7 February 2007 GST/HST Interpretation 83139 - Employee benefits

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 XXXXX Pita Chips.

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

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX (the Product) is an oven baked pita chip. It is sold in XXXXX gram bags.

2. The Product is available in the following flavours: XXXXX.

3. The Product is a small, XXXXX piece of pita that generally contains an air pocket.

4. The Product's packaging lists the ingredients as: pita bread XXXXX.

5. The Product labelling states XXXXX.

6. The Product is displayed in the store with other chips in the XXXXX section.

Ruling Requested

You would like to know how the GST/HST applies to supplies of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 6% GST, (or 14% HST as applicable) pursuant to section 165.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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

Generally, every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 6% on the value of the consideration for the supply (or 14% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) unless the supply is zero-rated. Zero-rated supplies are included in Schedule VI. The tax rate in respect of a zero-rated supply is 0%.

Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI, zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section.

In particular, paragraph 1(f) of Part III of Schedule VI excludes from zero-rating the following:

"chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels, but not including any product that is sold primarily as a breakfast cereal."

As discussed in GST/HST Policy Statement, P-241, Meaning of "Other Similar Snack Food" Under Paragraph 1(f) of Part III of Schedule VI to the Excise Tax Act (ETA), and also in GST/HST Info Sheet GI-021, Snack Foods, to determine whether a product is similar to snack foods described under paragraph 1(f), we consider the following factors: properties of the product (ingredients, flavours, texture, cooking process and appearance), labelling, packaging and marketing. No one factor should be relied upon to make a determination of the product's tax status.

The Product is considered to be a "similar snack food" for purposes of paragraph 1(f) of Part III of Schedule VI. The Product is cut into a bite-size piece of pita bread and is available in some flavours similar to products enumerated in paragraph 1(f). The Product is crunchy and puffed in the centre giving it an appearance similar to other snack foods enumerated in paragraph 1(f). The packaging of the Product is very similar to the type of packaging used for chips, crisps, puffs and similar snack foods. The Product is positioned in the store with other chips in the XXXXX section. All of these factors combined lead to the conclusion that the Product is considered to be a "similar snack food" for purposes of paragraph 1(f) of Part III of Schedule VI. As such, the Product is excluded from section 1 of Part III of Schedule VI and is therefore, a taxable supply subject to the GST at 6% or HST at 14% (as applicable).

In contrast, XXXXX referenced in your letter, determined that the particular pita chips in that case (Product C) were zero-rated. The facts of that case were such that Product C was considered similar to crackers and to have different characteristics than products enumerated in paragraph 1(f). Further, the packaging and marketing was found to be different than for those products enumerated in paragraph 1(f).

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-5124.

Yours truly,

Cheryl McKenzie
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2007/02/20 — RITS 83275 — Requirement to Collect GST on a Membership Fee for XXXXX