tax is imposed, levied and collected on the sale of all gasoline produced or manufactured in Canada or imported into Canada. In the case of domestically produced gasoline, the tax is payable by the manufacturer while on importation of gasoline, tax is paid by the importer. Provision is made in the ETA for certain exemptions not unlike, for example, heating oil and diesel fuel used for the generation of electricity. However, there is no provision in the Act for exemption where the gasoline is purchased by or imported by an Indian or Indian Band.

In administering the ETA, therefore, it has been considered that there is no authority for granting tax exemption unless the sale of goods (in this case, gasoline) to an Indian or Indian Band qualifies in its own right under one of the existing exempting provisions in the Act. As a result, a manufacturer selling the goods of his manufacture under taxable conditions to a purchaser who is an Indian or Indian Band on the reserve is liable for payment of the excise tax on the transaction in accordance with subsection 23(2) of the ETA. The burden or incidence of the tax is normally passed on to the consumer by the manufacturer by including the amount of the tax in the sale price. The consumer is subject to the payment of an indirect tax. At that point, the amount is a cost not an excise tax because the excise tax has already been levied and accounted for by the manufacturer.

Excise taxes, as taxes of single incidence are paid on the same article or commodity only once as held in Goodyear Tire and Rubber Co. of Canada Ltd. v. T. Eaton Co. (1955) Ex. C.R. 229 (Can Ex. Ct.) reversed on other grounds (1956) S.C.R. (S.C.C.) In that case, Goodyear was manufacturing tires subsequently sold to T. Eaton Co. who, in turn, sold the tires to their customers. The facts show beyond dispute that the supplier was the manufacturer of the tires it subsequently sold to T. Eaton Co. That being so, the charging sections of the Act, section 23 for excise tax and section 30 for sales tax, make it clear that the tax is to be paid at the time of the sale by the producer or manufacturer to the purchaser. Only one excise tax and only one sales tax are exigible on the same article. Each tax was paid by the supplier when it sold the tires to Eaton's. That being so, it could not be payable by Eaton's when it sold them to its purchasers. This clearly demonstrates that the federal excise tax is paid by the manufacturer of the goods.

Please find attached a copy of those cases.

You have stated that in the court case of Union of New Brunswick Indians versus New Brunswick, Minister of Finance in 1998, Madame Justice McLachlin made it clear that when the (point of sale) is on reserve, that taxation did not apply. We have reviewed that case and found that the ruling by the court was in reference to New Brunswick sales tax specifically on purchases made off reserve and then conveyed and consumed on reserve. That decision essentially agreed that the Indian or Band was the direct taxpayer. This is quite different from the federal excise tax (indirect tax) paid by a manufacturer on goods sold to an Indian who is clearly not the taxpayer as shown in the Goodyear case above.

It is your belief that the intention of Section 87 of the Indian Act is to provide full tax exemption of property of Indians situate on a reserve. We agree with you in those cases where the tax imposed is a direct tax.

You have mentioned that the seller shows the excise tax separately on the invoice to XXXXX. We are unable to speak to the invoicing practices of sellers of gasoline in Canada.

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 Excise Tax Act, 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) 952-5323.

Yours truly,

David F. Turnbull
Excise Taxes Unit
Excise Duties & Taxes Division
Excise and GST/HST Rulings Directorate

2006/12/15 — RITS 85925 — Contract Brewing Under the Proposed Reduced Rates of Duty