14 March 2003 Excise Interpretation 44815 - Responsibilities of a Ferment on Premises Registrant and Those of the Customer Under the Excise Act, 2001

Dear XXXXX

This letter is in response to your query regarding the responsibilities of a ferment on premises registrant and those of the customer under the Excise Act, 2001. I apologize for the delay in providing a response however as the legislation and its application has evolved it was necessary to obtain legal clarification on the issues surrounding your inquiry.

In your letter you requested clarification on the activities that may be performed by a ferment-on-premises registrant and those that the customer must perform in the production of wine. The responsibilities of the customer and the operator have their base in Sections 15 and 135(2)(a) of the Excise Act, 2001.

Subsection 135(2) provides an exception to the imposition of excise duty on wine produced in Canada for wine that is "produced and packaged by an individual for their personal use". The term produced is also defined in the Act to mean, in respect of wine, to bring into existence by fermentation. Therefore, as per subsection 135(2) and the definition of "produce", the customer's responsibilities include the addition of yeast to initiate the fermentation process as well as the packaging or bottling of the finished product. Should the ferment-on-premises registrant perform either of these steps, the registrant would be the manufacturer of the wine and would be required to obtain a licence to produce or package wine and be liable for the excise duty that would be imposed.

Section 15 of the Excise Act, 2001 states that on application, the minister may issue a ferment-on-premises registration to a person authorizing the person to possess at their ferment-on-premises facility bulk wine produced at the premises by an individual and owned by the individual. This allows a registrant to store the bulk wine that is owned by an individual who produced it. It should be noted that since the Act allows the registrant to store only bulk wine that is owned by an individual, the sale transaction of the raw materials or ingredients must take place at the beginning of the process not at the time of bottling. Additionally, the registrant can perform the interim steps in the production of wine (i.e. racking, stabilizing, fining, filtering, etc.). These steps are not included in the definition of "produce" or in subsection 135(2) of the Act as steps that must be performed by an individual to allow for the exemption from the imposition of excise duty. Furthermore, the registrant is only permitted to store bulk wine and once packaged the wine must be immediately removed from the premises. Failure to do so would be a contravention of section 89 of the Act and subject to a penalty of $0.5122 per litre of wine as provided by section 243.

With respect to circumstances where more than one individual's name is on the sales invoice and whether all parties are required to be present to complete the production or bottling. The term "individual" in the Act can refer to one or more persons. Therefore at least one of the individuals named on the invoice must perform the customer's activities. In your example where two names were stated on the sales invoice, either one of the individuals or both could be present when the wine is produced or bottled.

I would also refer you to the applicable provincial regulations regarding the ferment-on-premise industry as additional controls or requirements may apply.

The foregoing comments represent our general views based on the subject matter and information as presented in your letter. We are bound by this, provided that none of the above issues are currently under audit or objection and that you have fully described all necessary facts and transaction(s). Proposed amendments to the Excise Act, 2001 if enacted, could have an effect on the interpretation provided herein.

I trust that this information will clarify your concerns and again I apologize for the delay in responding. If you have any further questions do not hesitate to contact me XXXXX.

Yours truly,

Mark Hartigan
Manager,
Excise Act, 2001 Implementation Team
Excise Duties & Taxes Divis[i]on
Excise & GST/HST Rulings Directorate
(613) 954-5894

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