5 July 2000 GST/HST Ruling 8123/HQR0001729 - Tax Status of [Snack Bars]

Dear XXXXX

Thank you for your letter of March 1st, 1999 (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the above noted product.

Please note that as of November 1st, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

Statement of Facts

Our understanding of the facts is as follows:

1. Your company is the distributor of the "XXXXX Bar", a product that is made in Canada. The company is, at the present time, paying and charging GST/HST on this product. You have recently purchased a similar bar named "XXXXX", on which no GST was charged. In your letter, you mentioned that the "XXXXX" bar is exactly the same as your XXXXX Bar". A sample of both bars and a copy of the cash register receipt for the purchase of the "XXXXX" bar were enclosed for examination. The characteristics of the "XXXXX Bar" are as follows:

•   It comes in different flavours;

•   According to the label, the ingredients of the XXXXX Berry flavour are apple, strawberry, raspberry, plum, blueberry, blackberry, cherry purees and concentrate, and natural flavouring;

•   According to the packaging, each bar is 45 g., and indicates that it is "XXXXX XXXXX".

2. You also asked in your letter that if the XXXXX Bar" was packaged and promoted as a nutritional supplement, like the product "XXXXX Bar", no GST/HST would be applicable. A sample of XXXXX Bar XXXXX and a copy of the cash register receipt recording its purchase were enclosed for examination.

Ruling Requested

You request a ruling on the tax status of the "XXXXX Bar" and clarification on nutritional supplements.

Ruling Given

Based on the facts set out above, we rule that the supply of the "XXXXX Bar" is taxable at the rate of 7% GST or 15% HST (for supplies made in the participating provinces of Nova Scotia, New Brunswick and Newfoundland).

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 (ETA), or to CCRA interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

XXXXX[.] Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% or the HST rate of 15% on the value of the consideration for the supply pursuant to subsections 165(1) and (2) of the ETA. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.

Section 1 of Part III of Schedule VI to the ETA states that supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages) are zero-rated, other than supplies included in paragraphs (a) to (r).

Paragraph 1(l) of Part III of Schedule VI excludes from zero-rating supplies of fruit bars, rolls or drops or similar fruit-based snack foods. The "XXXXX Bar" is a snack bar that contains 100% fruit. It is the CCRA's position that snack foods containing 100% fruit in the form of bars fall within the scope of Paragraph 1(l). Therefore, the supply of the "XXXXX Bar" is taxable at the rate of 7% GST or 15% HST (for supplies made in the participating provinces of Nova Scotia, New Brunswick or Newfoundland).

The fact that the "XXXXX" bar is being sold zero-rated is not a consideration in determining the tax status of the "XXXXX Bar". However, we thank you for the information provided.

It is our understanding that products that are sold or advertised as nutritional supplements must meet the nutritional and labelling requirements set out in Sections B.24.201 and B.24.202 of the Food and Drugs Act. For your information, the "XXXXX Bar" does not meet the above requirements.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Roger Tessier CA
Goods Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate