23 March 1999 GST/HST Interpretation HQR0001319 - of Juices and Drinks

You have provided a list of more than three hundred types of fruit drinks supplied by XXXXX[.] You have asked us to confirm the tax status of the drinks, and you would like to know whether there is a "list or contact on beverage industries" or "a listing or standard for beverage products".

Interpretation Given

Section 1 of Part III of Schedule VI to the Excise Tax Act zero-rates supplies of food, beverages, and certain qualifying ingredients, unless one of the exceptions set out in paragraphs 1(a) through (r) applies. Based on the limited information provided, we are unable to provide a definitive response. Nevertheless, we can provide the following general remarks.

Assuming that each of the products is a beverage for human consumption and that none of the exceptions set out in paragraphs 1(a), (o), (o.4), (o.5), (p) or (q) apply (which seems to be a reasonable assumption in this case as all of the products are fruit drinks sold by a large grocery retailer), then supplies of the drinks are zero-rated under section 1 unless one of the exceptions set out in paragraphs 1(c), (d) or (n) applies. Whether or not one of these three exceptions applies is a question of fact.

Paragraph 1(c) refers to supplies of

(c) carbonated beverages;

If any of the fruit drinks at issue are carbonated, then supplies of those drinks would be excluded from section 1 by virtue of paragraph 1(c). Since no other relieving provision would apply in this case, the supplies would be taxable at 7% (or 15% where the supply is made in a participating province). If the drinks are non-carbonated, paragraph 1(c) will not apply, but paragraphs 1(d) or (n) may apply.

Paragraph 1(d) refers to supplies of

(d) non-carbonated fruit juice beverages or fruit flavoured beverages, other than milk-based beverages, that contain less than 25% by volume of

(i) a natural fruit juice or combination of natural fruit juices, or

(ii) a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state,

or goods that, when added to water produce a beverage included in this paragraph;

If any of the fruit drinks at issue contain less than 25% by volume of natural fruit juice or a combination of natural fruit juices, or a natural fruit juice or combination of natural fruit juices that have been reconstituted into the original state, then supplies of those drinks would be excluded from section 1 by virtue of paragraph 1(d), unless the drinks are milk-based. Since no other relieving provision would apply in this case, the supplies would be taxable at 7% (or 15% where the supply is made in a participating province). If the drinks are milk-based or contain 25% or more by volume of the juices referred to in subparagraphs (d)(i) or (ii) above, although paragraph 1(d) will not apply, paragraph 1(n) may apply.

Paragraph 1(n) refers to supplies of

(n) beverages (other than unflavoured milk) or pudding, including flavoured gelatine, mousse, flavoured whipped dessert product or any other products similar to pudding, except

(i) when prepared and prepackaged specifically for consumption by babies,

(ii) when sold in multiples, prepackaged by the manufacturer or producer, of single servings, or

(iii) when the cans, bottles or other primary containers in which the beverages or products are sold contain a quantity exceeding a single serving;

Unless the fruit drinks at issue are prepared and prepackaged specifically for babies, sold in multiples (prepackaged by the manufacturer or producer) of single servings, or the cans, bottles or other primary containers in which the drinks are sold contain a quantity exceeding a single serving, supplies of the drinks would be excluded from section 1 by virtue of paragraph 1(n). Since no other relieving provision would apply in this case, supplies of such drinks would be taxable at 7% (or 15% where the supply is made in a participating province). Any supplies of the drinks at issue which are not excluded by paragraph 1(n), or by paragraphs 1(c) or (d) discussed previously, are zero-rated under section 1.

Note that for the purpose of paragraph 1(n), the Department will generally regard a beverage sold in a primary beverage container containing less than 600 mL of the beverage as a single serving. Nevertheless, the Department will also take into account the manner in which the beverage is packaged, marketed, and promoted. Thus, a beverage sold in a container which contains less than 600 mL of the beverage may not be a single serving if the evidence (i.e., the nature of the packaging and the manner in which the product is marketed and promoted) indicates on balance that the beverage is not a single serving. For example, a 540 mL sealed can [i.e., a can without a built-in opening device] of tomato juice would not be regarded as a single serving as such products are not generally packaged, marketed, or promoted as single servings.

There is no comprehensive listing of fruit juices broken down according to the tax status of the drinks. Indeed, in our view, such a listing is impossible to devise. For example, assuming that no exclusions other than paragraph 1(n) could apply, if X-Juice is sold in 700 and 400 mL containers, supplies of the 700 mL containers would be zero-rated under section 1, but supplies of the 400 mL containers could be excluded from section 1 by virtue of paragraph 1(n) (depending on whether they are sold individually or in multiples). As you can see, supplies of the same product (i.e., X-Juice) could be taxed at 0% or 7% (or 15%) depending on factors such as the volume of the containers and whether the containers are packaged by the manufacturer for sale in multiples, and this doesn't even take into account other exclusions which could potentially apply. As a result, it is impossible to devise a list of the type you suggest based on the nature of the product alone.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (403) 231-4104.