29 March 2001 GST/HST Ruling 8036 - Tax Status of Bars

Dear XXXXX:

This is further to our letter of XXXXX, regarding Application Ruling No XXXXX, (dated XXXXX). In our XXXXX, letter, we indicated that we were in the process of reviewing the tax status of XXXXX bars (i.e. nutritional supplements), that XXXXX was suspended and that GST/HST did not have to be charged on the supply of nutritional supplements.

At this time, we confirm that nutritional supplements, as defined in section B.01.001 of the Regulations to the Food and Drug Act ("FDA"), are considered as a basic grocery and are zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act ("the Act"). Our current ruling is set out below.

Please accept our apologies for the delay in replying to your letter.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX. produces XXXXX bars ("bars") for the Canadian market.

2. The bars are available in four flavours, XXXXX, strawberry and chocolate.

3. The bars qualify as nutritional supplements, but not meal replacements, under the Regulations to the FDA. Section B.01.001 of the Regulations to the FDA defines "nutritional supplement" to mean "a food sold or represented as a supplement to a diet that may be inadequate in energy and essential nutrients."

4. As nutritional supplements, the bars must meet the nutritional profile, compositional and labeling requirements of the Regulations to the FDA. The bars must contain 21 specified micronutrients (i.e. vitamins and minerals) within a range relative to their energy content, which is also regulated. Also, among other things, there are requirements for protein and fat content.

5. Marketing for them is targeted to active, healthy individuals who may use it as a source of energy and nutrition. The marketing emphasizes their key attributes (e.g. their value as a source of energy and nutrition and the fact that the XXXXX.)

6. The bars are sold through various retail channels including sporting goods stores, supermarkets and grocery and convenience stores.

7. The bars are labeled as "nutritional supplements".

8. Bars are sold individually from merchandising cartons. Relevant marketing literature indicates a suggested retail price of between $1.29 and $1.69 apiece, although this appears to be in U.S. dollars. They sell in Canada for approximately $2.00 apiece.

Ruling Requested

Supplies of the bars are zero-rated under section 1 of Part III of Schedule VI to the Act.

Ruling Given

Based on the facts set out above, we rule that supplies of the bars are zero-rated under section 1 of Part III of Schedule VI to the Act.

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

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% (or 15% where the supplies are made in one of the provinces participating in the HST). However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the Act.

Section 1 of Part III of Schedule VI to the Act zero-rates supplies of food or beverages for human consumption ("basic groceries") and many ingredients mixed with or used in the preparation of such food or beverages, unless one of the exceptions set out in paragraphs 1(a) through 1(r) applies. Also, the Canada Customs and Revenue Agency's ("CCRA") administrative policy on basic groceries is set out in Chapter 4.3 of the GST Memoranda Series and a relevant aspect of the policy is as follows:

"If a product's tax status is in doubt, the Department will consider the manner in which the product is displayed, labeled, packaged, invoiced and advertised to determine its tax status."

We have again reviewed all information submitted on the bars. Further, we have considered representations on the marketing of the bars, in accordance with CCRA administrative policy. (This includes such factors as market distribution, product placement and display, labeling, pricing and advertising). In particular, we note that the bars qualify as nutritional supplements pursuant to the FDA and its Regulations and that marketing of the bar emphasizes this. It is the CCRA's position that products which qualify and are labeled as nutritional supplements pursuant to the FDA and its Regulations are basic groceries, pursuant to section 1 of Part III of Schedule VI to the Act and, therefore, are zero-rated.

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,

Pauline Greenblatt
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
References