13 November 2007 GST/HST Ruling 97036 - XXXXX Cranberry Juice 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.

XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of blank recordable media where the private copying levy imposed under the Copyright Act may have applied.

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

Statement of Facts

1. XXXXX was a registrant from XXXXX to XXXXX.

2. XXXXX made supplies of blank audio recording media (e.g. blank CDs) it imported into Canada.

3. The Copyright Act is a federal statute that is administered by the Copyright Board of Canada. Private copying is the subject of sections 79 to 88 of the Copyright Act and includes the imposition of the private copying levy on the importation of or the first supply in Canada of a "blank audio recording medium" as defined under section 79 of that Act.

4. The private copying levy when imposed upon an importer or manufacturer in Canada is not consideration for a supply for GST/HST purposes.

5. XXXXX paid the private copying levy imposed under subsection 82(1) of the Copyright Act to the Canadian Private Copying Collective (CPCC) on imported blank audio recording media.

6. When XXXXX made supplies of blank recordable media to its clients there was an amount identified as the private copying levy invoiced to XXXXX clients which is understood to be equal to the amount XXXXX paid in respect of the levy on their importations.

Ruling Requested

You would like to know how the GST/HST applies to the amount of the levy paid by XXXXX that was added to the price charged by XXXXX and included in the invoice to customers for supplies made in Canada by XXXXX of the blank audio recording media (e.g. blank CDs).

Ruling Given

Based on the facts set out above, we rule that when XXXXX supplies blank audio recording media (that XXXXX previously imported and for which XXXXX had paid the private copying levy in respect of the importation), the amount identified on invoices as the private copying levy is part of the consideration for supplies of blank audio recording media made in Canada by XXXXX and is subject to the GST/HST.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

The supply of a blank audio recording medium (hereafter referred to as "blank media") such as a blank CD made in Canada by a registrant is a taxable supply. The consideration for a taxable supply is subject to GST/HST under the provisions of section 165. The term "consideration" is defined in subsection 123(1) to include "any amount that is payable for a supply by operation of law".

Subsection 82(1) of the Copyright Act imposes the private copying levy on the manufacturer or importer "on selling or otherwise disposing" of blank media. The private copying levy is payable by the supplier in respect of the manufacture or importation of blank media. The private copying levy is imposed at one stage only, on the manufacturer or importer. In this case, it is imposed on XXXXX. The amount imposed in respect of the private copying levy is not consideration for a supply for GST/HST purposes. This means that when your firm imported the blank recordable media, the levy did not become part of the consideration for the calculation of the GST/HST on that importation.

It was your firm's custom to identify the amount that you paid when you supply or re-supply the blank media. Your client does not pay the levy under the Copyright Act. The levy is payable by XXXXX. The levy is not a multi-stage levy like, for example, the GST/HST is a multi-stage tax, notwithstanding your custom of identifying the amount that you paid on your invoices to your clients. The actual levy becomes part of your cost for the blank recordable media that you sell and whether identified separately or included in the selling price for the blank recording media, it is subject to the GST/HST. The sum of the amounts is the total consideration for the supply.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8811. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Wm Parker
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2007/11/29 — RITS 97230 — Tax Status of [Dessert Products Not "Similar to Pudding"]