26 March 2001 GST/HST Ruling 34601 - Application of the GST/HST to Individually Wrapped Bars

Dear XXXXX:

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

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX. has recently launched line extensions to their current XXXXX XXXXX. One of the new products is XXXXX (the 'product').

2. The product comes in three packaging formats:

•   In cartons of XXXXX individually wrapped bars sold mostly to retail grocery store customers where the carton is the selling unit. The information on the carton includes the list of ingredients, the total weight of the product XXXXX, and a Universal Product Code (UPC).

•   In cartons of XXXXX individually wrapped bars sold mostly to retail grocery store customers where the carton is the selling unit.

•   In cartons of XXXXX individually wrapped bars sold mostly to Foodservice vendors and distributors. The carton is designed to be used as a display box from which single servings can be dispensed.

Ruling Requested

Is the supply of this new product subject to the GST/HST?

Ruling Given

Based on the facts set out above, we rule that supplies of the cartons of XXXXX individually wrapped bars and the cartons of XXXXX individually wrapped bars are taxable at 0% (zero-rated). The carton of XXXXX individually wrapped bars is taxable at 7%, or 15% as applicable.

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 our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

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 of 15% where applicable, on the value of the consideration for the supply pursuant to subsections 165(1) and (2) of the Excise Tax Act (ETA). Where however, a supply is a zero-rated supply, the tax in respect of that supply is 0%.

Paragraph 1(m) of Part III of Schedule VI to the ETA excepts the following from zero-rating.

"cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where

(i) they are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving, or

(ii) they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six, but not including bread products, such as bagels, English muffins, croissants or bread rolls, without sweetened filling or coating".

The product in question is considered to be sweetened baked goods for GST/HST purposes.

Subparagraph 1(m)(i) of Part III of Schedule VI refers to goods "prepackaged for sale to consumers". The term is understood to mean packaging undertaken or performed by the manufacturer, or undertaken on the manufacturer's behalf. A zero-rated prepackaged unit is a package of six or more single servings packaged by the manufacturer in a container intended for purchase by the final consumer. A package intended for sale to consumers normally includes information required under the Consumer Packaging and Labelling Act. Consumer packages normally include the ingredients and net weight and in many cases the Universal Product Code (UPC) to be read by scanner-type point-of-sale equipment.

The cartons of XXXXX individually wrapped bars are considered prepackaged for sale to consumers in quantities of 6 or more items. Accordingly, these supplies are zero-rated.

Display boxes are not considered to be "prepackaged for sale to consumers" for the purposes of paragraph 1(m) of Part III to Schedule VI. Display boxes are designed to be opened and set up to create an eye catching display from which the consumer may purchase any number of individually packaged single servings. Therefore, the supply of a display box containing XXXXX individually wrapped single servings of the product is taxable at the rate of 7%, or 15% as applicable.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9218.

Yours truly,

Kevin W. Smith
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate