5 August 1998 GST/HST Interpretation HQR0001201 - Tax Status of Products Supplied to Stores

I refer to XXXXX facsimile message of April 28, 1998 (with attachments), addressed to XXXXX concerning the tax status for GST/HST purposes of six products supplied by the above-referenced registered firm, through a branch called XXXXX, to customers XXXXX[.]

The following information is contained in the brochures for these products:

•   XXXXX[.] The literature states that this product is supplied to stores that are planning to build and decorate their own XXXXX at store level and therefore just require the over wrapped, pre-baked XXXXX forms. This unit allows the store to prepare a cost efficient XXXXX and obtain a competitive retail price point. The product contains XXXXX[.]

•   XXXXX[.] The literature states that this product is supplied to stores that are planning to build and decorate their own XXXXX at store level and therefore just require the over wrapped, pre-baked XXXXX forms. This unit allows the store to prepare a more impressive XXXXX with a lot of character. The product contains XXXXX[.]

•   XXXXX[.] The literature states that this product provides the store with an attractively packaged, "retail boxed" item for consumers that are looking for a "do-it-yourself" activity. XXXXX[.]

•   XXXXX[.] The literature states that this product provides the store with an "unique" item that can be sold "year-round". The item is great for kids' day-to-day activities, birthday parties or as a gift. The product contains XXXXX[.]

•   XXXXX[.] The literature states that this product provides the store with an "unique" item that can be sold "year-round". The item is great for kids' day-to-day activities, birthday parties or as a gift. The product contains XXXXX[.]

•   XXXXX[.] The literature states that these kits are a compliment to XXXXX[.] Instead of XXXXX decorating the XXXXX all the ingredients are in a kit so that the consumers can make their own creations. XXXXX[.]

Under the provisions of Schedule VI, Part III, section 1 to the Excise Tax Act (Act), supplies of food or beverages for human consumption (including sweetening agents, seasons and other ingredients to be mixed with or used in the preparation of such food or beverages are subject to the GST at 0% (i.e., zero-rated), unless the supplies are specifically excluded by paragraphs (a) to (r).

XXXXX

The XXXXX containing XXXXX which can be decorated by the purchasers (i.e., consumers) are excluded from zero-rating by virtue of Schedule VI, Part III, subparagraph 1(m)(i) to the Act because the XXXXX are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving. The XXXXX are, therefore, subject to the GST at 7%, if supplied in a non-participating province, or the HST at 15%, if supplied in a participating province.

The XXXXX which contains XXXXX is zero-rated under the provisions of Schedule VI, Part III, section 1. The exclusion in Schedule VI, Part III, subparagraph 1(m)(i) does not apply because there are more than five XXXXX in the kit.

The above opinions are based on the product literature submitted by XXXXX to your office. However, if XXXXX decides to alter the contents of the above products in any manner, XXXXX should be advised to submit details to the Department for confirmation of the products' tax status.

Should you have any further questions or require clarification on the above matter, please contact Ms. Alyson Trattner, A/Manager, Goods Unit, General Operations and Border Issues Division, at (613) 954-4397.

Garry L. Ryhorchuk
Senior Rulings Officer
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate

c.c.:      G. Ryhorchuk
A. Trattner

Legislative References:           Schedule VI, Part III, section 1, Sections 138, 144.1 and 165, Schedule IX, Part II,
Section 4.3 (Basic Groceries) of the GST/HST Memoranda Series
XXXXX Section 4.3
Department of Finance Explanatory Notes dated May 1990 (pages 36-37)
GST Q & As Nos. 2a.166 and 6c.10
RISE Ruling Card No. 590032
Policy Statements P-159R and P-160
XXXXX

NCS Subject Code:                 11850-1