16 November 2001 GST/HST Interpretation 37032 - Wedding Cakes

Dear XXXXX

Thank you for your electronic mail of August 2, 2001 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your operations. Your request has been transferred from the XXXXX Region to the Goods Unit in the General Operations and Border Issues Division for response.

We understand that you are a professional cake decorator specializing in wedding cakes. You create edible flowers, icings and bouquets. You bake cakes for your clients that you decorate into a wedding cake. You also ice and decorate cakes which your clients provide to you. You have recently received a business number for your small, part-time business. You do not make supplies outside of XXXXX.

In accordance with GST/HST Memoranda Series Section 1.4, an application ruling can only be issued with reference to a clearly defined fact situation of a particular registrant. Rulings are issued upon request and where the taxpayer has presented all the relevant facts such as the nature of the transactions undertaken, detailed descriptions of services or property involved, the parties involved in all transactions and relevant documentation such as invoices, contracts and other pertinent agreements. Where all the relevant facts are not provided, an interpretation may be issued. I am pleased to issue you an interpretation which will elaborate on how the GST/HST applies to the supplies described in your letter

Interpretation Requested

You would like to know the tax status of the following items:

1. A wedding cake that includes cakes that you have baked as well as decorated.

2. A decorating job where the client provides the cakes that you decorate and make into a wedding cake.

3. An artificial cake (all styrofoam layers decorated to look like a wedding cake).

4. A wedding cake that is part artificial, part real and the real cake is provided by the customer or baked by you. You recently did a wedding cake whereby the customer provided one baked cake, you baked the second and the third cake was artificial.

5. Rental of an artificial cake or knife and server or a cake-box basket.

6. A delivery fee.

7. A service of decorating a knife and server to match the cake.

Interpretation Given

Based on the information provided, we offer the following interpretation:

1. A wedding cake that includes cakes that you have baked as well as decorated.

A wedding cake is zero-rated as a supply of food for human consumption under Part III of Schedule VI to the Excise Tax Act (the "Act").

2. A decorating job where the client provides the cakes that you decorate and make into a wedding cake. In certain cases, the icing acquired by you to decorate a cake may be very costly.

Pursuant to subsections 165(1) and 165(2) of the Act, every recipient of a taxable supply made in Canada shall pay tax in respect of the supply calculated at the rate of 7% on the value of the consideration for the supply, or 15% when the supply is made in a participating province (Nova, Scotia, New Brunswick, or Newfoundland). Therefore, in accordance with section 165 of the Act, the service of decorating a wedding cake is taxable at 7% (15% in a participating province) regardless of the cost of the inputs.

Where the supply is made in Canada and is not a zero-rated supply, a further analysis with respect to the province in which the supply is made or deemed to be made is necessary to determine the appropriate rate of GST/HST. In order to determine whether the HST applies to the supply of a service of decorating a wedding cake, the place of supply with respect to a province must be determined. For this determination, the relevant provisions of the Act are section 144.1 and Part V of Schedule IX to the Act. Section 144.1 provides that a supply is deemed to be made in a province if it is made in Canada and is, under the rules set out in Schedule IX, made in the province. Section 144.1 also states that a supply made in Canada that is not made in a participating province is deemed to be made in a non-participating province.

Paragraph 2(a) of Part V of Schedule IX to the Act deems a supply of a service to be made in a province if all or substantially all of the Canadian element of the service is performed in that province. Considering the fact that the service of decorating a wedding cake supplied by "XXXXX" is performed exclusively in the province of XXXXX, this service is deemed to be made in that province. Consequently, the supply of the service of decorating a wedding cake, is subject to XXXXX at the rate of XXXXX.

3. An artificial cake (all styrofoam layers decorated to look like a wedding cake).

This type of "cake" is not food for human consumption for the purposes of Part III of Schedule VI to the Act. The supply by way of sale or rental of this type of "cake" is subject to GST/HST.

4. A wedding cake that is part artificial, part real and the real cake is provided by the customer or baked by you. You recently did a wedding cake whereby the customer provided one baked cake, you baked the second and the third cake was artificial.

Where there is a combination of more than one component, each transaction must be examined on its own merits for a determination of what is actually being supplied. Nevertheless, we are pleased to offer you the following general guidelines.

As mentioned previously a supply of a single cake is zero-rated provided it is sold as a serving which weighs at least 230 grams. Therefore, where a wedding cake is part artificial and part real, we consider the supply to be a supply of a wedding cake where a real part is provided by you and weighs at least 230 grams. Where the wedding cake is part artificial and part real and where the real part is provided by the customer, it is considered to be a supply of a decorating service and, therefore, is subject to GST/HST.

5. Rental of an artificial cake or knife and server or a cake-box basket.

6. A delivery fee.

7. A service of decorating a knife and server to match the cake.

The supplies described in question 5, 6 and 7 are all taxable supplies pursuant to subsection 165(1) of the Act. Furthermore, since the supply is made in XXXXX will apply at the rate of XXXXX.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-5124.

Yours truly,

Gabrielle Nadeau
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate