4 August 1994 GST/HST Interpretation 11640-4(glr)[2] - Soft Drinks Sold in a Duty Free Shop

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Fax: (613) 990-1233

Attached is a copy of a memorandum dated September 22, 1993 (File : XXXXX), written by Mr. XXXXX, Interpretations Officer, XXXXXDistrict Excise/GST Office, to Mr. XXXXX, District Chief of Audit of the XXXXX Office. The memorandum concerns the application of the Goods and Services Tax (GST) to soft drinks sold in a duty free shop.

In his memorandum,XXXXX has determined that the supplies of the soft drinks are subject to the GST at 7% for the following reasons:

•   vending machines in the duty free stores are not under the control of Canada Customs for audit purposes;

•   the goods (i.e., soft drinks) in these vending machines are not considered to be a part of the inventory of the duty free shop for export purposes; and

•   no invoices are issued on the sale of the goods in question as is the case with all other goods sold from the store.

XXXXX has also advised XXXXX that, provided proper documentation was available to the non-resident purchaser, the non-resident could file a Visitor Rebate Application to recover the GST paid on the soft drinks.

However, it is likely that the supply of the soft drinks to both non-residents and residents may not be subject to the GST at 7%, but may be zero-rated.

Schedule VI, Part V, section 11 to the Excise Tax Act zero-rates:

"A supply of tangible personal property made by a person operating a duty free shop licensed as such under the Customs Act to an individual at a duty free shop for export by the individual."

Soft drinks are tangible personal property and are being supplied by a person operating a duty free shop. Provided the soft drinks are for export by the purchaser (i.e., either resident or non-resident individual), the supplies may be zero-rated. The duty free shop will, of course, be required to maintain documentation to substantiate that the soft drinks are for export. If the soft drinks are for consumption in Canada, the supplies would be subject to the GST at 7%.

If you require any further information, please contact Mr. Garry Ryhorchuk of my staff at (613) 952-6743.

H.L. Jones
Director
General Tax Policy
Excise/GST
Policy and Legislation

Att.