20 February 2007 GST/HST Ruling 83275 - XXXXX Pita Chips

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 XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a new marketing plan for the sale of XXXXX.

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

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX. XXXXX XXXXX fruit orchards.

2. XXXXX is starting a new marketing plan for the sale of XXXXX whereby it will sell a membership to have a family tree in its orchard. This marketing plan is an alternative to a traditional u-pick. XXXXX.

3. A person purchasing a membership (a "Purchaser") will receive the XXXXX off their tree. The purchaser will have his or her name placed on a particular tree and that tree can be the person's to pick XXXXX from for as many years as the membership is renewed. The Purchaser will receive training to pick the fruit without damaging the tree in order to keep the tree healthy for many years.

4. The Purchaser is notified in advance of the estimated harvest date and can bring his or her own containers or purchase containers for a nominal fee. If the Purchaser is not able to come and harvest, XXXXX can pick, pack and ship the XXXXX for an additional fee. A Purchaser can send someone in his or her place to pick XXXXX, provided the picker has the Purchaser's written consent to do this.

5. The XXXXX cannot guarantee the poundage of XXXXX on the tree. The weather plays a role in the development of the fruit, so each year is unpredictable. The trees are estimated to produce between XXXXX and XXXXX pounds of XXXXX each year. On average, the tree should produce about XXXXX pounds of XXXXX. The membership fee paid is based on the average amount of XXXXX expected at an average market price.

6. The Purchaser also has a place to relax, enjoy a picnic and the farm animals as well as take part in the tours of the orchard and greenhouse.

Ruling Requested

You would like to know if XXXXX is required to charge the GST on the $XXXXX annual membership fee.

Ruling Given

Based on the facts set out above, we rule that XXXXX is not required to charge the GST on the $XXXXX annual membership fee.

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 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

In general, every person who makes a taxable supply in Canada is required to collect the tax payable by the recipient of the supply. Every recipient of a taxable supply made in Canada is required to pay tax in respect of the supply at the rate of 6% (or 14% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador) on the value of consideration for the supply unless the supply is zero-rated. Zero-rated supplies are taxable at the rate of 0% and are listed in Schedule VI.

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.

The $XXXXX annual membership fee that XXXXX charges is considered to be a fee charged for the supply of XXXXX. Since none of the exclusions in paragraphs 1(a) to (r) of Part III of Schedule VI apply to the supply of XXXXX, the supply of XXXXX is a zero-rated supply.

As such, XXXXX is not required to charge the GST on the $XXXXX annual membership fee.

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

2007/02/22 — RITS 83508 — Eligibility for a GST/HST Transitional Rebate