16 November 2005 Excise Interpretation 58731 - Follow-Up - Request for additional information

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 federal excise tax (FET) to the operations of your client. We apologize for the delay in responding.

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

Statement of Facts

1. Your client, XXXXX, is a Canadian air charter operator who regularly flies into the USA and other foreign destinations. They are based out of the XXXXX International Airport.

2. Their base fuel-originating source is a Canadian fuel company, generally XXXXX.

3. Your client pays for their fuel using a card issued by a US third party rebiller (your term), including XXXXX. Your client uses their services because these rebillers are able to negotiate bulk prices and pass on the savings to their customers.

4. The Canadian fuel company XXXXX invoices the third party rebillers, including FET where applicable. The rebillers pay the Canadian company and invoice your client for fuel purchased.

5. You have indicated in your letter that the rebillers are not licensed under the ETA, however, a review of Canada Revenue Agency (CRA) records indicate that certain rebillers that your client has dealings with do hold an FET licence.

Interpretation Requested

You would like to know whom; either, the Canadian fuel company or the third party rebiller, is entitled to file for a refund or drawback of FET on fuel purchased and used by your client in international flights.

I will address the issue of a refund and drawback separately.

Interpretation Given

In your letter, you have not made available any information on the contractual relationship between the Canadian fuel companies and the third party rebillers. Nor has any information on the contractual relationship between your client and the third party rebillers been provided. As such, for the purpose of this interpretation, we will consider the third party rebillers to be resellers of fuel. Although as indicated, no information has been provided to verify the business relationships amongst the parties.

Paragraph 59(3.2)(a) of the ETA provides that the Governor in Council may make regulations designating certain classes of goods as ships' stores for use on board a conveyance of a prescribed class.

Subsection 3(1) and Item 4 of the Schedule to the Ships' Stores Regulations designate petroleum products, including jet fuel, as ships' stores for use on board an international aircraft. Subsection 2(1) of the Ships' Stores Regulations defines an international aircraft to mean "... an aircraft operating internationally in the transportation of passengers or goods, or both, for reward". Jet fuel purchased by your client for use in international flights would qualify to be taken on as ships' stores.

In order to recover the FET on goods designated as Ships' Stores, an application of either a refund or drawback must be submitted to the CRA.

Refund of FET

Section 68.17 of the ETA provides that "... If tax under Part III has been paid in respect of any goods and a manufacturer, producer, wholesaler, jobber or other dealer has sold the goods for use as ships' stores, an amount equal to the amount of that tax shall, subject to this Part, be paid to that dealer if that dealer applies for it within two years after that sale of the goods."

The third party rebillers are the persons who sold fuel to your client for use as ships' stores and therefore, are entitled to file for a refund of FET under section 68.17 of the ETA. In order to support their claim for refund, the third party rebillers should obtain, from your client, form K36A Ships' Stores Declaration and Clearance Certificate that has been authorized by the Canada Border Services Agency (Canada Customs) for each sale of fuel that was sold for use as ships' stores. Other documentation in lieu of the form K36A may be acceptable.

Drawback of FET

Paragraph 70(1)(b) of the ETA states that "... On application, the Minister may, under regulations of the Governor in Council, grant a drawback of the tax imposed under Part III and paid on or in respect of goods supplied as ships' stores."

Section 4 of the Goods for Ships and Aircraft (Excise) Drawback Regulations provides that a drawback may only be claimed by the person who supplied the goods as ships' stores. The CRA considers the word supplied to mean a sale and not a physical delivery. The third party rebillers are the persons who sold the fuel to your client for use as ship's stores and therefore are entitled to file for drawback of FET.

Subsection 70(4) of the ETA state that "... No drawback shall be granted under this section unless the person applying therefor provides such evidence in support of the application as the Minister may require." Likewise as in the case of a refund, in order to support their claim for drawback, the third party rebillers should obtain, from your client, form K36A Ships' Stores Declaration and Clearance Certificate that has been authorized by the Canada Border Services Agency (Canada Customs) for each sale of fuel that was sold for use as ships' stores. Other documentation in lieu of the form K36A may be acceptable.

It should be noted that there is no provision within the ETA that provides for a notice of determination to be issued for a drawback. Therefore, no right of appeal exist once a decision has been made by the CRA on the payment of a drawback.

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) 954-6718.

Yours truly,

Darren Weiner
Excise Tax Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate

2005/10/31 — RITS 62196 — "Goldsmiths' and Silversmiths' Products"