25 January 2007 Excise Ruling 82854 - PART I OF THE EXCISE TAX ACT XXXXX Insurance Company 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:

Eligibility for an excise tax refund on purchases of aviation fuel

Thank you for your letter XXXXX concerning the application of the Excise Tax Act to aviation fuel purchased and sold by XXXXX.

You have been authorized by XXXXX, VP Finance of XXXXX to make inquiries and discuss issues with the Canada Revenue Agency ("CRA") on behalf of XXXXX.

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

Statement of Facts

1. We understand that XXXXX buys and resells fuel to commercial airlines in the provinces of XXXXX. Starting in XXXXX, XXXXX was to expand its services into the provinces of XXXXX.

2. You have advised that up until recently, aviation fuel was purchased by XXXXX on a federal excise tax relieved basis. However, XXXXX has a vendor in the province of XXXXX that wants to apply the federal excise tax of $.04/litre to purchases of aviation fuel.

3. XXXXX main business activity is the purchase and resale of aviation fuel. They are not in the business of transporting property or passengers.

4. XXXXX purchases fuel from XXXXX in Canada and supplies the fuel in Canada to two non-resident airlines, including XXXXX. XXXXX loads the fuel directly onto the non-residents' airplanes.

Questions

(1) Should XXXXX be licensed for purposes of the non-GST/HST portions of the Excise Tax Act?

(2) Will licensing enable XXXXX to purchase aviation fuel on a Federal Excise Tax ("FET") relieved basis and sell it relieved of the FET?

(3) If XXXXX must pay the FET on the invoice, is there a procedure to request a refund, or must the end-user request the refund?

Interpretation

(1) With respect to your inquiry concerning licensing requirements for excise tax purposes, with regards to the non-GST/HST portions of the Excise Tax Act, fuel wholesalers may be entitled to apply for an excise tax licence.

Where a non-resident qualifies as a bona fide wholesaler or jobber, the non-resident may be granted a "W" licence whether or not the non-resident maintains a warehouse, inventory stock or distribution equipment in Canada. There are two types of licensed wholesalers:

•   bona fide (or regular) wholesalers,

•   and duty free shops.

Pursuant to subsection 55(1) of the ETA, a wholesaler's licence ("W" licence) may be granted to a bona fide wholesaler or jobber if at least 50% of the person's sales for the three months immediately preceding the person's application were exempt from excise tax.

Wholesalers or jobbers applying for a "W" licence are required to provide the Canada Revenue Agency ("CRA") with a form of security. Please note that requests for excise tax licences and related enquiries should be directed to:

Excise Duties and Taxes Section

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

An application for a licence (form L15) under the provisions of the Excise Tax Act can be obtained using the Internet at the following website: http://www.cra-arc.gc.ca/E/pbg/ef/l15/README.html

(2) With respect to your second question, it should be noted that licensed wholesalers that purchase or import goods subject to the excise tax under Schedule I to the ETA for resale are permitted to purchase or import these goods without the payment of excise taxes by quoting:

•   the certificate of exemption for purchases; or

•   in the case of imports, the appropriate excise tax exemption code.

However, please be advised that excise tax licensees are liable for the excise tax on their sales of goods subject to excise tax, unless the goods are sold under excise-tax-exempt conditions.

(3) We understand that XXXXX is not currently licensed for excise tax purposes. As such, XXXXX would be required to purchase aviation fuel on a tax-paid basis. With respect to your question regarding refund entitlements in circumstances where XXXXX sells aviation fuel for use as Ships' Stores, the following is the CRA's policy on end-user refunds with regards to aviation fuel sold for use as Ships' Stores:

•   If at the time of purchase, the use of the aviation fuel is known to be for Ships' Stores, it must be purchased relieved of the excise tax by furnishing form K36A ^[x]footnote 1 or other acceptable documentation to the supplier. If this is true in the case at hand, then XXXXX could file an application for a refund using form N15.

•   If at the time of purchase, the use of the aviation fuel is not known or has multiple uses, it must be purchased on an excise tax-paid basis and the purchaser (e.g., commercial airliner) can file for an N15 refund application directly with the CRA for a refund of the federal excise tax on the aviation fuel that was actually used for Ships' Stores.

For purposes of establishing who may file the N15 refund application, a determination must be made whether or not the aviation fuel was sold on a FET paid basis or whether it was sold on an FET relieved basis based upon the CRA's end-user policy. If the aviation fuel has been sold relieved of the federal excise tax, then XXXXX could file the N15 refund application. However, if the aviation fuel has been sold on an excise tax-paid basis, the end-user would file the N15 refund application directly with the CRA.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, 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 Memoranda Series, do not bind the CRA with respect to a particular situation.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 941-2348.

Yours truly,

Douglas Wood, CGA
Rulings Officer
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate

2007/01/03 — RITS 57422 — XXXXX - Air Travellers Security Charge Act (ATSC)