File no.: 11755-20(gjor)
XXXXX March 29, 1995
This is in response to your electronic mail of March 7, 1995, and a telephone conversation with Gerry O'Reilley of this office. XXXXX of the XXXXX Region has also sent us an E-Mail expressing her interest with respect to a number of XXXXX owners awaiting a decision by this Department with respect to the sale of "worts".
We understand that XXXXX wish to reduce the amount of their billing to customers for taxable services and increase the amount of their billing for zero-rated goods with respect to beer. They intend to accomplish this by selling "worts" as opposed to having the customer selecting the ingredients with the aid of the XXXXX and preparing the wort, again with the aid of the XXXXX . Under the new scenario, the customer adds the yeast to the "wort" and bottles the beer after fermentation.
At issue is whether this arrangement is acceptable for GST purposes.
A "wort" is the unfermented infusion of malt that becomes beer when fermented. It is tangible personal property and we believe that it may be considered as a separate supply from the service element provided by the XXXXX , based on our analysis included in my memorandum to you of November 17, 1994.
It would appear that such XXXXX are, in effect, changing their way of doing business with respect to the sale of worts. Therefore, where the XXXXX prepares the wort and supplies it to a client, the XXXXX is making a supply of goods zero-rated under section 1 of Part III of Schedule VI of the Excise Tax Act. Further, when a XXXXX manufactures wort in advance of client requests for the product (i.e., creating an inventory of worts), or when a XXXXX manufactures the wort at the request of the client, the supply also remains one of zero-rated basic groceries. The fact that this practice decreases the taxable service portion of the amounts being charged to the customer does not in itself affect the characterization of the supply as one of zero-rated basic groceries.
On the other hand, the issue of whether the consideration is reasonably apportioned between taxable and zero-rated supplies is a matter for audit to determine. In this regard, you may refer to the discussion of subsection 153(2) of the ETA in my November 17, 1994, memorandum.
If additional information is required please contact Gerry O'Reilley at 954-4397.
H.L. Jones
Director
General Tax Policy
GST Rulings & Interpretations
Policy and Legislation Branch - XXXXX
| c.c.: |
Imposition Team
Ken Syer, Special Sectors XXXXX |
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