27 April 1999 GST/HST Ruling HQR0001566 - Application of the GST/HST to the Supply of Fuel

Dear Sirs:

This letter is in response to your various discussions and exchanges of facsimiles with XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction concerning your sales of XXXXX  with delivery made to XXXXX XXXXX, which is more particularly described below. We have decided to issue an application ruling in this matter based on the following facts, rather than a more general interpretation of the law.

Statement of Facts and Transaction

Our understanding of the facts, and the transaction, is as follows:

1. XXXXX are registered for GST/HST purposes;

2. XXXXX is a corporation resident in the XXXXX[;]

3. XXXXX is a XXXXX resident in XXXXX[;]

4. XXXXX supplies XXXXX XXXXX which fuel is delivered to a location at or near XXXXX[;]

5. These supplies are XXXXX[;]

6. The procedures for the storage of a XXXXX are, generally, the following:

g) The fuel tanks for the storage of XXXXX are owned by a XXXXX incorporated specifically for that purpose;

h) This XXXXX is delivered to and loaded into the XXXXX storage tanks at the XXXXX[;]

i) Each major XXXXX[;]

j) The XXXXX do not have their own separate XXXXX, rather, the fuel purchased by the various XXXXX[;]

k) The XXXXX maintains inventory records of how much of the fuel in the storage tanks belongs to each XXXXX and these records are updated each time fuel is added to the XXXXX or removed when fuel is be loaded XXXXX[;]

l) Operating costs each month associated with the maintenance of these records and the fueling of XXXXX are shared by the XXXXX based upon the volume of fuel consumed in the given month by the XXXXX[;]

m) When fuel is purchased by an XXXXX  from its supplier and this XXXXX provides both domestic XXXXX it is not known at the time of purchase exactly how much of the quantity of this fuel will be used by the XXXXX[;]

n) Separate storage tanks are not maintained for fuel to be used for XXXXX[;]

7. XXXXX has advised that a significant percentage of its XXXXX this XXXXX on average in a given month, XXXXX with the balance being XXXXX[.]  However, this percentage varies among the various XXXXX XXXXX which XXXXX XXXXX[.]

Ruling Requested

Whether the supplies of XXXXX which are delivered to a location at or near XXXXX are zero-rated pursuant to section 2.1 of Part V of Schedule VI to the Excise Tax Act (the "ETA").

Ruling Given

Based on the facts set out above, we rule that the supplies of XXXXX by XXXXX XXXXX which are delivered to a location at or near XXXXX XXXXX are not zero-rated pursuant to section 2.1 of Part V of Schedule VI to the ETA. XXXXX is therefore required to collect and remit to Her Majesty in right of Canada tax at the rate of 7% on the value of the entire consideration (subsection 165(1)).

Explanation

Taxable supplies of tangible personal property made by a registrant in Canada pursuant to paragraph 142(1)(a) of the ETA are subject to GST/HST at the rate of 7% on the value of the consideration if this property is delivered in a non-participating province (subsection 165(1)). XXXXX is a non-participating province. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0% (subsection 165(3)).

Section 2.1 of Part V of Schedule VI to the ETA zero-rates a supply of fuel to a person who is registered under the ETA at the time the supply is made, where

(a) XXXXX

(b) the fuel is acquired by the person for use in the course of so XXXXX

The condition in subsection 2.1(a) is met where the recipient, who is registered under the ETA, carries on a business of XXXXX XXXXX XXXXX meets this condition. However, because of the manner in which the fuel is stored by the XXXXX the condition in subsection 2.1(b) is not met by XXXXX[.]  This zero-rating provision does not allow for any situation other than the complete use of the fuel supplied for XXXXX XXXXX[.]  At the time the supply of the fuel by XXXXX to XXXXX is made and filled into the XXXXX, it is known that some portion of that fuel will be used by XXXXX for XXXXX XXXXX[.] On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. Goods such as a XXXXX which are delivered or made available in a participating province, to the extent that they are taxable supplies (which are not zero-rated), are subject to the HST, and tax must be collected on the consideration for these supplies at the harmonized rate.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Richard Aronoff, Border Issues Officer, at (613) 954-2560.

Yours truly,

Randy Nanner
Manager
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate