6 September 2002 GST/HST Ruling 41975 - Supply of Promotional Items with

Dear XXXXX:

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of promotional multi-packs of XXXXX that contain a XXXXX and in one particular case, an additional XXXXX[.]

Statement of Facts

1. XXXXX (the Product) is a dry desert mix that requires preparation by the consumer.

2. From time to time, the manufacturer XXXXX produces various promotional multi-pack kits in connection with the promotion of the Product. These promotional kits contain XXXXX packages of the Product and a XXXXX.

3. In addition to the XXXXX, one particular promotional kit also contains a XXXXX[.]

4. The manufacturer does not generally sell the Product in multi-packs. The promotional kits are available for a limited period (usually XXXXX weeks, while supplies last).

5. Each promotional kit has its own distinctive UPC code, which is retired at the end of the promotional period.

6. The cost of the promotional items to the manufacturer, in all cases, is greater than 10% but less than 50% of the cost of the Product.

7. The manufacturer's suggested retail price (MSRP) for the promotional kit is generally less than the MSRP for XXXXX individual packages of the Product, however this is not always the case as the manufacturer has no control over the actual consumer pricing.

8. The promotional kits generally do not have the same placement in stores as regular packages of the Product, since the manufacturer usually get end-aisle placement or on the floor with 1/2 pallets for the promotional kits.

9. The manufacturer's objective is to increase sales of the Product by temporarily producing the promotional kits.

10. The manufacturer is in the business of selling food for human consumption, and does not ordinarily sell or distribute non-food items, except in connection with promotional activities.

Ruling Requested

I. What is the tax status of the promotional kit containing a XXXXX?

II. What is the tax status of the promotional kit containing a XXXXX[?]

Ruling Given

Based on the facts set out above, we rule that a promotional kit containing a XXXXX is zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax Act.

Also, we rule that a promotional kit containing a XXXXX is zero-rated pursuant to section 1 of Part III of Schedule VI to the Excise Tax 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.

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