12 October 2000 GST/HST Interpretation 7363/HQR0000969 - Basic Groceries: Sandwiches and Similar Products

Thank you for your memorandum of XXXXX, with attachments, concerning two rulings issued by your office on grocery products. You have requested that we review the letters to determine whether amendments are required in either case.

The products on which the rulings were issued have the following characteristics:

XXXXX

1. The product is a small triangular piece of pita bread, filled with pre-cooked ground beef, tomatoes, onions and spices.

XXXXX are sold in each package, with a weight of XXXXX grams per package.

3. They may be consumed hot or cold and the packaging gives heating instructions for conventional and microwave ovens.

4. The labeling on the package describes the product as XXXXX

XXXXX

1. This product consists of pre-cooked unleavened bread (tortilla) with a filling of chicken, beef or chilli, and vegetables and cheese.

2. The filling is not visible since it is totally enveloped (but not sealed) in the bread.

XXXXX are individually wrapped, placed on a small plastic tray and then shrink wrapped.

4. The product has to be kept refrigerated, and is usually sold at deli counters.

5. The product net weight is XXXXX grams (XXXXX ).

6. Consumers normally heat the product before consumption but it may be eaten cold.

The original ruling letters for these products stated that the supply of the products would be considered a zero-rated supply as long as they were not sold heated for consumption.

Pursuant to paragraph 1(o.2) of Part III of Schedule VI to the Excise Tax Act (ETA), supplies of sandwiches and similar products other than when frozen for which all of the consideration becomes due on or after May 14, 1996, or is paid on or after that day without having become due, are excluded from zero-rating and are therefore taxable supplies. This paragraph formerly read "... prepared foods and beverages sold in a form suitable for immediate consumption, either where sold or elsewhere, namely ... (iii) sandwiches and similar products,..."

The ETA is silent on the issue of defining "sandwiches and similar products". In the absence of legislative direction, the common meaning will be used.

It is our position that the phrase "sandwiches and similar products" would first be regarded as something which can be consumed with little or no preparation, represented by one or more pieces of bread, with meat, cheese, savoury or other topping or filling, all of which are 'ready to eat'.

'Ready to eat' is understood to mean that if any of the components of a sandwich or similar product require cooking or baking to make them safe for human consumption, these components must be cooked or baked prior to being used in the sandwich or similar product.

In many cases, it will be obvious whether an item is a sandwich. Where there is doubt, or to determine if the item is a similar product, the following questions may be beneficial in formulating a decision:

1. Does the product include a 'ready-to-eat' bread?

There are two important points here. First, the bread used in the sandwich or similar product must be baked prior to being used in the sandwich or similar product. 'Baked' refers to the process of changing the raw dough into bread. The second important point is that the bread may be made with various types of flour and may be leavened or unleavened. (Leavening refers to the use of a rising agent such as yeast in the making of bread.) For example, bread includes such things as flour tortilla, corn tortilla, pita bread, naan bread, rolls, flatbread, foccacia, croissants and bagels. This list is provided as an example and should not be construed as being all-inclusive.

2. Does the product include a 'ready-to-eat' filling or topping? For example, chicken must be cooked prior to consumption. Therefore, the chicken must be cooked prior to being used in the product for it to be considered 'ready-to-eat'. It should be noted that cooking does not include heating or re-heating previously consumable foods.

3. Does the product compete with a sandwich? The manner in which the product is displayed, labeled, packaged, invoiced and advertised may indicate whether the product competes with a sandwich.

Sandwiches and similar products supplied from a cooler in convenience stores or other retail outlet are commonly heated by the recipient in microwave ovens provided by the retailer. These products are pre-cooked and do not require the application of heat for the food to be consumable. The application of heat is optional and is applied to taste. These products include a ready-to-eat bread with a ready-to-eat filling or topping. The supply of these products is subject to the GST at 7% regardless of whether they are heated or not.

The size of the sandwich or similar product is not an issue in determining the GST tax status.

XXXXX It is unclear whether the product is assembled using a ready-to-eat bread or whether raw dough is wrapped around the filling and then baked. Our attempts to contact the manufacturer for a sample or for clarification have been unsuccessful, therefore, we will provide our opinion of the product on the basis of each possibility.

A. If the product is made with an uncooked dough wrapped around a filling, then baked or otherwise cooked, the product is not a sandwich or similar product and is therefore zero-rated.

B. If the pita bread is cooked, i.e. ready-to-eat, and is wrapped around a ready-to eat filling, the product would be considered a sandwich or similar product for the purpose of paragraph 1(o.2) of Part III of Schedule VI to the Excise Tax Act and taxable at 7% or 15% as applicable.

XXXXX

The product is a sandwich or similar product for the purpose of paragraph 1(o.2) of Part III of Schedule VI to the Excise Tax Act.

The product in question consists of a pre-cooked tortilla (a type of unleavened flat-bread) wrapped around a ready-to-eat filling. Therefore, a XXXXX is an item we could consider to be a sandwich or similar product and taxable at 7% or 15% as applicable.

We request that you revoke the original rulings and issue amendments based upon the above information. The clients should be advised that the revocation will be effective ninety (90) days after the date indicated on the letter of revocation.

If you have any questions, or require further clarification on the above matter, please contact me at 613-952-9218.

Kevin W. Smith
Technical Analyst